Idaho Tax Commission Warns Budget Cuts Could Delay Tax Refunds for Months

Idahoans could wait months for their refunds, while the state would be on the hook for millions in interest payments due to the delays.

Published on Feb. 11, 2026

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The Idaho State Tax Commission is warning that budget cuts made to create room for the cost of tax conformity to the federal One Big Beautiful Bill Act may significantly delay tax refunds for Idahoans. The tax commission estimates that reducing its temporary workforce during tax season could extend refund processing by 12-18 weeks, resulting in an estimated minimum cost of $3.5 million in interest payments from the state's general fund.

Why it matters

The delays in processing tax refunds could create financial hardship for many Idahoans who rely on those refunds, while also costing the state millions in interest payments. This highlights the challenges state agencies face in implementing complex tax changes on tight timelines with reduced budgets.

The details

The Idaho Legislature's Joint Finance-Appropriation Committee (JFAC) recently approved a bill that would cut nearly every state agency budget by an additional 1%, totaling $131 million in state general funds. The Idaho Tax Commission says most of its current year budget is already obligated, and reducing its temporary tax season workforce would be one of its few options to meet the cuts, which would extend refund processing by 12-18 weeks.

  • The current fiscal year ends on June 30, 2026.
  • The Idaho Legislature must approve the annual tax conformity bill each year to align the state's tax code with federal changes.
  • House Bill 559, which would adopt nearly all the 39 individual and corporate tax provisions from the federal One Big Beautiful Bill Act, was approved by the Idaho Senate on Friday and is now on the governor's desk for consideration.

The players

Brad Little

The governor of Idaho who is weighing whether to sign the bill adopting federal tax cuts.

Jeff McCray

The chairman of the Idaho Tax Commission who warned lawmakers about the potential delays and interest costs from the budget cuts.

Lori Wolff

The administrator of the Idaho Division of Financial Management who acknowledged the tax commission's concerns about the expedited timeline to implement the tax changes.

Jeff Ehlers

The Republican state representative who sponsored House Bill 559 and said he wasn't concerned about the timing for the tax commission.

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What they’re saying

“It will save $210,308, but will extend payment and refund processing by 12 to 18 weeks, resulting in interest payments from the General Fund.”

— Jeff McCray, Idaho Tax Commission Chairman (Idaho Capital Sun)

“The tax commission is going to be faced with a very expedited time frame to be able to implement those cuts retroactively to tax year '25. There was no additional funding in the fiscal note to assist the tax commission in putting those additional changes in place, and with the reductions that were approved by JFAC for the additional 1%, the tax commission is very concerned that they will be able to process refunds and tax submissions timely. So we could see some significant delays this tax year.”

— Lori Wolff, Division of Financial Management Administrator (Idaho Capital Sun)

What’s next

Gov. Brad Little must decide whether to sign House Bill 559, which would adopt the federal tax changes retroactively to 2025.

The takeaway

This situation highlights the challenges state agencies face in implementing complex tax changes on tight timelines with reduced budgets, which can lead to significant delays in processing tax refunds and cost the state millions in interest payments.