Officials hope new state property tax system will help taxpayers

Property tax assessments will likely start landing in Montana property owners’ mailboxes in early July, and following an overhaul of the state property tax system by the 2015 Legislature, state officials hope they finally will be comprehensible to ordinary taxpayers.

Senate Bill 157, sponsored by Sen. Bruce Tutvedt, R-Kalispell, was signed into law April 29 and was designed to simplify Montana’s notoriously complicated property tax system.

For owners of residential, commercial, agricultural and industrial property, the state’s six-year reappraisal cycle has now been changed to a two-year cycle.

The last statewide reappraisal, undertaken in 2008, brought renewed attention to the issue after the subsequent real estate crash brought dramatic drops in the values of properties that were still being taxed at 2008 rates. In Flathead County, where some of the largest increases in the state occurred, the reaction was particularly acute.

“Last time we had a reappraisal, we had a real boom and then there was a real drop in values,” Flathead County Treasurer Adele Krantz said. “By the time we sent out assessments it was in the middle of that, and people were getting high reappraisals, but their value had gone down with the market.”

Scott Williams, the Department of Revenue’s western regional director, said his department supported the change, which was aimed at making appraised values more reflective of their current price.

“There’s some significant benefit to it for us, if you discount the fact that we’ve got to do all of our work in one-third of the time with no new money to do it,” Williams said. “It’s going to be much easier to discuss the values with the taxpayers.”

He said the department also will also benefit because of the time-consuming process of calculating phase-ins over six-year periods, in which increases in property taxes would be incrementally included in tax bills each year to lessen the blow to taxpayers. Those phase-ins have been eliminated, as have related exemptions for residential and commercial property taxes, which were recalculated each year.

Williams described the state’s property tax system as a “three-legged stool,” with the Department of Revenue determining taxable value, the Legislature setting the tax rate and local tax jurisdictions calculating the number of mills needed to meet their budget requirements. The final taxes are calculated by multiplying each of those values together.

Tax rates for different types of property will remain static for at least two years at a time, with the Legislature able to tweak them every two years depending on how values have shifted between classes.

“Now we have a simple system that the people can understand,” Tutvedt said after his bill became law. “You have an accurate value on your home, so now policy-makers can decide how they want to tax the different classes based on accurate values.”

For residential and commercial properties, those tax rates now stand at 1.35 percent and 1.89 percent, respectively. As introduced, the bill would have grouped those two classes together, but a later amendment separated them once again.

Timber industry representatives had objected to a proposed two-year cycle on commercial timber lands, ultimately winning a continuation of their six-year cycles.

Most timber land values have dropped by this year’s appraisal, but that decrease will be offset to an extent by an increase in the tax rate from .29 to .37 percent. Assessments of timber lands will be based on a 10-year average in timber productivity values, a change from the previous five-year average.

For taxpayers, Williams hopes the assessments ultimately will be much less confusing.

“They’ll generally say, here’s your valuation, the current year’s millage and an estimate of what their taxes will be,” he said. “The valuation is probably going to be a lot more transparent to them, as opposed to a number of calculations that were required to mitigate a six-year reappraisal cycle.”

As with previous years, tax bills will head out to property owners in late October, and the first half of the two-year bill will be due at the end of November.

Reporter Samuel Wilson can be reached at 758-4407 or by email at swilson@dailyinterlake.com