BOISE, ID – The Idaho agency tasked with overseeing state tax collection told bill sponsors that administering the tax cuts in the federal One Big Beautiful Bill Act will cost $555,000, records obtained by the Idaho Capital Sun show.
Signed into law by the governor on Tuesday, House Bill 559, which conformed Idaho’s taxes to the federal tax cuts, had no mention of the additional administrative cost in its fiscal note. Under the Legislature’s Joint Rule 18, a fiscal note is required to “reasonably contain the proponent’s full fiscal year projected increase or decrease in existing or future appropriations, and/or the increase or decrease in revenues by the state or unit(s) of local government.”
The tax commission may need to seek a supplemental budget request to be able to pay for the internal changes to adopt the 39 tax provisions included in the law.
The driver of the cost is that the bill follows the federal tax bill and retroactively applies to 2025 taxes, according to Idaho State Tax Commission Chairman Jeff McCray. He wrote a memo to Reps. Jeff Ehlers, R-Meridian, and David Cannon, R-Blackfoot, and Sen. Doug Ricks, R-Rexburg, on Feb. 2.
He said the agency’s budget had already been spent preparing for the current tax filing season, which began Jan. 26.
“Conforming to the 39 provisions of the OBBBA retroactively means we must perform all that work again and attempt to mitigate the effect by extraordinary means and additional costs,” McCray wrote. “If there are no alternatives to this retroactive date, we’ve estimated the costs to be $555,000.”
“Considering current budgetary constraints and the Tax Commission’s ongoing efforts to support the Legislature and Governor,” McCray continued, “we recommend full transparency by including these estimated administrative costs in the fiscal note for this year’s conformity language. Your consideration is greatly appreciated.”
In the memo, he wrote that internal programming changes would cost $280,000, vendor testing would be $125,000, internal testing and scanning upgrades would be $115,000 and education and communication about the changes would be $35,000.
None of those costs were included in information about the bill when the House voted to approve it on Feb. 3 and the Senate on Feb. 5.
The bill’s sponsor, Ehlers, told the Sun in an interview Wednesday he had been assured the changes could be done with existing resources, given that the state is facing a tight budget situation this year.
Asked to respond to Ehlers’ comment, tax commission Spokesperson Julie Eavenson told the Sun in an email, “The commission’s position has always been what is articulated in the memo.”
Tax commission’s situation may be compounded by proposed budget cuts
State budget writers on the Joint Finance-Appropriation Committee voted on Feb. 6 to approve across-the-board cuts to most state agencies for the current and next fiscal year, the Sun previously reported. The cuts were in addition to the 3% reductions that Gov. Brad Little called for this summer as the state was facing a projected budget shortfall.
The tax commission wrote to the heads of the budget-writing committee, called JFAC, that the additional cuts may cause significant delays in issuing refunds and incur millions in interest payments due to those delays, the Sun reported.
McCray told the Sun in an interview Wednesday that the commission was still fully evaluating the impact of conformity and how to adjust. However, for the people who have already submitted their returns, they either won’t receive the tax benefits or will have to submit an amended return.
“We don’t have the ability to rework people’s returns, because your return is essentially your work,” McCray said. “And so if taxpayers desire to take advantage of the impacts to conformity, they’re going to have to file amended returns. As you can imagine, that’s twice the work. Once to process the original return, once to process the amended return. And of course, the same for the taxpayer.”
Sen. Scott Grow, R-Eagle, is co-chair of the budget-writing committee and was a co-sponsor on the tax conformity bill. He told the Sun on Wednesday he hadn’t seen the memo from McCray. Grow was not listed as one of the recipients on the letter.
Grow said it would be up to the working group within JFAC that does the tax commission’s budget if there will be a supplemental budget request to add funding in the current fiscal year. The supplemental request would need to be approved by JFAC members and the House and Senate.
This story first appeared on Idaho Capital Sun.
