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A pair of bills aimed at closing loopholes that may make it too easy for Montana property owners to qualify for hefty property tax benefits intended for farms and ranches got their initial hearings before the Montana Legislature this week, drawing hours of commentary from supporters and opponents.

, heard Friday by the House Taxation Committee, would rework state tax code so it no longer automatically awards agricultural tax status to large properties without requiring their owners to document farm income. , heard by the Senate Taxation Committee on Wednesday, would change tax calculations for land beneath homes on agricultural properties so the designation provides less benefit for lakefront parcels and other properties that would otherwise be taxed as high-value real estate.

Supporters say the changes, which would be enacted independently of residential property tax measures under consideration by the Legislature, would help ensure the agricultural benefit only goes to properties that should be receiving it. 

“There are pieces of property across the state that are taking advantage of the preferential agricultural tax rates when in fact they are not bona fide agricultural operations,” Republican Lt. Gov. Kristen Juras testified while supporting HB 27 during the Friday hearing.

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Previous reporting by �ԹϺ��� and High Country News found that the current tax system allows thousands of million-dollar homes across Montana to claim agricultural status, saving many of them hundreds or thousands of dollars a year versus what they would be paying if taxed like most residential properties.

One of those properties is Republican Gov. Greg Gianforte’s Bozeman home, where an agricultural designation means he’s paying an effective land tax rate that is about 1/144 what a neighbor is paying across the street. (The governor’s office has said his family’s land is used for barley and alfalfa production and to board horses and mules.)

Both bills are supported by the Montana Department of Revenue, which developed them through a stakeholder working group that was convened after bills trying to address the issue failed to pass the Legislature in 2023.

Under current law, properties of 160 acres or more are automatically classified as agricultural, which means they’re valued for tax purposes based not on how much they’d sell for but rather how much money their owner could theoretically earn farming or ranching them. Smaller properties can qualify for the agricultural designation if they demonstrate at least $1,500 a year in farm or ranch income, a threshold that hasn’t been updated since the 1980s.

The application bill, HB 27, would instead require property owners to demonstrate farm income for all properties where they want an agricultural designation. It would also specify that income from hobby farming, hunting trips, dude ranching and conservation-related activities doesn’t count as farm income.

Large properties that don’t qualify as agricultural under the new measure would instead be classified as “idle” land. Idle land would still be valued based on potential farm production, but would be taxed at a higher rate.

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Proponents said Friday those changes would ensure the full farm and ranch tax break isn’t given to property owners who take their land out of agricultural production. Juras called out “privately owned elk reserves” as an example in her remarks. Another supporter, United Property Owners of Montana Director Chuck Denowh, pointed to conservation nonprofits such as American Prairie, formerly the American Prairie Reserve, which has attracted criticism from agricultural groups as it buys land in north-central Montana.

As introduced, the application bill would have also scaled the income threshold up from $1,500 to $4,000, a change that would have made it harder for property owners to secure agricultural status with nominal farming effort. However, sponsor , said during Friday’s hearing that she intends to amend the measure to dial back that change.

“It’s a reasonable number. Although it hasn’t been changed since 1986, we felt like commodity prices are not necessarily affected by inflationary factors,” Essmann said.

�����������Բ�’s planned amendment also avoids imposing higher taxes as it eliminates a partial agricultural tax break currently granted automatically to properties between 20 and 160 acres. Those properties would also be reclassified as idle land if they don’t meet the $1,500 income threshold.

Opponents to the application bill said they worried it could complicate conservation easement arrangements or encourage small farmers to sell their land for development. Others said it should offer accommodations for homestead-style farms that can’t report the $1,500 in farm income because the owners eat most of what they grow instead of selling it.

“Hobby farms may be a hobby to some, but are subsistence to others,” said former Granite County commissioner Chunk Hinkle.

Essmann said that she also plans to amend the bill in an effort to address subsistence farming concerns.

“What we hope is that some million-dollar properties that engage in no agricultural production, that have been taking advantage of our preferential ag rate for many years, will find out that they can still do whatever they want on their land but they are not going to get the ag rate unless they grow something,” Essmann said.

Supporters of the homesite bill, SB 4, argue that it would address situations where an agricultural designation dramatically reduces tax bills on high-value real estate.

Revenue Department Property Assessment Bureau Chief Bryce Kaatz, for example, presented an example at Wednesday’s Senate Taxation Committee where a property on Flathead Lake including a boathouse, tennis court and four residential dwellings has qualified as agricultural thanks to the presence of a small orchard. The status, Katz said, means its owner pays a land tax bill of about $70 a year while nearby properties owe about $5,000.

“There is quite a discrepancy and quite a preferential treatment, and really if you look at these parcels they are not that different,” Katz said. “So you can see, hopefully, that there are some equalization issues with how those one-acre homesites are treated.”

One-acre homesites on agricultural properties are currently taxed like other agricultural property, a treatment that gives them substantial savings compared to the market-rate tax valuations for lots beneath urban homes. The bill would instead subject them to market rate valuation but offer an exemption to avoid raising taxes on properties with below-average values.

That exemption wasn’t enough to head off opposition at Wednesday’s hearing.

Steve White, a former Gallatin County commissioner whose family ranches on the outskirts of Bozeman, said he was worried about the bill raising taxes on longtime agricultural operators with land around fast-growing cities. 

“There will be collateral damage,” White said, “In Gallatin County, that translates to over 1,100 ag owners.”

Revenue Department Director Brendan Beatty acknowledged the homesite bill would raise taxes on some property owners — but maintained it would also make the tax system more fair.

“There is a big distinction between good policy and who gets hit, whose ox gets gored — I totally understand that there are some oxes being gored here.”