HELENA — After Wednesday, there are just ten working days left in the Montana Legislature’s 69th session. Property tax relief remains one of the biggest open questions, but as lawmakers approach the end, we’re getting a clearer picture of what a final plan might look like.
(Watch the video for a closer look at what two advancing property tax bills would do.)
On Tuesday evening, the House and Senate each spent well over an hour debating a different bill for property tax reform. Both passed initial votes. As currently written, there are differences between the bills, but they share an underlying structure.
“I think we’re getting to a spot where we’ve got a product that the vast majority of the Legislature can agree on,” said House Majority Leader Rep. Steve Fitzpatrick, R-Great Falls.
The House voted 80-20 to advance SB 542, which Fitzpatrick called a “flagship bill.” Meanwhile, the Senate narrowly endorsed HB 231, 26-24 – after the bill failed on a vote last week, but was revived.
“We're approaching this from both chambers, and, at this point, it's a little hard to predict what the final outcome is going to be,” said Senate Minority Leader Sen. Pat Flowers, D-Belgrade.
Both bills now include “homestead tax rates” – Gov. Greg Gianforte’s preferred model for property tax relief – that would give a tax advantage to Montanans’ primary residences, long-term rentals and small commercial properties. They also both have a one-time rebate of up to $400 for this year.
One of the biggest differences between the two bills at the moment is how they would handle tax rates in 2025 – since leaders believe the Montana Department of Revenue won’t have time to fully implement the homestead rates this year. SB 542 would institute a graduated rate system for residential property, with higher tax rates as a property’s value increases. HB 231 would drop the rates for all residential property to the same level for the year.
It can be difficult to analyze exactly how a property tax bill would affect an individual property owner. The state assigns each type of property – like residential, commercial, or agricultural – a tax rate. That rate multiplied by the property’s assessed value determines the taxable value, and the taxable value multiplied by the mill rate – mostly set by local governments – gives the annual tax bill.
If the Legislature passes a bill that reduces a tax rate, most local governments can adjust their mills up because they’re authorized to keep their revenue steady. That means – unlike with income taxes – cutting the tax rate in half doesn’t necessarily translate to a 50% cut on your tax bill.
Currently, the tax rate on residential property is 1.35%. The homestead rates would be 0.76% for Montanans’ primary homes and long-term rentals worth up to the statewide median residential value – around $340,000. For qualifying properties worth more, the rate would be 0.76% on the value up to the median, then higher on the rest of the property’s value: rising to 0.9%, 1.1%, and eventually 1.9% on any value above four times the median. For second homes and short-term rentals, the rate would be 1.9% on the full property value.
The commercial tax rate is currently 1.89%. These bills would adjust that to 1.5% for properties worth less than six times the median value, and 1.9% for ones worth more.
During Tuesday’s debate, Fitzpatrick said Department of Revenue models indicated the homestead tax rates would lead to a tax cut of between 20% and 40% for the average primary residence in most Montana counties. That average number would be lower in counties like Gallatin and Missoula, which he said was due to the number of high-value properties in those areas.
If the rate on one type of property goes down, it means those properties will pay a smaller share of the tax burden, relative to other types. That means the changes in SB 542 and HB 231 would shift more of that burden to second homes, large commercial and industrial property and agricultural and forest land.
This week, groups led by the Montana Chamber of Commerce sent a letter to lawmakers, expressing concern about how SB 542 and HB 231 would affect businesses, farms and ranches.
“The tax increases to business and agriculture in current bills will provide only modest relief for Montana residential taxpayers, and that modest relief will be undermined as residential property values increase,” the Chamber said in a newsletter.
Supporters of the bills said some of the large taxpayers concerned about a tax shift here have been seeing lower property taxes in recent years because the spike in residential property values has already shifted more of the tax burden to homeowners.
“If you look at the numbers, for example, for Northwestern Energy, their property taxes were down about $35 million,” said Fitzpatrick. “We're not even coming close to coming back to $35 million, so they're still going to be paying less property tax than they were in 2022.”
“I certainly understand their concerns, and I think residents felt the same way in 2023 when there in fact was a shift onto Class Four residential property,” Flowers said. I think what we've tried to land on is a solution that's as fair as it can possibly be.”
Some of the lawmakers opposed to the homestead model said they preferred Senate Bill 90, which would use money from the state taxes on hotels, campgrounds and rental cars to fund a property tax credit. Supporters of that bill said it was the only way to provide long-term property tax relief without creating a tax shift.
“This bill picks winners and losers,” Sen. Carl Glimm, R-Kila, said during the debate on HB 231. “It's unfortunate, and I don't know that we're all going to see it until all those taxes come out, because it is complicated and we won't know.”
Fitzpatrick said he objected to SB 90 as a policy, because it was only “changing buckets” of where money is used, and because it would remove large amounts of money from the state general fund. SB 90 was tabled in committee, and several efforts to revive it have been unsuccessful.
SB 542 and HB 231 will each need to pass a final vote in their current chamber before going over to the other chamber. If that chamber – the Senate for SB 542 and the House for HB 231 – votes to accept the current version of the bill, it could be on its way to the governor fast. If not, the bill will need to go to conference committee to iron out a final version.
Fitzpatrick told MTN he would object to HB 231 in its current form and try to send it to conference committee. Flowers said he hadn’t had a chance to look closely enough at SB 542 to know if he could support it as currently amended, but he believed either it or HB 231 could work as the vehicle to deliver the final property tax plan.
