Time to reassess Montana's tax exempt properties
How many buildings in Montana get fire and police protection for free?
That question can now be answered because the Montana Department of Revenue has built a map that shows all the tax exempt property in Montana. The map is color coded by the type of exemption the parcel has and lists the corporate name of the not for profit owner. You can look at it here: mtdorpad.maps.arcgis.com/home/index.html
Toward the end of my legislative service, I began to think about the impact that exempting certain properties from paying taxes had on the tax burden of those who remained, namely the homeowners and small businesses Montana Legislators keep hearing from. So I asked the Montana Department of Revenue for a list of all the tax exempt property in my home county. Surprisingly, at that time, the DOR told me that they couldn’t provide me with one as they had never built one. Therefore, I introduced HB389 in the 2015 session to require all owners of tax free properties in Montana to pay a small fee, reapply for tax free status and to require the department to verify that the properties were still qualified to be tax free.
The total number of exempt properties identified for review exceeded expectations. The department originally mailed notices to 3,290 entities identifying 7,841 parcels for review. The number of parcels finally reviewed totaled 10,435. 1,087 failed to respond or provide information. 966 applied but were denied due to failure to qualify. So according to a 2021 report from the DOR, HB389 had the net effect of restoring over 2,000 parcels back to the tax rolls and collecting over $2 million in taxes that homeowners and small businesses no longer had to pay.
But other interesting information also came to light. Now that the DOR finally had a complete list of exempt properties they could estimate the total value of that property. The DOR estimated that the total ballpark value of tax exempt property in Montana is over $5 billion which, if on the tax rolls, would pay nearly $60 million in taxes. So it is now clear that owners of homes and small businesses are paying to provide the public services like fire and police that the tax exempt properties receive for free.
Are these tax exempt organizations financially capable of paying for police and fire services? There is a way to tell. You can set up a free account at a website called Guidestar to see how financially solvent the tax exempt organizations in your city actually are. Guidestar lists the tax exempt organizations and contains links to their IRS form 990s which shows their gross receipts and their net profit after paying all expenses. Please take a look. It makes for very interesting reading.
Should we end police or fire protection for these tax exempt entities like our churches, charities like the Girl Scouts, and our hospitals, since they do not pay for them? Of course not. But would it be fair for financially healthy organizations to pay to cover the cost of at least the fire and police protection they receive so that our retirees and families of lesser means don’t keep getting squeezed by higher and higher property taxes? I think so.
If you agree, please contact your legislators and ask them to start thinking about a fair means of sharing the cost of these basic public services with all the organizations that need and require those services, not just those unlucky enough to own a home or business that is not organized as a tax exempt entity.
Former Sen. Jeff Essmann, R-Billings, served as chairman of both the House and Senate taxation committees during his 14 years in the Legislture.