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Sen. Molnar brings class-action lawsuit for statewide residential property tax relief


Sen. Molnar brings class-action lawsuit for statewide residential property tax relief

Sep 26, 2023 | 8:19 pm ET
By Darrell Ehrlick
Sen. Molnar brings class-action lawsuit for statewide residential property tax relief
Yellowstone County Courthouse in downtown Billings, Montana (Photo by Darrell Ehrlick for the Daily Montanan).

A former and a current lawmaker are hoping to do what neither the Legislature nor the Montana Attorney General was willing to do – challenge residential property taxes.

In a class-action lawsuit filed in Yellowstone County on Tuesday, attorney Matthew Monforton, a former Republican lawmaker, and current lawmaker Sen. Brad Molnar, R-Laurel, allege that the state is continuing to overcharge residential taxpayers of the state, and the suit insists that the maximum Montana can tax is far lower than the rates established by the Montana Department of Revenue.

The crux of the lawsuit is an allegation that Montana has, for more than a decade, misapplied state statute, which constrains how much the state can charge. The court documents claim that Montana is limited to charging no more than one-half the rate of inflation for the prior three years.

Sen. Molnar brings class-action lawsuit for statewide residential property tax relief
Rep. Brad Molnar (Courtesy Montana Legislative Services).

The lawsuit also charges that Montana has incorrectly interpreted state law since 1999 by allowing itself to “bank” unused mills – the rates at which property is taxed – to use them in the future when it needs.

Rapidly escalating property values, coupled by Montana’s residential property re-appraisal cycle, have created a sort of “sticker shock” syndrome as property tax assessments have been sent out.

Monforton, the attorney representing Molnar who brought the suit, argues that the law, passed in 2001, allows only “a local governmental entity” to bank unused tax caps – a provision that he said was meant to help counties or cities that were being fiscally conservative but may need the extra revenue in future years. Monforton said that nothing in state law allows the Department of Revenue or the state to bank unused mills as it has done this year. Molnar, through the lawsuit, claims that language in state statute is very clear about local entities.

State law currently caps the residential mill levy rate at 95, for education. However, the lawsuit argues the mill levy is subject to the inflation rate. Monforton and Molnar said that the State of Montana should have only been allowed to levy 77.89 mills instead of 95 mills. The extra 17.11 mills will result in more than $80 million of extra revenue that will create a surplus.

While neither the Department of Revenue nor the Governor’s Office responded to inquiries from the Daily Montanan about the class-action claim, Monforton said that the state has decided to tack on the extra 17.11 mills from unused tax mills from previous years, a practice that it has used previously but not to this extent.

“They have done it previously by one or two mills, not by 17,” Monforton said. “And past illegalities by the Department of Revenue do not justify future illegalities.”

Molnar and Monforton argue that state lawmakers never intended to give the state or the Department of Revenue the same authority to “bank” unused property tax caps. Instead, “local governmental entities” mean counties or cities – an argument that hasn’t been explored.

With support from all 56 counties, Beaverhead County previously urged Montana Attorney General Austin Knudsen to issue an advisory opinion on the issue. Advisory opinions by the Attorney General can have the force of law until a court rules on the matter. However, recent requests by those counties have went ignored.

Molnar had also called on lawmakers to hold a special session to change the residential property tax rate, but the leadership of the Republican Party in both the state’s House and Senate seemed cold to the idea, instead supporting a different GOP plan for property tax rebates of as much as $675 per property owner.

Monforton and Molnar filed the complaint as a class action, meaning that if a Yellowstone County judge certifies the motion, it could mean that other “similarly situated” residents – meaning virtually any property owner in the state – could be included as part of the case or eligible for relief.