Bill Description: House Bill 559 would fully conform Idaho’s tax code to the federal changes enacted by HR1 (The One Big Beautiful Bill Act) for individuals and partially for businesses. Projected tax savings for Idaho residents and businesses are somewhere between $155 million to $188 million during the 2026 tax year, with the higher number more likely.
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Note: This bill is an updated version of House Bill 519. Changes include nonconformity to the Qualified Production Property Deduction (§ 168(n)), removal of the ineligibility for section 174 deductions when using the Idaho Income Tax Credit For Capital Investment, and the continued use of the previous R&E amortization schedule for expenses incurred in tax years 2022-2024.
Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
House Bill 559 reduces tax burdens on individual Idahoans and Idaho businesses. Idaho tax code does not currently allow for personal income tax deductions on tips, car loan interest, overtime pay, and it does not let seniors take enhanced deductions, as the federal code does. If Idaho lawmakers amend Idaho Statute 63-3004 to conform to these and other federal changes, individual filers are projected to save $167.4 million in tax year 2026, according to the Tax Foundation. The Idaho Tax Commission estimates these four specific deductions amount to $116 million. All individual tax breaks are retroactive to tax year 2025 and are therefore in full conformity to HR1.
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House Bill 559 also partially conforms the state corporate tax code to the business expensing provisions found in HR1. It would fully conform Idaho to the Small Business Expensing (§ 179) provisions of federal law, as well as certain other minor deductions. This would save businesses a projected $6 million in tax year 2026, according to the Tax Foundation.
Concerningly, the bill maintains Idaho’s stance against conforming to Bonus Depreciation (§ 168(k)). If Idaho does not conform to the federal changes regarding bonus depreciation, Idaho businesses are expected to be taxed an additional $151 million in tax year 2026. Idaho completely decoupled from conformity to this provision at the end of 2009 and has not conformed since, costing Idaho businesses significant sums and making the state less competitive.
House Bill 559 further expands the prohibition on conforming to bonus and bonus-like depreciation by excepting the new Qualified Production Property Deduction (§ 168(n)) from Idaho tax code. The projected costs to Idaho businesses by not conforming to this provision are $15 million, according to the Tax Foundation.
The next proposed change revolves around implementing the new federal changes to Research & Experimentation Cost Recovery (§ 174) in the Idaho tax code. Businesses would save $96 million annually were the state to fully conform to section 174, according to the Tax Foundation. However, House Bill 559 amends section 63-3029G titled “Credits For Research Activities Conducted In This State – Carryforward.” This change makes Idaho corporations ineligible for this state-level tax credit if they choose to claim a section 174 deduction.
The Idaho State Tax Commission claims this mutual exclusivity is needed to prevent double dipping, that is, accepting multiple tax deductions and credits based on the same expenses. They state this exclusion will not have a great effect on Idaho’s tax revenue due to timing effects and the fact many Idaho businesses already claim the state-level tax credit. There is intense debate between industry and tax professionals on the exact fiscal impact of this provision and the exemptions granted or lack thereof to section 174 of the federal code.
The final change compels Idaho businesses that began expensing under the previous research and experimentation amortization schedule to continue to do so. Businesses are ineligible to immediately start expensing under the new provision, unlike in HR1. Any expenses incurred “in taxable years beginning on or after January 1, 2022, and before January 1, 2025, shall continue to expensed…” under the rules of the previous version of the Internal Revenue Code. All expenses occurring after January 1st, 2025 are eligible for the new amortization schedule.
While the precise amount of savings is unclear, Idaho businesses are still expected to save tens of millions of dollars in taxes due to these proposed changes.
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Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?
All taxes are a redistribution of wealth, and in this broad sense the reduction of taxes inherently reduces the redistribution of wealth. Additionally, the proposed changes offer some broad-based tax relief such as the increase of the standard deduction, a provision that does not generally favor specific interest groups.
Conversely, HR1 and by extension House Bill 559, rewards many specific interest groups and businesses with tax breaks. Favored individuals include tipped workers, borrowers who purchased an American- made vehicle, workers who earn overtime pay, and seniors. This legislation also rewards certain business interests, as most of the benefits go to select entities that either incur research and experimentation expenses or are considered to be small businesses.
While there is some broad based relief in House Bill 559, there are also special carve-outs for interests as well as carve outs regarding the conformity to section 174. It is crucial to note these carve-outs at the federal level have been passed by the federal government and are merely being conformed to in the main by House Bill 559.
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