Legislative committee studying Montana property taxes

Montana State Capitol
Posted at 7:06 PM, Nov 03, 2023

HELENA — Across Montana, residents are starting to see their official property tax bills – for the first time since a spike in assessed property values, announced earlier this year.

As property taxes remain top-of-mind for many Montanans, the state Legislature’s Revenue Interim Committee is in the midst of studying the issue. During a meeting Thursday, lawmakers talked about their own tax bills – specifically how the increases in taxes compared to the increases in their properties’ taxable values.

That comparison varied significantly. Sen. Greg Hertz, R-Polson, said he has properties in Flathead and Sanders Counties that rose more than 40% in taxable value, but saw tax increases of 3% and 18% respectively. Sen. Becky Beard, R-Elliston, said her home in Powell County rose 46% in value, but her tax liability increased by 59%.

“What is becoming apparent, I think to everybody, is if your property went up 40%, 43%, that doesn't necessarily equate to your taxes going up,” Hertz said. “In fact, from county to county, there are significant differences in how much tax bills went up, and I think that points to the direction as to what's going on in that particular county, what local budgets are happening, what's going on with other taxable values.”

In many cases, property taxes didn’t rise as much as taxable values did because local governments reduced how many mills they assessed on each property as the value of a single mill rose. However, the value of one mill depends on all classes of property – including things like agricultural land, forest land, mines and utilities, as well as residential and commercial property – so a drop in taxable value in those classes could lead to a higher share of the tax burden landing on residential property.

In addition, 49 counties voted to charge only 77.9 mills for school equalization funding, instead of 95 as in previous years, as part of an ongoing dispute between the state and counties that’s likely to be resolved in court.

During Thursday’s meeting, lawmakers talked about the challenges of comparing property tax data across counties, since they don’t all use the same systems.

“We need something that's more uniform, understandable,” said Rep. Paul Fielder, R-Thompson Falls.

The committee also heard an update on the tax rebates that went out to Montana taxpayers this year. The Legislature approved up to $1,250 per individual in income tax rebates, and up to $675 each of the next two years in property tax rebates on Montana homeowners’ primary residences.

The Montana Department of Revenue reported issuing more than 467,000 income tax rebates, for a total of more than $482 million. Property owners had to file an application to claim the property tax rebate. Revenue leaders said they received more than 227,000 applications and approved almost 216,000, for a total of more than $141 million.

During the legislative session, an initial fiscal analysis said roughly 290,000 property owners might be eligible for the property tax rebate. On Thursday, Derek Bell, administrator of Revenue’s Business and Income Taxes Division, told lawmakers the department now believes that estimate was too high. He said it was based on a U.S. Census estimate of owner-occupied residences in the state, but that that number likely included some ineligible properties – like those owned by entities instead of individuals, people who own multiple properties, and those who didn’t live at the home long enough to qualify.

“We think we don't have a perfect number, and to be honest with you, I don't know that we ever will have a perfect number, but our suspicion is that 230,000 is probably pretty close to where we think we should be – and again, we've received 227,000 applications today,” Bell said.

Bell told lawmakers he’s proud of the work department employees did to help Montanans with questions about the rebates.

While the state released all the income tax rebates at once, the second half of the property tax rebates will come out next year. Bell said Revenue leaders plan to look over the data from this year’s rebates and see what went well and what they can improve on in the application and outreach procedures.

“It's important for us that as we go into next rebate season, we build our successes and then we work on the things that we need to work on,” he said.