Lawsuit challenging Idaho’s business tax break dismissed

George Gersema talks tax breaks

In January 2016, George Gersema, the CEO of Employers Resource, said the state hurt his Boise company by giving a $6.5-million incentive package to Paylocity.
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In January 2016, George Gersema, the CEO of Employers Resource, said the state hurt his Boise company by giving a $6.5-million incentive package to Paylocity.

A judge in Boise has dismissed a lawsuit filed by a Boise company challenging a new Idaho business tax break, saying the company’s claim of harm was “fuzzy and speculative.”

The ruling preserves Idaho’s tax reimbursement incentive, a law passed in 2014 that the state says is helping to produce nearly 5,000 current or future jobs created by 30 companies in exchange for tax breaks worth up around $53 million.

The break is worth up to 30 percent return of a company’s income, payroll and sales tax for up to 15 years. Companies must secure agreements with the state and meet job creation thresholds and pay wages higher than average in the counties where they operate.

Employers Resource, a payroll and human resources company, sued in March in 4th District Court after the state awarded an incentive to Paylocity, a competitor, to open an office in Boise.

Paylocity will receive a $6.5 million tax break if it meets job creation and wage thresholds over the next 15 years. Paylocity promised to create 551 jobs paying an average of $46,200 per year.

District Judge Samuel Hoagland said Employers Resource’s arguments were based on what could happen as a result of the Paylocity deal and the tax program.

“In short, [Employers Resource] has no protectable, legal interest that has been directly damaged by the Act; the claim of injury is ill-defined, fuzzy, and speculative, essentially self-inflicted in mere anticipation and expectation of what may happen,” Hoagland wrote.

Business groups and the Idaho Department of Commerce, which runs the incentive program, say it has drawn companies to Idaho and helped home-grown companies expand. Opponents say the program creates an uneven playing field and gives the state power to pick winners by rewarding larger companies and recruiting companies to become competitors to Idaho companies.

This is a decisive win for the program moving forward.

Megan Ronk, director of the Idaho Department of Commerce

Employers Resource owner George Gersema said he would appeal. He said Hoagland’s opinion disregards his core argument: that the Legislature lacks authority to delegate dispersing tax dollars to the Department of Commerce.

The state has yet to argue the merits of the case.

George Gersema, owner of Employers Resource

“This is not how we should treat taxpayer money,” he said in March.

Megan Ronk said Hoagland’s ruling reaffirms that the program is sound in structure and practice.

“Moving forward, we expect (the incentive) to continue to put Idaho on the map by providing a path for companies to thrive in Idaho’s robust economy,” she said.

One of the program’s vocal supporters has been Clark Krause, executive director of the Boise Valley Economic Partnership. Krause said that site visits by national companies to the Treasure Valley have roughly doubled since the incentive program started.

“Any time something like that is in court, it deserves a little worry and concern,” Krause said. “I was very happy to hear that it passed legal muster.”

Idaho’s tax reimbursement incentive

Here is a summary of the agreements struck by the state and companies applying for the tax break. Companies receive tax reimbursements after meeting job creation and wage thresholds.

The program started July 1, 2014.

TRI Program Summary

Approved projects


Average offer percentage


Average offer term

10 years

Approved project jobs


Average wage


*Total project payroll


*Estimated full-term direct state tax revenue


Total value of incentives


*Over the life of current agreements

Source: Idaho Department of Commerce