Judge favors Latah County in property tax dispute

A judge on Monday ruled in favor of Latah and Lincoln counties in a court battle over property taxes.

Second Judicial District Court Judge Adam Green ruled that the two counties can prorate the homeowner’s exemption, which Latah County says will benefit sellers and local governments.

Idaho’s homeowner exemption reduces the taxable value of an owner-occupied home by $125,000 or 50%, whichever is less.

In 2020, the Legislature amended the law to allow homeowners to apply for the exemption at any point during a year. At the same time, they added language saying the exemption “shall be effective upon the date of application.”

Latah County believes that means the exemption should be prorated, so homeowners only get a portion of it based on the date of their application.

The Idaho Tax Commission, on the other hand, determined the full exemption should be granted, beginning in whatever tax year someone first applies.

The counties were involved in a legal dispute with the Idaho State Tax Commission, which ordered them to stop prorating and grant the homeowner’s exemption for the entire year.

In a news release sent Wednesday, Latah County stated this inability to prorate the homeowner’s exemption would result in a “tax windfall to the purchaser of the property, to the detriment of the seller and the local governments in that taxing district.”

On Monday, Green issued a memorandum decision and order in favor of Latah and Lincoln counties and determined that the Legislature intended for the homeowner’s exemption to be prorated.