The centerpiece of the 12-part proposal from Governor Greg Gianforte’s Property Tax Task Force could mean a 15 to 20 percent tax cut for about 345,000 homeowners and long-term renters and 32,000 small business owners, according to tax agency estimates.

The package of proposals is expected to be finalized and presented to the governor in the form of a report next week. The most important proposal is a Homestead-Comstead tax exemption, which members believe is the most effective proposal they could achieve by the deadline to lift the property tax burden, especially from the middle class and small business owners.

The task force has spent the past seven months working on proposed legislation that would mitigate the property tax increase that Montana homeowners felt last year. That increase was due in part to the legislature’s failure to reduce the assessed value of property taxes last session, as the IRS recommended, to keep tax increases to a minimum for homeowners.

During two meetings in July, the task force, which was divided into subcommittees on education, local government and tax equity, agreed to submit 12 different proposals in the final report, which is expected to be presented to the governor on August 15, the task force said in its last meeting on July 30. The task force released a draft, which members agreed to move forward with.

THE BEST The proposal discussed at those meetings, the Homestead-Comstead exemption, is perhaps one of the most far-reaching among the dozens the task force plans to propose next session, and it is a similar type of proposal that Democrats said in early July they plan to bring forward next year.

But the two concepts differ in who will benefit from tax relief and who will likely face another property tax increase as the tax burden shifts between single-family homeowners, owners of second homes and short-term rentals, and commercial enterprises of various types.

The working group’s proposal aims to reduce the tax rate on primary residences and long-term rental properties valued up to $1 million to 1.1 percent. This would save each homeowner around 18 percent of their tax burden compared to current law. For homes valued above this market value, the tax rate would rise to 1.9 percent under the proposal.

For Class 4 commercial properties, the tax rate would be 1.5% for properties up to six times the median value and 2.1% for properties above that. The draft report to the governor says commercial properties valued at $2 million and under would likely be taxed at about 23%, while commercial properties valued at $5 million would see a 4% reduction. Commercial properties valued at $10 million would see a 2% increase in taxes, the task force estimates.

The task force’s draft report and discussion among members said the idea behind shifting the property tax burden was to provide relief to Montana residents, not out-of-state homeowners, since they generally do not contribute to Montana’s income tax base and Montana has no sales tax.

One of Gianforte’s key messages at the start of the task force’s work was that he did not want to see any sales tax proposals, meaning the changes would have to be split between property taxes and income taxes.

The Montana Department of Revenue reported that 21% of taxable residential value in Montana is charged to out-of-state addresses to people who use municipal resources without paying for them.

“Because a statewide sales tax is consistently unpopular, a higher tax rate on properties that are not occupied by Montana residents for at least seven months of the year is one of the few ways to tax residents of other states to offset the taxes of Montana residents,” the draft report states.

It’s still unclear to what extent the tax burden will shift, as the IRS is still in the process of determining the full extent of property types. This will be based in part on the tax refund checks requested by homeowners and will also depend on estimates that will be released later this year. The report said the IRS would also likely need to hire additional staff to complete the assessment of whose tax rates will change and how.

“If you move the chairs around and try to bring in some from out of state, there will undoubtedly be a shift. That’s impossible to avoid. The other shift is the shift to income tax, and we all know that Montana residents pay income tax and out of state residents don’t,” said Rep. Llew Jones (R-Conrad), chair of the Tax Fairness Subcommittee, at the early July meeting. “I think this, as we currently stand, is the most equitable solution we’ve been able to achieve so far.”

THE TRAINING The subcommittee, led by David Bedey (Republican, Hamilton), included three proposals in its final report. The first proposes replacing school districts’ property taxes with a statewide levy. The task force believes this would reduce property taxes for poorer school districts and shift the burden to wealthier districts.

Bedey said he believes the proposal will address the “huge discrepancies” in mandatory tax levies across the state’s districts, and that a statewide levy would more equitably distribute the state’s obligation to adequately fund schools.

The second goal is to set the state tax at a fixed 95 percent and leave in place last year’s House Bill 587, which carved out those funds from the general budget fund and would allow counties to levy lower local taxes, according to initiator Jones.

The third approach is to apply either a voter turnout requirement or a two-thirds majority requirement to tax-raising elections, as is the case in some local bond elections. Task force members said a higher minimum threshold for school levies would ensure that more voters within a district or county participate in an election to raise taxes for the district.

THERE ARE Eight proposals from the Subcommittee on Local Government, chaired by Senator Greg Hertz (R-Polson).

Four of them concern mill levy elections and in some ways go hand in hand. Hertz explained that he believes the proposals would prevent local mills in some communities from continually increasing unless everyone is willing to pay more.

The first option would require new voter-approved levies to receive 60% of the vote to pass. Another option would require questions on the mill levy ballot to be phrased in dollar amounts rather than mills, so that mills would automatically adjust to the voter-approved monetary amounts.

Another proposal is to allow all voter-approved levies, except bond levies, to expire after ten years so that they don’t run forever and local voters can decide whether to extend the levies. The task force’s idea is that this could also prevent a constant increase in property taxes.

During discussions in July, Lance Melton, executive director of the Montana School Boards Association, expressed concern that allowing some levies to expire and imposing additional requirements on enacted levies, although they have been rejected less frequently in recent years, could hurt districts if voters do not want to raise their taxes to fund education services.

The fourth goal is to amend the tax calculation law based on last year’s Senate Bill 511, which was introduced by Senator Daniel Zolnikov (R-Billings) and rejected in the last Senate session by a vote of 25-25.

The proposal would require that some newly taxable land be taken into account when setting the value of the tax rates so that existing landowners do not feel the burden as much and tax jurisdiction does not automatically grow, the task force said. The draft final report said some members of the task force believe the statutory mechanism already works well as it is.

Another proposal is to reform Tax Increment Financing (TIF) laws so that economic development districts do not increase the tax burden on municipalities. In addition, the group wants lawmakers to conduct a study to look for ways to limit the growth of special districts. According to the task force, these districts account for about 10% of property taxes paid statewide, but the state has limited information about them.

The last two proposals include adopting portions of Utah’s Truth in Taxation law, which would force taxing authorities to raise taxes above the prior year’s budget to exclude new taxable property only if they hold an announced hearing on the matter and then put the question to a vote.

The other part would address changes to Montana’s Property Tax Assistance Program, particularly with regard to who is eligible for the assistance and the inclusion of an asset-based test to meet eligibility requirements.

Hertz said at the meeting in early July that he wasn’t sure how many people would fall for the theory he put forward that someone has $1 million invested in a 401(k) plan, is collecting Social Security benefits, has a paid-off house and is receiving PTAP.

“That’s not what it was designed for, not for that specific person,” Hertz said. “I think that was part of the thinking, but how many of them are there? We just don’t know.”

The task force had scheduled a meeting for August 15, next Thursday, at its last meeting, to present the report to Gianforte. His office confirmed late Wednesday afternoon that the meeting was still scheduled for that date.

But the subcommittee chairs and task force chairman Ryan Osmundson, director of the Office of Budget and Program Planning, said at the July 30 meeting that they were satisfied with their work and happy with the report.

“It looks like we’ve accomplished pretty much everything we wanted to accomplish,” Osmundson said. “… I’m really grateful for the time and effort that everyone has put into this, because I think this is going to be a very good document going into session. It’s going to give the legislature some great ideas that they can put into practice.”

Blair Miller is a reporter based in Helena. The Daily Montanan is a nonprofit newsroom.