BILLINGS -- On the heels of property tax bills that were mailed to homeowners last week, the Montana Budget and Policy Center has published a seven-page document explaining Montana’s property tax system.
“Policy Basics: Montana’s Property Tax System” is available at www.MontanaBudget.org.
According to the report, state and local property taxes collected in Montana make up about 40 percent of state and local revenue. Eighty-one percent of property tax revenue goes to local governments, including schools, public safety and infrastructure, such as roads and bridges.
Montana homeowners pay about 48 percent of property taxes, and renters aren’t off the hook.
They pay a portion of the property taxes paid on rental properties because taxes are passed through by the landlord when setting the rent amount. According to the report, the passed-through property taxes paid by renters tend to represent a higher share of their income than for wealthy taxpayers.
The Montana Department of Revenue is responsible for appraising, or valuing, property for determining the market value. Each taxing jurisdiction — counties, cities and school districts — uses these values to calculate property taxes.
The Montana Legislature has created 14 different classes of property, including residential, commercial, agricultural land, business equipment and centrally assessed property, such as utilities. The Legislature assigns a tax rate to each class of property and multiplies that tax rate by the property’s market value to determine the taxable value.
With those values, cities and counties apply the mill levies to the property’s taxable value to determine taxes owed. County governments are responsible for collecting property taxes and distributing the appropriate portion of those taxes to the state, cities, school districts and other taxing jurisdictions.
Residential property has grown as a share of overall taxable value, from about 30 percent 20 years ago to 45 percent in 2013, according to the Montana Department of Revenue. Commercial property’s share also increased over the same period, but only by about 2 percent, to about 13 percent of overall taxable value.
Utility, agriculture and business equipment have all shown declines in their share of overall taxable value.
Residential property owners pay a greater share of property taxes, in part, because the legislature has cut the tax rates on other property classes. The effective tax rate on business equipment, for example, has fallen by more than 50 percent in the past few decades.
The Montana Constitution and state law requires the Department of Revenue to reappraise all property every six years, and the department is now completing the reappraisal cycle that began Jan. 1, 2009, and ends Dec. 31.
The department estimates that total taxes on a median home in Yellowstone County, worth about $179,000, will be $1,398 in 2015, down $21 from 2014.
MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.