Department of Revenue Director Brendan Beatty: Montana Property Taxes Explained

By now, most Montana property owners have opened their 2023 Property Classification and Appraisal Notices, and many have been surprised by the Montana Department of Revenue’s estimate of their property’s market value. It’s no secret that property in Montana has been selling at higher and higher prices, but the size of the increased values is astonishing to everyone — including me.

These value increases and estimated 2023 General Taxes described on the notice — based upon the prior year’s mills — have created a great deal of confusion, fear, and some frustration among Montana’s residents. After talking with many Montanans about this issue recently, I learned that most of the fear and frustration is resulting from a misunderstanding of how property values, mill levies, and laws work together to become the property tax bill property owners receive in the fall. Let’s break this down to make this complex issue more understandable.

Property taxes in Montana are the primary source of funding for cities, counties, and school districts. Thus, the property taxes fund county roads, public school teacher salaries, city police, and every other service provided to Montanans by their local governments. We elect our city council members, county commissioners, and school board trustees to create budgets and administer our local government. As it relates to property taxes, our local elected officials should prioritize and budget their property tax receipts in the best interests of the constituents who elected them.

Property taxes are calculated locally by applying mills to a property’s taxable value. A “mill” is simply a unit of measurement and one mill will generate $1 dollar of property tax revenue for every $1,000 of a property’s taxable value. Each year, local governments enact a “mill levy,” which is a calculation determining how many mills need to be assessed for each dollar of taxable value there is in that jurisdiction to meet the budget. Thus, if a jurisdiction has a large increase in property taxable value (like we have with these higher appraisals), a local government will be able to reduce the number of mills levied on each property to meet their budget. To put it simply, the more the total value of property in a jurisdiction, the fewer mills are needed to meet the general budget. The fewer the mills, the lower the tax bill on a property.

A second element included in property taxes is voter-approved mill levies. Voter mill levies are not limited by Montana law, but they are imposed by the direct election of the local residents. These mill levies are presented on your ballot, and every voter can vote for or against them. When a majority of voters approve these mill levies for new schools, recreation facilities, or public safety, to name a few, property taxes go up.

Now, back to the notice you received. The Department of Revenue is required by law to appraise virtually all properties at 100% of market value every two years. We’re also required to include the prior year’s millage rate in your jurisdiction on the notice you receive. From there, “Estimated General Taxes” on the notice are calculated.

In appraisal cycles that don’t have huge increases in property value, estimates based on the prior year’s millage rate provide a ballpark estimate of property taxes. This year, however, this estimate is likely to be too high, unless your jurisdiction has a lot of mills that were enacted by the voters.

The bottom line here — even though your property is appreciated greatly, it doesn’t mean your taxes will go up by the same amount. Montana law restricts local governments from receiving a property tax windfall from increasing valuations, and local voters have control over their special mill levies. Tax bills will be coming from your county office in November, and I am confident that in most cases, the bill will be lower than my agency could estimate from last year’s mill levies.