Idaho Tax Bill Heads to Governor After Senate Approval

Idaho Senate Approves Tax Bill Aligning State Code with Federal Changes

BOISE, Idaho – The Idaho Senate on Friday approved House Bill 559, legislation designed to conform Idaho’s tax code to recent changes made in the federal “One Big Beautiful Bill” of 2025. The bill passed with a vote of 28-7 and now returns to the House before heading to Governor Brad Little for consideration.

The legislation aims to allow Idaho taxpayers to benefit from provisions within the federal tax changes, including the elimination of taxes on workers’ tips, overtime pay, and an expanded senior deduction for those meeting specific income requirements. However, these individual tax benefits are scheduled to expire in 2028.

House Bill 559 also includes a number of corporate tax write-offs that will remain in effect indefinitely, a point of concern for some lawmakers. Senate Majority Leader Lori Den Hartog, R-Meridian, reportedly expressed frustration that the federal bill established sunset dates for individual tax deductions while making corporate incentives permanent.

The bill’s sponsor, Rep. Jeff Ehlers, R-Meridian, stated that making the tax changes retroactive would “capture the full benefit for individuals.” He believes the projected fiscal impact – a $155 million reduction in state revenues for the current fiscal year and $175 million for fiscal year 2027 – is “reasonable.”

The decision to move forward with the bill followed a recent decision by the state budget committee to approve permanent cuts to several agencies, in addition to 3% cuts previously called for by Governor Little in August and September. These cuts are intended to offset the revenue loss associated with the tax conformity bill.

Idaho has historically decoupled from federal bonus depreciation provisions, and House Bill 559 continues this practice. The bill also adopts a plan similar to one implemented in Delaware, requiring businesses with existing amortization agreements to complete those agreements to spread the fiscal impact over future years.

The passage of House Bill 559 represents the Legislature’s annual effort to align Idaho’s tax code with federal regulations. This year’s conformity bill proved more complex due to the significant changes included in the federal legislation approved last July, prompting concerns from Idaho Democrats regarding the potential impact on the state’s already tight budget.

The Senate’s approval sends the bill back to the House for final consideration before it can be signed into law by Governor Little. The bill’s passage marks a significant step in adjusting Idaho’s tax structure to reflect recent federal changes, with potential implications for both individual taxpayers and the state’s financial outlook.