Zombies and Frankenstein: Montana Legislature looks to cobble together tax relief

A stalemate over property tax relief in both Montana Legislative chambers continues with little end in sight as disputes and heated floor sessions continue. 

Montana Senators left a marathon session on the floor without any property tax relief on Thursday after voting down two major pieces of legislation — House Bill 155 and House Bill 231.

In another twist, the House Taxation Committee on Friday morning amended Senate Bill 542, originally a two-year freeze on property taxes, to include portions of HB 155 and HB 231.

“I think I’m optimistic (542 will) be the vehicle,” Rep. Mark Thane, D-Missoula, who sponsored HB 155, said on Friday morning.

HB 155 is technically still alive in the chamber, as the Senate did not indefinitely postpone the legislation. HB 231 was the preferred bill from the governor, and it would have shifted some tax burden onto those with multiple homes. The Senate indefinitely postponed HB 231 on Thursday night, but voted Friday to reconsider their actions and will take it up again next week.

The 69th Legislative session began with a mandate — both self-imposed by legislators and by the Governor — to develop property tax relief. While movement has been slowly made on the issue, the Legislature has yet to push through expansive property tax relief to the executive branch 78 days into the session.

The House has had long discussions over the merits of Senate Bill 90, legislation that would take tourism tax dollars and use them for tax relief. That bill was tabled in committee and has yet to technically see the House floor, but has been discussed for around an hour total during failed blast motions on Wednesday and Thursday.

However, a version of SB 90 has been factored in to House Bill 924, legislation that would create a large trust.

The discussions on the major bills have been occasionally emotional and often frustrated. It’s also been repeated many times in the hallways, in committee meetings and on the floor that Montanans will hold their elected officials accountable if they don’t pass real tax relief.

In the most recent reappraisal cycle, property taxes increased significantly, even leading to a lawsuit against the state. The worry for many Montanans? Being priced out of their homes with no place to go. Legislators on both sides of the aisle promised property tax help this session.

In the background, deals and arguments over what type of assistance is right for the state reign supreme. But the session is days from concluding and there is no consensus. 

“I think that this is going to be changing every five minutes for the next week,” Sen. Wylie Galt, R-Martinsdale said on Friday.

‘A thoughtfully developed solution’

Before the session started, Gov. Greg Gianforte formed a task force to tackle the issue, and from the beginning of the session this year, he looked to push and prod the Legislature to pass property tax reform, specifically in HB 231.

But both political parties are split into their own factions, responding to different political pressures and interests, and a majority has yet to coalesce around any proposal. 

Some are interested in giving property taxpayers cash in the form of a credit or rebate, some want structural relief, some don’t understand why Montanans can’t have both, and some worry that plans to help residential payers will just hit industry instead.

That impasse has yet to be fully resolved.

There has been some friction between the branches, with legislative Republicans going so far as to issue a press release after the governor made comments about the slow pace of property tax legislation in March.

“The Governor understands the legislative process and should have submitted his proposals earlier if he wanted them enacted more quickly,” the press release stated.

In the meantime, legislators are cobbling together ideas. HB 231, brought by Rep. Llew Jones, R-Conrad, was recently described as a “Frankenstein” bill by Senate Taxation Committee Chairman Sen. Greg Hertz and has faced significant scrutiny.

For Hertz, who represents part of the Flathead, second-homes, including rentals, are common in his district and HB 231 would tax those at a higher rate.

He also said Jones had taken control of the finance and claims process, as well as the budgeting process.

“Now I believe he’s gotten himself into trouble,” Hertz said. “Because now we can only control the budget, but he has no balance over here to allow conservative Republicans to readjust the budget that happens this session.”

During a Thursday press conference, Gianforte reiterated his support for the Homestead exemption in House Bill 231.

“I continue to urge the legislature to keep its focus on Montanans who live in their primary residence, the place that they call home, and not on those who only live here part of the year,” Gianforte said. “Our homestead rate cut was a thoughtfully developed solution and a result of a diverse, bipartisan effort.”

‘Why can’t we do both?’

Republican Senate President Matt Regier has pushed Senate Bill 90, a tax rebate proposal.

Hertz has also said he’s in favor of SB 90, as are some House Republicans, including Billings Rep. Katie Zolnikov.

She brought the first motion to bring the tabled bill to the House floor and said the conversation around the legislation has become convoluted, challenging and difficult.

“The most frustrating part of the discussion is that most of the arguments against the bill basically utilize the assumption that this is the only property tax bill that we’re going to pass,” Zolnikov said in an interview. “And so it’s talked about as if it’s this mutually exclusive thing … SB 90 or nothing.”

She also said people then criticize the bill as not being meaningful reform.

“Of course it’s not meaningful reform,” she said. “You’re comparing apples to oranges here. But why can’t we do both?”

Some Democrats have also supported SB 90, including a cohort who has voted in favor of blast motions to move it to the House floor.

That coalition seems to have taken cues from House Minority leader Rep. Katie Sullivan, D-Missoula, who has voted in favor of bringing SB 90 to the floor twice.

But her caucus has not completely followed her lead. Sullivan had no comment on SB 90 when reached through staff.

For Rep. Jonathan Karlen, D-Missoula, who has been against SB 90, it’s a general fund issue. He’s concerned the rebate will just eat up more of the fund over time, and that it’s simply not enough relief.

“To me, it’s almost an insult to my constituents,” Karlen said. “If I’m like, ‘Hey, you know, guess what, the rates are still going to be the same, residential property taxpayers keep paying more and more of the total tax share. But don’t worry, we’re gonna give you $250 bucks.’”

When asked if he’d consider rebates as a property tax relief option, Gianforte said, “We’ve been pretty clear we need permanent, meaningful relief.”

‘The unique issue of Billings’

Local government policies are playing a role too.

A cohort of representatives from Montana’s largest city have an interest in avoiding the potential legal and constitutional issues related to language in HB 231 and HB 155. 

Under both bills, cities with a charter that has specific stipulations around how many mills they can levy without voter approval could stand to lose millions. This has Billings legislators on both sides of the aisle and in both chambers looking for answers.

“We feel that the unique issue of Billings needs to be taken into consideration when trying to come to a final resolution on property taxes,” Rep. Denise Baum, D-Billings, said in a Thursday text message. “We are hoping that SB 90 will become part of the solution in conjunction with an overall property tax reform.”

There’s also worry about the constitutionality of legislation surrounding solutions proposed for “the Billings problem,” something Hertz has repeatedly said in committee meetings.

During an impassioned Senate floor discussion on HB 231 on Thursday, Sen. Dave Fern, D-Whitefish, who is carrying the bill in the Senate, pushed back against the idea the potential city charter fixes would be unconstitutional.

Karlen had similar thoughts on Billings Friday morning.

Charters were a problem with HB 155, too, and an amendment was added to that bill to address the issue.

“What I would say to folks in Billings is: You’ll be included in long term property tax relief,” Karlen said in an interview. “It’s just a little bit wonkier in how that happens.”

One of the proposed solutions is reimbursing local governments impacted by the issue with state money, an idea Gianforte indicated he wouldn’t support.

“The other hard line we’ve drawn is that we do not think we should take someone’s income tax dollars and use it to backfill local spending,” Gianforte said. “So that’s something we will not do.”

‘Plenty more work to do’

Galt also had a two year-property tax freeze bill he described April 3 on the Senate floor as a “backstop” and “Plan D.” 

That idea is now dead, he said on Friday.

Some Republicans had considered the idea as an option — and not just as a last-ditch attempt to show the Legislature did something on property taxes.

“We’re looking at two weeks, if even less, and being out of here,” Regier said on Tuesday. “And so when things come together and come together fast, and that’s obviously one piece that needs to be talked about.”

But all language regarding a tax freeze was cut out, and while Galt’s name is at the top of House Bill 542, it’s a very different piece of legislation. The House Taxation committee approved a large amendment on Friday morning that creates a $400 tax credit for 2024 taxes paid and takes parts from other pieces of tax legislation. 

Residential rates in HB 542 for 2025 mirror language in House Bill 155, starting at 0.76% rate for residential properties. The calculation for 2026 rates are similar to what’s in HB 231. There’s also a fix in HB 542 for Billings and other cities where there has been conflict between bill language and a charter, though its legality is unclear.

House Speaker Brandon Ler, R-Savage said in the House Taxation committee on Friday morning that it was a good amendment and a step toward how the legislature is going to address property taxes.

“This amendment here kind of has a lot of fixes in it for a lot of different concerns that we’ve heard in the last 78 days,” Ler said.

Other supplementary property tax legislation beyond direct relief has passed out of the Legislature.

SB 117, which is on the Governor’s desk, will allow property taxes collected on new development to be used to offset taxes paid by existing homeowners and businesses. Regier has mentioned it several times as part of a fix for property taxes, and sponsor Sen. Daniel Zolnikov, R-Billings, said he was pleased it passed.

“We’ve got plenty more work to do on property taxes before we wrap up the session, but SB 117 is an important structural reform that will help contain property tax increases heading into the future, and we got it across the finish line,” Sen. Zolnikov said in a press release. “This is a long-term solution to a long-term problem of endless government growth.”

While bits and pieces of property tax legislation have gone through both chambers, no final long-term solution has gathered enough support to get it to the governor’s desk.

“A lot of times you don’t feel like you actually have input,” Rep. Katie Zolnikov said. “Because things have been decided prior. Prior to a committee meeting, prior to a floor vote, prior to the session in general.”

What may have been decided remains to be seen as frustration mounts.