City says Idaho Supreme Court affirms that counties must distribute delinquent-tax penalties and interest to taxing districts

Post Falls City Attorney Field Harrington told council on Oct. 7 that the Idaho Supreme Court unanimously affirmed a district court decision finding Kootenai County must distribute delinquent-tax penalties, interest and costs to the taxing districts that levied those taxes.

Harrington said the dispute began when the county treasurer in October 2022 began withholding late charges and interest on delinquent property-tax payments rather than distributing those amounts to taxing districts. City and highway-district officials challenged the practice in district court. The district court concluded Idaho law requires apportionment of penalties and interest and ordered distribution to taxing districts. Kootenai County appealed; the Supreme Court affirmed the district court’s ruling.

Harrington said the city and partner taxing districts recovered about $126,000 in principal plus roughly $20,000 in pre- and post-judgment interest, for a total near $147,000. He said monthly distributions that had been paused prior to October 2022 have resumed. The city also was awarded attorneys’ fees and costs; Harrington described a flat-fee district-court arrangement shared with Coeur d’Alene and additional Supreme Court defense costs.

Council members noted the ruling returns funds to taxing districts but observed that taxpayers ultimately bear legal costs and expressed disappointment at the county’s prior unilateral approach to withholding funds. Harrington said counties that disagree with the statutory allocation could seek legislative changes.

Harrington recommended staff continue to monitor receipts and any legislative activity that could affect future distribution rules.