One topic where there’s broad, bipartisan agreement at the state Capitol this winter? The notion that something needs to be done about surging residential property taxes. What, if any, tax reform measures will manage to win support from a critical mass of lawmakers remains an open question, however.
As the Montana Legislature’s 2025 session gears up, both Republican and Democratic lawmakers are crafting bills aimed at providing long-term tax relief. Some of those measures would rework state tax laws in an effort to shift taxes currently landing on residents’ homes to other types of property. One would offer an income tax credit to offset the burden of property tax bills. Others would make it harder for the local government entities that ultimately spend most property tax dollars to grow their budgets.
Property taxes have become a top-of-mind issue for Montana lawmakers in recent years amid the surging property values produced by the state’s ongoing housing crunch. Tax values for residential properties, based on their estimated market value, have generally risen faster than those for other types of property, shifting tax burden onto homeowners and renters.
MTFP estimated previously that the median residential property in Montana saw its tax bill rise by 21% between 2022 and 2023. State revenue department staff have projected that residential taxes could rise by another 11% on average next year if lawmakers don’t adjust the state’s tax system before this year’s session wraps up.
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Lawmakers who want to offer residents substantial immediate property tax relief face an inescapable mathematical reality: Unless they want to force local governments to lay off cops and teachers, the money to lower residential property tax bills has to come from somewhere. That somewhere, for one of the first major tax relief proposals to come up for hearing before a legislative committee this year, is the $120 million a year collected by the state’s pair of bed taxes.
Some further context: Montana, unlike most U.S. states, doesn’t have a statewide sales tax, meaning income taxes and property taxes are the main way public services are funded. Generally speaking, income taxes pay for state-level services, such as health care programs, universities, and the Montana prison system. Most Montana property taxes, in contrast, flow to local services such as law enforcement, fire departments and K-12 schools.
As lawmakers roll up their sleeves to examine the state’s tax system, anti-tax growth advocates outside the Capitol are getting to work too. Bozeman attorney Matt Monforton, a former legislator, said earlier this month that a tax cap initiative he wants to place on the 2026 ballot has cleared a legal sufficiency review conducted by the office of Attorney General Austin Knudsen. Monforton said that decision may be challenged in court, but otherwise clears the way for him and other supporters to begin gathering the signatures necessary to qualify the initiative for the ballot starting this summer.
THE GOVERNOR’S PITCH
The most prominent of the pending legislative proposals is a “homestead” bill backed by Gov. Greg Gianforte after being developed through his property tax task force. Broadly speaking, the measure would reduce taxes on primary residences by raising them on properties used as second homes and Airbnb-style short-term rentals.
The bill, , is sponsored by House Appropriations Chair Llew Jones, R-Conrad. It would have the Montana Department of Revenue track which of the state’s residential properties are being used as primary residences, starting with properties where owners applied for two-time property tax rebates over the last two years and continuing with an application process. Landlords would also be allowed to apply for similar designation on properties they’re renting to tenants on a long-term basis.
Properties designated as primary residences or long-term rentals would qualify for a lower rate in the portion of the tax math that converts property market values into the taxable values used to divide tax burden between different taxpayers. Other residential properties, in contrast, would be assigned higher conversion rates, meaning they end up paying more.
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Democrats pitch property tax relief via income tax credit
A measure pitched by the Democrats in the Montana Legislature would take aim at rising homeowner property bills by offering an income tax credit, offsetting a portion of property tax payments for homeowners and renter households earning up to $150,000 a year.
The bill boosts taxes on high-end properties like Yellowstone Club mansions by specifying an even higher conversion rate for home values in excess of four times the state’s median value. It would also rework some business rates in an effort to keep the residential discounts from pushing higher taxes onto mid- and lower-value commercial business properties.
Jones and the governor have argued that it’s fair to segregate second homes from primary residences in property tax relief because many part-time owners rely on public services when they’re in Montana but don’t file Montana income taxes.
“It’s not fair to Montanans who own their homes and live here and who invest their lives in their communities,” Gianforte said during his Jan. 13 State of the State address. He also used the address to urge lawmakers to fast-track the bill, saying it needs to get to his desk by mid-February so state tax officials can implement it this year instead of next.
Jones and Gianforte have said they believe the proposal could reduce residential taxes by 15%.
WHAT DEMOCRATS WANT
Democrats have pitched an alternative set of property tax measures, including a tax credit that would offset property tax bills for middle- and lower-income residents by offering them a credit on their state income taxes.
Instead of dividing the state tax rolls into primary and non-primary residences like the governor’s homestead pitch, Democrats want to set up a progressive rate system to lower taxes on low-value residential properties and raise them on higher-value ones — regardless of whether the properties are used as full-time homes. Their proposed system would function similarly to the brackets used for income taxes, where higher incomes are taxed at higher marginal rates.
That piece of the Democratic proposal, , would exempt the first $50,000 of residential property value from taxation entirely. It would also offer a discount to higher-value rental properties when the owners charge tenants less than 150% of the U.S. Department of Housing and Urban Development’s fair-market rent benchmarks.
The bill’s sponsor, Missoula Democratic Rep. Mark Thane, said offering progressive tax relief based on property value rather than sorting second homes into a higher-tax bucket would avoid punishing family cabins owned by Montana residents.
Democrats would also offer a property tax discount to business properties, exempting as much as $200,000 in property value per individual owner or business entity from taxes. They say this would support “main street businesses” that are facing higher property taxes as they try to compete with online retailers.
Another Democratic bill, , would tie the income and property tax systems together by offering an income tax credit to offset property tax bills. The credit, which Democrats have dubbed a “housing fairness” credit, would be available to homeowners and renters with household incomes of up to $150,000.
For example, a taxpayer with $50,000 in annual income and a $3,000 tax bill would be eligible for a $1,200 property tax credit. If their tax bill rose by $500 while their income stayed the same, the credit would rise to $1,575 — offsetting three-quarters of the increase.
The bill would also let renters claim the credit by attributing 15% of their rent to property taxes.
Rep. Jonathan Karlen, D-Missoula, the tax credit bill’s sponsor, argues that approach would shield residents from future tax increases they can’t afford to pay.
“It would provide the long-term stability that our constituents need in order to make decisions, to plan — whether it’s a young person trying to plan on what home [they] can afford, or someone planning for retirement,” Karlen said in a Jan. 14 press briefing.
Karlen also argued that it’s better for tax relief measures to assist renters directly, rather than providing a discount to landlords and hoping landlords will pass those savings on to renters.
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OTHER REPUBLICAN IDEAS
A variety of other proposals backed by at least some members of the Legislature’s Republican majority are also circulating in the Capitol.
Sen. Carl Glimm, R-Kila, for example, has introduced a bill that would redirect money collected by the state’s lodging and vehicle rental taxes, some of which is currently used for tourism promotion, to property tax relief on primary residences. Republican Senate leadership and the Legislature’s hard-right Freedom Caucus have voiced support for the proposal.
That “bed tax” bill, , would have the state Department of Revenue track which homes are primary residences and work with counties to put the relief money toward credits on homeowners’ tax bills
According to a fiscal analysis prepared by the governor’s budget office, the bill would divert about $40 million a year currently allocated to tourism promotion through the Montana Department of Commerce. It would also defund the University of Montana’s and divert about $50 million a year that is currently sent to the state’s General Fund.
The analysis estimates that the bill would produce more than $100 million a year in property tax relief, providing about $450 to each of roughly 230,000 primary residences.
In a December opinion column , Glimm argued that the proposal provides a way to use dollars collected from tourists to help residents cover the cost of local services.
“Would you rather state government spend public money on things like billboards in Chicago to attract more tourists, or use that money to lower your property taxes?” Glimm wrote. “I know exactly how my constituents in the Flathead Valley would answer that question and I’m sure their opinion is shared by other Montanans.”
Some Republicans have also said they want to adjust a longtime state law that nominally caps how fast local governments can grow their property tax collections.
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Gianforte-backed property tax measure would offer homeowner relief by raising taxes on second homes, Airbnbs
A property tax relief measure touted by Gov. Greg Gianforte as his signature response to widespread public angst over rising residential tax bills reached its initial hearing at the Montana Legislature.
Other proposals would also tweak details for the rules that apply as cities, counties and school districts pursue voter approval to raise taxes, generally making it harder for local governments to collect more taxes over time.
, for example, would require local governments to put voted levies on ballots phrased in terms of dollar amounts rather than “mills,” a technical term for a unit of property taxes. While mill-based collections increase proportionately to rising property values, dollar-based levies do not.
THE OUTSIDE INITIATIVE
Outside the Capitol, tax-cap backers organized as Cap Montana Property Taxes are looking to the state’s ballot initiative process to circumvent legislative politics. Monforton, the initiative’s lead advocate, has expressed doubt lawmakers will make meaningful progress on the property tax issue this year.
If it qualifies for the ballot and is passed by voters, the current iteration of the tax cap initiative would amend the Montana Constitution to require the state to value homes for tax purposes annually, as opposed to the current two-year reappraisal cycle. It would also limit annual growth in assessed value for primary residences that don’t change ownership to 2% a year. When a home is sold, its assessment would generally reset to market value.
As such, the initiative would provide a guarantee to homeowners that their taxes would increase only modestly over the time they own their properties. It doesn’t specify what would happen to the taxes on properties not covered by its language. That means it could eventually raise taxes on farms, businesses and any residential property that isn’t a “single-family dwelling” being used as a primary residence.
Earlier iterations of the initiative have failed to make the ballot after being bogged down in litigation brought by a including the Montana Federation of Public Employees, the Montana Association of Realtors and the Montana Chamber of Commerce. Those opponents have argued that the tax-cap approach, which is modeled on California’s landmark Proposition 13, would upend the tax system that funds essential public services and produce spillover effects that raise taxes for non-residential properties such as farms and ranches. Prop 13 triggered decades of , and .
The Gianforte-backed homestead proposal and the two Democratic bills have been referred to the House Taxation Committee, where the Democratic bills are set for a public hearing Jan. 21 and the Gianforte-backed proposal is set for hearing Jan. 22. The bed tax bill is set for a hearing before the Senate Local Government Committee Jan. 20.
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