Lately, you may have come across articles from some members of the Legislature promoting the new property tax bills (now laws) that were passed this year. It appears they have been on a publicity tour highlighting the benefits of these new laws while criticizing those who opposed them. There were legislators, including myself, who opposed these bills for a variety of reasons that have not been accurately represented. Our opposition was not solely about providing a small rebate or protecting the interests of ourselves and out-of-state property owners. Instead, many of us believed that this these new tax laws simply shuffled the deck of property tax collections. Real property tax reform will require a comprehensive overhaul of government funding, a challenge that few are willing to tackle to make substantial changes.
So, why is this considered a tax shift? It is important to note that property taxes primarily fund local governments, including cities, counties, schools, and fire departments. These local entities will not collect less money than in previous years. According to Montana Code (MCA) 15-10-420, they have the authority to increase their budgets by half the average rate of inflation over the past three years. While some may argue that local municipalities should reduce their budgets, I do not believe that is applicable in our county. Our budgets are already as tight as they can be, especially considering the rising costs of materials and services in recent years.
For instance, if the city of Dillon collected $1,000,000 in taxes last year, they will collect that same amount the following year, plus the growth rate prescribed in MCA 15-10-420. This means that if the tax on your residence decreases—according to advocates of the new property tax laws—the loss in revenue must be compensated for elsewhere. In Dillon, that would come from businesses. By definition, this constitutes a tax “shift.” The authors of these promotional articles even mention that someone else will be paying more. If business taxes increase, what does that mean for the cost of the products or services we purchase? Or what happens if market forces don’t allow a business to pass the tax on to the customer? They must pay the new tax out of their profits. What if they already have a slim profit margin? Well, they just might have to close their business.
The same principles apply to our county budget, which will likely include adjustments to agricultural land taxes to make up for the decline in residential tax revenue. Most likely, the number of mills assessed on each property will simply increase to generate revenue to offset the loss in revenue caused by the lower tax rates on primary residences as a result of the lower valuations imposed by the new property tax laws.
Proponents of these new laws argue for taxing second homes at significantly higher rates to keep up with revenue needs. They claim that out-of-state owners benefit from living in Montana part time without paying income tax, thus not contributing to governmental operations. However, if you examine your property tax bill, you will see that your taxes fund essential services such as road departments, fire services, libraries, waste management, public health, and police departments. One crucial service that often goes unnoticed is education—our schools are funded through these taxes as well! A service that non-residents never use.
Additionally, keep in mind that the state cannot distinguish between second homes owned by residents and non-residents. These new tax rates will apply to everyone equally. Consider how many people we know who own a second home, whether it’s a cabin or another house, including those with multiple residences on ranches.
According to the Department of Revenue, here are the projected rate changes for Beaverhead County over the next two years. I will focus on 2026 because the new rates will be fully integrated by then. We are set to receive a $400 rebate this year for property taxes paid in 2024.
Below are the estimated percentage changes based on tax year 2024. You can refer to your 2024 tax bill to see how these changes will affect you.
Primary residences will experience a 27% decrease in taxes, mainly due to the implementation of the Homestead Exemption reduced tax rate. If you own only one home, this is the only potential decrease available for any category.
– Agricultural residences that are not primary homes will see a 22% increase—this includes multiple homes on ranches.
– Second homes, whether owned by residents or non-residents, will face a dramatic 74% increase. This category includes houses and cabins in the mountains or by lakes, as well as family cabins passed down through generations and properties purchased as investments for short-term rentals.
– Other agricultural land will experience a 5% increase.
– Commercial properties will see a 2.5% increase.
– Utilities, pipelines, and similar services will encounter a 12.5% increase.
Keep in mind that if the newly calculated assessed values do not generate the needed revenue, the mills levied will be increased. This scenario appears likely in the city of Dillon, suggesting that the savings seen from the 27% decrease in taxable value may diminish as the mills increase.
As you can see, since the primary residential properties constitute the main tax base and their rates are decreasing, the burden will be shifted to other property categories. These numbers are preliminary, and we are collaborating with cities, counties, and the Department of Revenue to provide the most accurate information possible. I hope this insight helps you understand what to expect regarding property taxes in the coming years.
I understand that this may seem overly complicated—and it is—but I aim to answer the questions I have been receiving and to offer you the best information I can. Please feel free to reach out to me if I can help you in any way.
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