2021-2022 Revenue Interim Committee Members CHAIR VICE CHAIR Sen. Jill Cohenour (D) Rep. Becky Beard (R) (406) 227-1144 (406) 479-3048 [email protected] [email protected] Rep. Alice Buckley (D) Sen. Greg Hertz (R) (406) 404-0891 (406) 253-9505 [email protected] [email protected] Sen. Brian Hoven (R) Rep. Connie Keogh (D) (406) 761-8533 (406) 298-0985 [email protected] [email protected] Sen. Mike Lang (R) Sen. Edie McClafferty (D) (406) 654-7357 (406) 490-5873 [email protected] [email protected] Sen. Shannon O'Brien (D) Rep. Mark Thane (D) (406) 274-3805 (406) 552-3957 [email protected] [email protected] Rep. Jeremy Trebas (R) Rep. Tom Welch (R) (406) 899-5445 (406) 660-2988 [email protected] [email protected] Committee Staff: Megan Moore, Lead Staff RESIDENTIAL [email protected] Jaret Coles, Attorney PROPERTY TAX [email protected] Brochure Design: Laura Sherley, Research Assistant Revenue Interim Committee Data Visualizations: HJ 36 Residential Property Tax Study Dan Kayser, Data Analyst September 2022 https://leg.mt.gov/committees/interim/ric/ [Web address] Residential Property Tax What are property taxes? Property Tax Assistance and Appeals A property tax is a tax levied on the value of property. Property taxes are Call your local Department of Revenue office to apply for a property tax levied on land, buildings, and certain business property. assistance program or appeal your property value. Residential property is valued in odd-numbered years. Taxes are billed Montana has four property tax assistance programs. annually and due in two payments on November 30 and May 31. • Property Tax Assistance Program: Reduces the tax rate on the Homeowners with a mortgage often pay property taxes with their mortgage first $200,000 of market value for a primary residence owned by a payments. single person with income below $23,385 or a married person or head of household with income below $31,181. Property Taxes Are a Larger Share of State and Local Revenue in Montana Than in the • Elderly Homeowner and Renter Tax Credit: Income tax credit for homeowners or renters 62 years of age or older with U.S. household income of less than $45,000. Refundable credit of up to $1,150 based on property taxes or rent paid in the prior year on a primary residence. Property taxes in Montana account for 10% of state taxes compared with 2% for all states combined. At the local level, Montana property taxes make up • Disabled Veteran Program: Reduces the tax rate on the primary 97% of local taxes, considerably more than the 71% share for all states. residence of a disabled veteran or surviving spouse with income below $54,067 for a single disabled veteran, $62,385 for a married Under state law, the property tax is the only tax many cities and counties or head of household disabled veteran, or $47,136 for an may levy. A limited number of localities are permitted to impose local option unmarried surviving spouse. resort taxes and some counties levy marijuana taxes. • Intangible Land Value Property Exemption: Exempts the appraised land value that exceeds 150% of the appraised value of the primary residence and improvements for property owned by a family for at least 30 years. The Department of Revenue mails notices of residential property values in the summer of odd-numbered years. Property owners may appeal the property value by following the instructions on the notification letter. MONTANA LEGISLATIVE SERVICES DIVISION S ource: U.S. Census Bureau, Montana Department of Revenue Revenue Interim Committee 1 6 Residential Property Tax Taxes Levied by Jurisdiction Type, FY 2022 Legislative and Local Government Decisions Percent Taxing Jurisdiction Tax Revenue of Total Affect Tax Bills Local Schools $657,987,701 33.02% County $549,771,437 27.59% State $356,591,368 17.90% Market Tax Mill Rate/ Cities and Towns $209,355,673 10.51% Value Rate 1,000 Taxes County-Wide Schools $129,563,295 6.50% Fire and Miscellaneous $89,350,291 4.48% Taxable value $1,992,619,764 100.00% Example: $400,000 x 1.35% x 650/1,000 = $3,510 Source: Department of Revenue Property taxes are equal to market value times tax rate, known as taxable State Laws Limit Property Taxes value, times mill levies. One mill generates $1 for each $1,000 in taxable value. State and local entities play a role in making property tax policy, Cities and counties are permitted to levy mills to collect the amount of adopting budgets, and administering the tax. revenue raised in the prior year plus an inflation factor. The maximum mill levy is calculated using the current year's taxable value. The application of State Legislature – The Legislature establishes property tax policy for the approved mill levy to new property may result in revenue growth. The the state, including property classes, tax rates, valuation methods, total taxable value varies based on the mix of property types, property reappraisal cycles, property tax limits, appeal procedures, and property values, and the amount of exempt property in the taxing jurisdiction. tax assistance programs. School districts use property taxes to fund multiple budgets based on Taxing Jurisdictions – School districts, cities, counties, and special school funding formulas adopted by the state and based on local districts collect property taxes by setting budgets and mill levies. The preferences. The main budget for the district's general fund must meet a state levies 95 mills for K-12 education and 6 mills for the state university minimum level of required funding and is subject to a maximum budget system. limit. Department of Revenue – The Department of Revenue administers property tax policies adopted by the Legislature. This includes classifying Voters May Approve Property Taxes Above State Limits property, appraising property, and providing taxable values to property State law allows cities, counties, school districts, and special districts to ask owners. voters to collect property taxes higher than those authorized in state law and to levy property taxes to pay for bonds. These levy elections or bond County Treasurers – County treasurers bill and collect property taxes issue questions appear on school, city, or county election ballots. and distribute revenue to taxing jurisdictions. MONTANA LEGISLATIVE SERVICES DIVISION Revenue Interim Committee 5 2 Residential Property Tax Residential Property Pays the Largest Share More Than Half of Montana Property of Property Taxes Taxes Fund Schools There are 16 classes of property in Montana with tax rates that vary by class Of the $1.99 billion in property tax revenue collected in FY 2022, $1.12 and range from 0.9% of market value to 100% of net proceeds of mines. In billion funds K-12 education. 2020, taxes levied on residential property accounted for 50% of the property • Local school district property taxes totaled $658 million, or one- taxes collected in the state. Taxes on commercial property and nonelectrical third of collections. generating property of electric utilities each added another 15%. • County-wide school levies make up another 6.5%, or $130 million. • Of state property tax collections, $334 million is deposited in the general fund. Though not directly earmarked for K-12 funding, the revenue accounts for less than half of the $881 million in general fund revenue budgeted for schools in FY 2022. The remaining 44% of property taxes are distributed as follows: 27.6% to counties, 10.5% to cities and towns, 4.5% to fire and miscellaneous districts, and 1.1% to higher education. Source: Department of Revenue Residential, commercial, and agricultural property are revalued every 2 years and forest property is revalued every 6 years. All other property is valued annually. Source: Department of Revenue MONTANA LEGISLATIVE SERVICES DIVISION Revenue Interim Committee 3 4 Residential Property Tax Residential Property Pays the Largest Share More Than Half of Montana Property of Property Taxes Taxes Fund Schools There are 16 classes of property in Montana with tax rates that vary by class Of the $1.99 billion in property tax revenue collected in FY 2022, $1.12 and range from 0.9% of market value to 100% of net proceeds of mines. In billion funds K-12 education. 2020, taxes levied on residential property accounted for 50% of the property • Local school district property taxes totaled $658 million, or one- taxes collected in the state. Taxes on commercial property and nonelectrical third of collections. generating property of electric utilities each added another 15%. • County-wide school levies make up another 6.5%, or $130 million. • Of state property tax collections, $334 million is deposited in the general fund. Though not directly earmarked for K-12 funding, the revenue accounts for less than half of the $881 million in general fund revenue budgeted for schools in FY 2022. The remaining 44% of property taxes are distributed as follows: 27.6% to counties, 10.5% to cities and towns, 4.5% to fire and miscellaneous districts, and 1.1% to higher education. Source: Department of Revenue Residential, commercial, and agricultural property are revalued every 2 years and forest property is revalued every 6 years. All other property is valued annually. Source: Department of Revenue MONTANA LEGISLATIVE SERVICES DIVISION Revenue Interim Committee 3 4 Residential Property Tax Taxes Levied by Jurisdiction Type, FY 2022 Legislative and Local Government Decisions Percent Taxing Jurisdiction Tax Revenue of Total Affect Tax Bills Local Schools $657,987,701 33.02% County $549,771,437 27.59% State $356,591,368 17.90% Market Tax Mill Rate/ Cities and Towns $209,355,673 10.51% Value Rate 1,000 Taxes County-Wide Schools $129,563,295 6.50% Fire and Miscellaneous $89,350,291 4.48% Taxable value $1,992,619,764 100.00% Example: $400,000 x 1.35% x 650/1,000 = $3,510 Source: Department of Revenue Property taxes are equal to market value times tax rate, known as taxable State Laws Limit Property Taxes value, times mill levies. One mill generates $1 for each $1,000 in taxable value. State and local entities play a role in making property tax policy, Cities and counties are permitted to levy mills to collect the amount of adopting budgets, and administering the tax. revenue raised in the prior year plus an inflation factor. The maximum mill levy is calculated using the current year's taxable value. The application of State Legislature – The Legislature establishes property tax policy for the approved mill levy to new property may result in revenue growth. The the state, including property classes, tax rates, valuation methods, total taxable value varies based on the mix of property types, property reappraisal cycles, property tax limits, appeal procedures, and property values, and the amount of exempt property in the taxing jurisdiction. tax assistance programs. School districts use property taxes to fund multiple budgets based on Taxing Jurisdictions – School districts, cities, counties, and special school funding formulas adopted by the state and based on local districts collect property taxes by setting budgets and mill levies. The preferences. The main budget for the district's general fund must meet a state levies 95 mills for K-12 education and 6 mills for the state university minimum level of required funding and is subject to a maximum budget system. limit. Department of Revenue – The Department of Revenue administers property tax policies adopted by the Legislature. This includes classifying Voters May Approve Property Taxes Above State Limits property, appraising property, and providing taxable values to property State law allows cities, counties, school districts, and special districts to ask owners. voters to collect property taxes higher than those authorized in state law and to levy property taxes to pay for bonds. These levy elections or bond County Treasurers – County treasurers bill and collect property taxes issue questions appear on school, city, or county election ballots. and distribute revenue to taxing jurisdictions. MONTANA LEGISLATIVE SERVICES DIVISION Revenue Interim Committee 5 2 Residential Property Tax What are property taxes? Property Tax Assistance and Appeals A property tax is a tax levied on the value of property. Property taxes are Call your local Department of Revenue office to apply for a property tax levied on land, buildings, and certain business property. assistance program or appeal your property value. Residential property is valued in odd-numbered years. Taxes are billed Montana has four property tax assistance programs. annually and due in two payments on November 30 and May 31. • Property Tax Assistance Program: Reduces the tax rate on the Homeowners with a mortgage often pay property taxes with their mortgage first $200,000 of market value for a primary residence owned by a payments. single person with income below $23,385 or a married person or head of household with income below $31,181. Property Taxes Are a Larger Share of State and Local Revenue in Montana Than in the • Elderly Homeowner and Renter Tax Credit: Income tax credit for homeowners or renters 62 years of age or older with U.S. household income of less than $45,000. Refundable credit of up to $1,150 based on property taxes or rent paid in the prior year on a primary residence. Property taxes in Montana account for 10% of state taxes compared with 2% for all states combined. At the local level, Montana property taxes make up • Disabled Veteran Program: Reduces the tax rate on the primary 97% of local taxes, considerably more than the 71% share for all states. residence of a disabled veteran or surviving spouse with income below $54,067 for a single disabled veteran, $62,385 for a married Under state law, the property tax is the only tax many cities and counties or head of household disabled veteran, or $47,136 for an may levy. A limited number of localities are permitted to impose local option unmarried surviving spouse. resort taxes and some counties levy marijuana taxes. • Intangible Land Value Property Exemption: Exempts the appraised land value that exceeds 150% of the appraised value of the primary residence and improvements for property owned by a family for at least 30 years. The Department of Revenue mails notices of residential property values in the summer of odd-numbered years. Property owners may appeal the property value by following the instructions on the notification letter. MONTANA LEGISLATIVE SERVICES DIVISION S ource: U.S. Census Bureau, Montana Department of Revenue Revenue Interim Committee 1 6 2021-2022 Revenue Interim Committee Members CHAIR VICE CHAIR Sen. Jill Cohenour (D) Rep. Becky Beard (R) (406) 227-1144 (406) 479-3048 [email protected] [email protected] Rep. Alice Buckley (D) Sen. Greg Hertz (R) (406) 404-0891 (406) 253-9505 [email protected] [email protected] Sen. Brian Hoven (R) Rep. Connie Keogh (D) (406) 761-8533 (406) 298-0985 [email protected] [email protected] Sen. Mike Lang (R) Sen. Edie McClafferty (D) (406) 654-7357 (406) 490-5873 [email protected] [email protected] Sen. Shannon O'Brien (D) Rep. Mark Thane (D) (406) 274-3805 (406) 552-3957 [email protected] [email protected] Rep. Jeremy Trebas (R) Rep. Tom Welch (R) (406) 899-5445 (406) 660-2988 [email protected] [email protected] Committee Staff: Megan Moore, Lead Staff RESIDENTIAL [email protected] Jaret Coles, Attorney PROPERTY TAX [email protected] Brochure Design: Laura Sherley, Research Assistant Revenue Interim Committee Data Visualizations: HJ 36 Residential Property Tax Study Dan Kayser, Data Analyst September 2022 https://leg.mt.gov/committees/interim/ric/ [Web address]