Republican "Homestead Act," Two Flagship Democrat Tax Relief Bills Begin Hearings in Montana House

Lawmakers heard first testimony last week on major property tax bills from both sides of the aisle – the Republican-backed “Homestead Act” touted by Gov. Greg Gianforte proposes wide-spread cuts, and two Democrat-backed bills target relief on lower-income households.

Rep. Jonathan Karlen, D-Missoula, introduced House Bill 154 on Tuesday, Jan. 21, warning a panel of legislators that residents are being priced out of their communities.

The bill aims to make property tax more affordable to low-income taxpayers through a tax credit. House Bill 155, the second of the two Democrat-backed bills, would add a tier structure to property tax.

Property tax relief has been a main talking point for both parties as rates increase across the state. According to an analysis from the Montana Free Press, Montanans saw a 21 percent increase in median residential property taxes from 2022 to 2023, an additional $213 million in tax bills across the state.

Rep. Llew Jones, R-Conrad, is carrying House Bill 231, the so-called “homestead” bill championed by the governor’s office. Jones said about 230,000 homeowners would see a 17% tax reduction on their primary residences under the bill.

The burden would then fall on properties like vacation homes and short-term rentals, which would see a 53% increase — a hike Jones justified with what he called the “significant likelihood” that their often out-of-state owners do not contribute to Montana income tax and, therefore, limit the support of state services.

 “Well, who cares? Right? They don’t pay Montana income tax. If you look at what property tax is forecasted to bring in, it’s $2.34 billion. If you look what income tax is forecasted to bring in, it’s $2.55 billion,” Jones said at the bill’s hearing on Wednesday, Jan. 22.

The bill also includes an exemption for agricultural land, ensuring the shift does not affect those taxes.

But Rose Bender with the Montana Budget and Policy Center said HB 231’s relief is not targeted enough.

“ Currently, extremely high-value homes will see tax decreases that could be used as more significant tax reductions for more moderate-value homes,” Bender said.

Other opponents said they worried the bill would make taxes for larger industries too high.

Karlen’s HB 154 proposes a credit calculated by income and property tax bills. Karlen said, for instance, for a taxpayer with a household income of $69,000 with a $4,000 tax bill, the tax credit would be about $1,100.

“ So what this allows us to do is say, your property tax might stay the same or it might go up, but we are going to make you whole through this tax credit,” Karlen said.

The credit would also apply to renters, compensating for potential rent increases tied to property tax hikes.

Allen Lloyd of the Montana Association of Certified Public Attorneys was the sole opponent of 154, continuing the Association’s streak of opposing all tax credit bills in hopes of limiting tax code confusion.

Rep. Mark Thane, D-Missoula, is sponsoring HB 155. The bill would make the first $200,000 of commercial properties and the first $50,000 of residential properties tax-exempt. The leftover value of residential properties would be taxed at a tiered rate, from 1-2%.

Nicole Rolf of the Montana Farm Bureau Federation opposed HB 155. She said the shift would disproportionately affect taxpayers who own agricultural properties.

“ So while they may have a small decrease in their home taxes, they’re going to turn around and most likely see an increase in their class three ag land property tax,” Rolf said.

Cary Hegreberg also opposed, representing the Montana Chamber of Commerce. He said there is not a large enough commercial tax base to warrant the change, and the popularity of working from home further decreases that need.

The House Taxation Committee also heard testimony Wednesday, Jan. 22, on House Bill 213, which would lower the property tax rate for residential properties. A similar bill in the Senate, Senate Bill 189, hasn’t yet been scheduled for an initial hearing.

Lawmakers in the Senate are also considering Senate Bill 90, which would divert some income from taxes on lodging and rental cars to credits for property taxes on primary residences.