HELENA — On Wednesday morning, a state legislative committee moved forward several of the major tax relief bills still under consideration – but not before making big changes to the language.
The Senate Taxation Committee met for just over two hours. In that time, they covered a dozen bills.
“I’m hoping to clear the board out of here today,” said Sen. Greg Hertz, R-Polson, who chairs the committee.
(Watch the video to see some of the bills the committee debated.)
Committee members voted to advance House Bill 231, Gov. Greg Gianforte’s preferred property tax proposal – but sometimes with reservations.
“I'm not particularly fond of this bill, but I agreed to help get it out of here, just so we can get it on the floor and have a debate about it,” Hertz said.
“This is an atrociously complicated bill,” said Sen. Becky Beard, R-Elliston. “But I think we need to get it down to the financial wizards, to start looking at the good parts of it and perhaps come to some kind of reconciliation there.”
They also passed House Bill 155, another property tax bill. For both bills, they added significant amendments.
HB 231, sponsored by Rep. Llew Jones, R-Conrad, is known as the “homestead” bill. It would give lower tax rates to most Montanans’ primary residences, long-term rentals and smaller commercial properties, but raise rates on properties that don’t qualify for those homestead rates.
The committee voted to add provisions to lower all residential property tax rates for a year and offer a one-time property tax rebate of up to $400, since the state might not be able to implement the homestead rates this year. Gianforte had frequently called on the Legislature to pass HB 231 by mid-February to give the Montana Department of Revenue time to get it in place for 2025.
“The issue with 231 is, obviously we're late in the game,” Hertz said Wednesday.
They also made a change aimed at resolving an issue that could lead to a big loss of revenue for two Montana municipalities. The city of Billings and the town of Sunburst are governed by voter-approved charters that limit the number of property tax mills they can levy. If a property tax bill lowers tax rates, other cities and towns can increase their mills to keep revenue steady – but Billings and Sunburst don’t have that option.
The amendments to HB 231 would allow these municipalities – and other local governments with fixed levies to fund specific priorities like public safety – to adjust their mills once to avoid losing revenues. If that provision is found to be unconstitutional, an alternate fix would go into effect, to reimburse those communities for up to four years from the state general fund.
HB 155, sponsored by Rep. Mark Thane, D-Missoula, originally created a graduated property tax rate – charging seven separate rates for residential property, rising as the property’s value increased. However, the committee stripped out that structure entirely. Instead, the bill would now have one rate for homes worth less than $1.5 million and one for more valuable homes. The committee also added a different version of a homestead exemption, which would exempt the first $50,000 of a Montanan’s primary residence from taxation.
The committee did not agree to a proposed amendment to address the Billings and Sunburst issue on HB 155, but members said they would look at possibly adding an amendment on the floor.
Lawmakers said Wednesday that they had reached the point in the session where, even if they don’t like every part of these bills, they wanted to keep the conversation going.
“We’ve got to move this bill forward, at least for the optics of it for the state – saying we are taking property taxes seriously and we're putting something on the floor for a good discussion,” said Sen. Dave Fern, D-Whitefish.
Hertz said he was reluctant to advance HB 231 after the committee voted against his proposal to add a provision putting more limits on local government levies.
“I think Senator Fern hit the nail on the head when he said the word ‘optics,’ because I believe what we're doing here with either 231 or 155 is just that,” he said. “We're providing property tax relief only because one other taxpayer is going to step up and pay more in taxes.”
The committee voted down one other large-scale property tax bill: House Bill 528, from Rep. Ed Byrne, R-Creston. It would have lowered tax rates across the board for residential, commercial and agricultural properties. Opponents warned it would lead to significant tax increases for other types of property.
“if we're going to be intellectually honest in this, we can't cut property taxes – not unless we really get down to the education or local government,” said Sen. Wylie Galt, R-Martinsdale. “So with the way everything shifts, I believe that this is shifting too much on to, as the chair said, agriculture, industry – which we will see that shift come back in all of our utility bills.”
The committee also advanced a major income tax reduction proposal: House Bill 337, sponsored by House Speaker Rep. Brandon Ler, R-Savage. It would raise the income level at which taxpayers transition from Montana’s lower tax bracket to the higher bracket, lower the tax rate for the higher bracket, and increase the earned income tax credit.
Gianforte had backed Senate Bill 323, which would have dropped the top tax rate faster. The committee voted that bill down, but they approved an amendment to HB 337 that would create triggers – which could eventually bring the top rate all the way down to the lower rate, if Montana’s state revenues keep rising in the coming years.
“I thought it was too fast in two years, and I think triggers make a lot more sense,” Hertz said. “Plus we'll be back in 2027; if we need to look at the triggers, adjust them, eliminate them, we can do that. But I am amazed how fast our income tax collections have grown; it is truly amazing and that's why we have such these huge budget surpluses – it's fully from income tax collections. And at some point in time, we need to quit overcharging the taxpayers of Montana.”
Fern supported the amendment but said he had reservations about what another income tax reduction would mean for the state budget in the long term.
“I think that we probably can’t responsibly get to a 4.7% – I’ll be blunt – without a sales tax,” he said. “I just think that looking at the outward years.”
With HB 231, 155 and 337 all having been amended, if any of them pass the Senate, they’ll need to go back to the House for consideration. On Wednesday, both chambers voted to suspend their rules and push back a transmittal deadline – allowing amended bills dealing with state money to return to their initial chamber until the 82nd legislative day, April 25.
