Oral arguments in Latah County tax dispute hearing begin next week

Oral arguments are scheduled next week in an ongoing tax dispute between Latah County and the Idaho State Tax Commission.

Second Judicial District Administrative District Judge Gregory FitzMaurice will hold an online Zoom hearing on the case beginning at 9 a.m. Wednesday.

Latah County is challenging the tax commission’s interpretation of a 2021 law that removed a deadline for the residential homestead exemption and allowed people to apply for it at any point during the year.

The exemption reduces the taxable value of a primary home by 50% or $125,000, whichever is less. Taxable value is used to calculate a homeowner’s annual property tax bill, so the homestead exemption is one of the few opportunities available in Idaho for property tax relief.

However, when the Legislature amended the law, it also added language saying the exemption “shall be effective upon the date of application.”

Latah County interprets that to mean the exemption should now be prorated, meaning homeowners only get a portion of the available tax relief, based on the date of their application.

The tax commission disputes that interpretation, saying homeowners should get the full exemption, beginning in whatever tax year they first apply.

Following a May 11 hearing, the tax commission ordered Latah County to comply with its interpretation of the law.

The county filed a motion requesting the commission’s order be stayed or suspended. It also wants the court to overturn the order because it was “arbitrary, capricious … (and) based on a flawed statutory interpretation of Idaho Code.”