Weeks of apparent legislative gridlock on measures aiming to offer Montana homeowners relief for rising residential property taxes broke loose Wednesday as lawmakers on the Senate Taxation Committees voted forward heavily amended versions of two major taxbills, one of them the second-home tax backed by Republican Gov. Greg Gianforte.
The Gianforte proposal, House Bill 231, and an alternative, House Bill 155, will now advance to debate on the Senate floor. Both bills still face several hurdles before they can head to the governor’s desk, including floor votes, the Senate Finance and Claims Committee and potential conference committee meetings to reconcile Senate-side amendments with language that passed the House in February. Assuming one or both bills survive the remainder of that journey, further amendments are likely to come along the way.
The Senate Taxation Committee also voted down a third prominent tax relief push Wednesday, House Bill 528. Sponsored by Rep. Ed Byrne, R-Bigfork, that bill would have essentially implemented a tax rate rebalancing proposal championed by Democratic candidate for governor Ryan Busse as he campaigned against Gianforte last year. It was opposed by a wide variety of business interests who argued it would shift too much tax burden from residences to farms and business properties.
The Gianforte-backed proposal, developed by House Appropriations Chair Llew Jones, R-Conrad, would scale down taxes on primary residences and long-term rental properties, raising them on second homes and Airbnb-style short-term rentals in an effort to limit how much tax burden is shifted onto business properties. Like most of the other tax proposals considered by the Legislature this year, it aims to provide homeowner tax relief without reducing the local tax revenues that fund services including schools, law enforcement and parks departments.
In order to impose higher taxes on second homes, the state Department of Revenue would need to begin tracking which of Montana’s residential properties are and aren’t being used as primary residences, a potentially tricky administrative task that has been a source of worry for the bill’s opponents. While the bill directs the department to use the list of owner-occupied homes that received one-off property tax rebates over the past two years as a starting point, the department would need to run a new application process to catch long-term rental properties and the tens of thousands of homeowners who qualified for those rebates but didn’t successfully apply.
Among the changes lawmakers made to the Gianforte-Jones relief bill Wednesday was an amendment that acknowledges it’s now too late for the department to differentiate between primary and secondary homes for the property tax bills that will be mailed this fall. Instead, the version of the bill that passed the tax committee provides for a third round of rebates, up to $400 a homeowner, and scales down residential taxes regardless of occupancy status on an interim basis. Both those provisions could be amended as lawmakers consider other bills that could provide one-time or ongoing rebates.
The tax committee also amended the Gianforte-Jones bill to specify that land in fee ownership within the bounds of American Indian reservations is automatically eligible for the lower tax rates for primary residence — an effort to address concerns that Native homeowners could be saddled with higher tax rates intended for second homes if they end up disenfranchised by the application process.
Additionally, lawmakers took a stab at addressing concerns about how the rate rebalancing employed by the Gianforte-Jones bill would collide with a provision of the Billings city charter.
Like other proposals that aim to rebalance the property tax system by dialing back residential tax rates to offset the rapid home value growth, the Gianforte-Jones bill would shrink the total taxable value of tax bases across the state. In most jurisdictions, the millage rates used to calculate property taxes would adjust automatically so cities, counties, towns and cities receive the same amount of tax revenue. However, officials from both Billings, the state’s most populous city, and Sunburst, a population-351 town in north-central Montana, have told lawmakers that their municipal charters contain provisions that would keep that adjustment from happening, potentially forcing them to cut their budgets.
Language added to the Gianforte-Jones bill Wednesday aim to address that concern by specifying that the Legislature intends to have its tax relief legislations preempt those charters. It also specifies that the state will reimburse cities for lost revenues in the coming years if that legislative intent fails to hold up in a court case.
The amended Gianforte-Jones passed the Senate Taxation Committee on a bipartisan 6-2 vote, though several lawmakers described their support as “reluctant.”
“I’ve committed to Rep. Jones to get this bill out of here,” said Senate Taxation Chair Greg Hertz, R-Polson. “I don’t like it — it’s more or less a Frankenstein bill now, but I hope we get it out of here so we can have the discussion on the [Senate] floor.”
The other bill advanced by the tax committee Wednesday, SB 155, was initially pitched by Democrats as an alternative to the Gianforte-Jones bill. As introduced by Rep. Mark Thane, D-Missoula, it would have used a tiered rate bracket structure to lower taxes for middle- and low-value properties while offsetting some of those savings with increases on high-value homes regardless of their occupancy status. Supporters have argued that the bill would provide a path to middle-class tax relief without the administrative burden of tracking which homes are being used as primary residences.
Republicans on the tax committee, however, amended SB 155 to rework its central language Wednesday before passing it forward over opposition from the committee’s Democrats. As the bill is now structured, it contains comparatively modest rate rebalancing for residential, commercial and agricultural properties, as well as a homestead exemption making the first $50,000 of value for primary residences tax free.
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Those changes to the tax code, Hertz said, would mitigate the 11% increase in residential taxes projected as a result of this year’s reappraisal cycle. It wouldn’t, however, adjust rates to account for the historic increase to residential tax values that drove homeowner taxes up by 21% on median in the 2023 cycle.
Hertz said the reworked version of the bill would dovetail with a proposal like Senate Bill 90, which would redirect some revenue from the state’s lodging tax toward annual property tax rebates.
Sen. Dave Fern, D-Whitefish, responded that he was skeptical that a rebate-forward proposal would pass muster with the governor.
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“I think folks don’t want rebates,” Fern said. “I’m not sure that we can get it through the second floor with the tension we have about who possesses what bucket and how it can be used.”
The lodging tax dollars that would be tapped by SB 90 currently provide a minor revenue stream into the state General Fund, which is primarily filled with state income taxes. Gianforte, whose office is on the second floor of the Capitol, has repeatedly said he doesn’t want to pay for property tax relief with income tax dollars.
SB 90 has stalled in the House Taxation Committee but has been partially incorporated into a sprawling trust bill, House Bill 924, that is currently under consideration by the Senate Finance and Claims Committee. Also sponsored by Jones, the Legislature’s longtime budget guru, HB 924 would use hundreds of millions from the state’s current budget surplus and a portion of future income tax collections to set up an endowment-style fund that supports state pension systems and housing efforts while spinning off interest earnings for programs including bridge maintenance, child care investments and property tax relief.
SB 155 passed the Senate Taxation committee Wednesday on a 7-1 vote.