House Bill No. 590
Introduced By _______________________________________________________________________________
A Bill for an Act entitled: "An Act adjusting tax rates for class three, four, and ten property to compensate for increased valuation of taxable property; providing an exemption to the property tax limitation for taxing jurisdictions to increase property tax mill levies with the approval of their electorate; amending sections 15-6-133, 15-6-134, 15-6-143, and 15-10-412, MCA; and providing an immediate effective date and a retroactive applicability date."
Be it enacted by the Legislature of the State of Montana:
Section 1. Section 15-6-133, MCA, is amended to read:
"15-6-133. Class three property -- description -- taxable percentage. (1) Class three property includes:
(a) agricultural land as defined in 15-7-202;
(b) nonproductive patented mining claims outside the limits of an incorporated city or town held by an owner for the ultimate purpose of developing the mineral interests on the property. For the purposes of this subsection (1)(b), the following provisions apply:
(i) The claim may not include any property that is used for residential purposes, recreational purposes as described in 70-16-301, or commercial purposes as defined in 15-1-101 or any property the surface of which is being used for other than mining purposes or that has a separate and independent value for other purposes.
(ii) Improvements to the property that would not disqualify the parcel are taxed as otherwise provided in this title, including that portion of the land upon which the improvements are located and that is reasonably required for the use of the improvements.
(iii) Nonproductive patented mining claim property must be valued as if the land were devoted to agricultural grazing use.
(c) parcels of land of 20 acres or more but less than 160 acres under one ownership that are not eligible for valuation, assessment, and taxation as agricultural land under 15-7-202(1). The land may not be devoted to a commercial or industrial purpose.
(2) Class three property is taxed at
the taxable percentage rate applicable to class four property, as provided in
(3) The land described in subsection (1)(c) is valued at the productive capacity value of grazing land, at the average grade of grazing land, and the taxable value is computed by multiplying the value by seven times the taxable rate for agricultural land."
Section 2. Section 15-6-134, MCA, is amended to read:
"15-6-134. Class four property -- description -- taxable percentage. (1) Class four property includes:
(a) all land, except that specifically included in another class;
(b) all improvements, including trailers or mobile homes used as a residence, except those specifically included in another class;
(c) the first $100,000 or less of the market value of any improvement on real property, including trailers or mobile homes, and appurtenant land not exceeding 5 acres owned or under contract for deed and actually occupied for at least 7 months a year as the primary residential dwelling of any person whose total income from all sources, including net business income and otherwise tax-exempt income of all types but not including social security income paid directly to a nursing home, is not more than $15,000 for a single person or $20,000 for a married couple or a head of household, as adjusted according to subsection (2)(b)(ii). For the purposes of this subsection (1)(c), net business income is gross income less ordinary operating expenses but before deducting depreciation or depletion allowance, or both.
(d) all golf courses, including land and improvements actually and necessarily used for that purpose, that consist of at least nine holes and not less than 3,000 lineal yards; and
(e) all improvements on land that is eligible for valuation, assessment, and taxation as agricultural land under 15-7-202, including 1 acre of real property beneath improvements on land described in 15-6-133(1)(c). The 1 acre must be valued at market value.
(2) Class four property is taxed as follows:
(a) Except as provided in 15-24-1402 or 15-24-1501, property described in subsections (1)(a), (1)(b), and (1)(e) is taxed at
3.86% 2.78% of its market value.
(b) (i) Property qualifying under the property tax assistance program in subsection (1)(c) is taxed at
3.86% 2.78% of its
market value multiplied by a percentage figure based on income and determined from the following table:
Income Income Percentage
Single Person Married Couple Multiplier
Head of Household
$ 0 - $ 6,000 $ 0 -$ 8,000 20%
6,001 - 9,200 8,001 - 14,000 50%
9,201 - 15,000 14,001 - 20,000 70%
(ii) The income levels contained in the table in subsection (2)(b)(i) must be adjusted for inflation annually by the department of revenue. The adjustment to the income levels is determined by:
(A) multiplying the appropriate dollar amount from the table in subsection (2)(b)(i) by the ratio of the PCE for the second quarter of the year prior to the year of application to the PCE for the second quarter of 1995; and
(B) rounding the product thus obtained to the nearest whole dollar amount.
(iii) "PCE" means the implicit price deflator for personal consumption expenditures as published quarterly in the Survey of Current Business by the bureau of economic analysis of the U.S. department of commerce.
(c) Property described in subsection (1)(d) is taxed at one-half the taxable percentage rate established in subsection (2)(a).
(3) Within the meaning of comparable property, as defined in 15-1-101, property assessed as commercial property is comparable only to other property assessed as commercial property and property assessed as other than commercial property is comparable only to other property assessed as other than commercial property."
Section 3. Section 15-6-143, MCA, is amended to read:
"15-6-143. Class ten property -- description -- taxable percentage
-- alternative classification. (1) Class ten property
includes all forest lands as defined in 15-44-102.
(2) Class ten property is taxed at
the percentage rate "P" 0.35% of its forest productivity value. (3) For taxable years beginning January 1, 1994, and thereafter, the taxable percentage rate "P" applicable to class ten
property is 4%/B, where B is the certified statewide percentage increase to be determined by the department of revenue as
provided in subsection (4). The taxable percentage rate "P" must be rounded downward to the nearest 0.01% and must be
calculated by the department before July 1, 1994. (4) (a) Prior to July 1, 1994, the department shall determine the certified statewide percentage increase for class ten
property using the formula B = X/Y, where: (i) X is the appraised value, as of January 1, 1994, of all property in the state, excluding use changes occurring during the
preceding year, classified under class ten as class ten is described in this section; and (ii) Y is the appraised value, as of January 1, 1993, of all property in the state that would be classified under class ten as
class ten is described in this section as this section reads in 1993. (b) B must be rounded downward to the nearest 0.0001%."
NEW SECTION. Section 4. Voter approval for taxing unit to levy additional mills to compensate for 1997 revaluation and property tax rate adjustments. (1) The number of mills levied by a taxing jurisdiction may be increased if authorized by the electorate of the taxing jurisdiction as provided in this section.
(2) (a) If because of the implementation of the 1997 statewide revaluation of property and subsequent adjustments of tax rates to compensate for the statewide average increase in property values the anticipated property tax revenue of the taxing jurisdiction for tax year 1998 will be less than the property tax revenue of the taxing jurisdiction for tax year 1997, the electorate may authorize the levy of an additional number of mills, not to exceed the number of mills necessary to raise the same amount of property tax revenue raised by the taxing jurisdiction in 1997.
(b) If a taxing jurisdiction anticipates that it will raise at least the same amount of property tax revenue in tax year 1998 as it raised in tax year 1997, the electorate may authorize the taxing jurisdiction to levy an additional number of mills, not to exceed the number of mills that would raise property tax revenue equal to the amount that would have been raised by the taxing jurisdiction had the tax rates in 15-6-133, 15-6-134, and 15-6-143 not been reduced.
(3) Unless the ballot measure for approval of the increased millage provides otherwise, an increase in the number of mills authorized by this section is not required to be voted upon annually.
Section 5. Section 15-10-412, MCA, is amended to read:
"15-10-412. Property tax limited to 1986 levels -- clarification -- extension to all property classes. Section 15-10-402 is interpreted and clarified as follows:
(1) The limitation to 1986 levels is extended to apply to all classes of property described in Title 15, chapter 6, part 1.
(2) The limitation on the amount of taxes levied is interpreted to mean that, except as otherwise provided in this section, the actual tax liability for an individual property is capped at the dollar amount due in each taxing unit for the 1986 tax year. In tax years thereafter, the property must be taxed in each taxing unit at the 1986 cap or the product of the taxable value and mills levied, whichever is less for each taxing unit, except in a taxing unit that levied a tax in tax years 1983 through 1985 but did not levy a tax in 1986, in which case the actual tax liability for an individual property is capped at the dollar amount due in that taxing unit for the 1985 tax year.
(3) The limitation on the amount of taxes levied does not prohibit a further increase in the total taxable valuation of a taxing unit as a result of:
(a) annexation of real property and improvements into a taxing unit;
(b) construction, expansion, or remodeling of improvements;
(c) transfer of property into a taxing unit;
(d) subdivision of real property;
(e) reclassification of property;
(f) increases in the amount of production or the value of production for property described in 15-6-131 or 15-6-132;
(g) transfer of property from tax-exempt to taxable status; or
(h) revaluations caused by:
(i) cyclical reappraisal; or
(ii) expansion, addition, replacement, or remodeling of improvements.
(4) The limitation on the amount of taxes levied does not prohibit a further increase in the taxable valuation or in the actual tax liability on individual property in each class as a result of:
(a) a revaluation caused by:
(i) construction, expansion, replacement, or remodeling of improvements that adds value to the property; or
(ii) cyclical reappraisal;
(b) transfer of property into a taxing unit;
(c) reclassification of property;
(d) increases in the amount of production or the value of production for property described in 15-6-131 or 15-6-132;
(e) annexation of the individual property into a new taxing unit; or
(f) conversion of the individual property from tax-exempt to taxable status.
(5) Property in class four is valued according to the procedures used in 1986, including the designation of 1982 as the base
year, until the reappraisal cycle beginning January 1, 1986, is completed and new valuations are placed on the tax rolls and
a new base year designated
, if the property is:
(a) new construction;
(b) expanded, deleted, replaced, or remodeled improvements;
(c) annexed property; or
(d) property converted from tax-exempt to taxable status.
(6) Property described in subsections (5)(a) through (5)(d) that is not class four property is valued according to the procedures used in 1986 but is also subject to the dollar cap in each taxing unit based on 1986 mills levied.
(7) The limitation on the amount of taxes, as clarified in this section, is intended to leave the property appraisal and
valuation methodology of the department of revenue intact. Determinations of county classifications, salaries of local
government officers, and all other matters in which total taxable valuation is an integral component are not affected by
15-10-401 and 15-10-402 except for the use of taxable valuation in fixing tax levies. In fixing tax levies, the taxing units of
local government may anticipate the deficiency in
revenues revenue resulting from the tax limitations in 15-10-401 and
15-10-402, while understanding that regardless of the amount of mills levied, a taxpayer's liability may not exceed the
dollar amount due in each taxing unit for the 1986 tax year unless:
(a) except as provided in subsection (8)(a), the taxing unit's taxable valuation decreases by 5% or more from the 1986 tax year. If a taxing unit's taxable valuation decreases by 5% or more from the 1986 tax year, it may levy additional mills to compensate for the decreased taxable valuation, but the mills levied may not exceed a number calculated to equal the revenue from property taxes for the 1986 tax year in that taxing unit.
(b) a levy authorized under Title 20 raised less revenue in 1986 than was raised in either 1984 or 1985, in which case the taxing unit may, after approval by the voters in the taxing unit, raise each year thereafter an additional number of mills but may not levy more revenue than the 3-year average of revenue raised for that purpose during 1984, 1985, and 1986;
(c) a levy authorized in 50-2-111 that was made in 1986 was for less than the number of mills levied in either 1984 or 1985, in which case the taxing unit may, after approval by the voters in the taxing unit, levy each year thereafter an additional number of mills but may not levy more than the 3-year average number of mills levied for that purpose during 1984, 1985, and 1986;
(d) the electorate of the taxing unit has approved an increase in the number of mills that may be levied to compensate for 1997 revaluation and tax rate adjustments as provided in [section 4].
(8) (a) Except as provided in subsection (8)(b), if a taxing unit has levied additional mills under subsection (7)(a) to compensate for a decrease in taxable valuation, it may continue to levy additional mills to equal the revenue from property taxes for the 1986 tax year when the taxing unit's taxable valuation is greater than 95% but less than 100% of the taxing unit's taxable valuation in tax year 1986.
(b) When the taxable valuation of a taxing unit that levied additional mills under subsection (7)(a) or (8)(a) is equal to or greater than the taxing unit's taxable valuation in tax year 1986, it may not levy additional mills to compensate for a subsequent decrease in taxable valuation unless the conditions of subsection (7)(a) are satisfied.
(9) The limitation on the amount of taxes levied does not apply to the following levy or special assessment categories, whether or not they are based on commitments made before or after approval of 15-10-401 and 15-10-402:
(a) rural improvement districts;
(b) special improvement districts;
(c) levies pledged for the repayment of bonded indebtedness, including tax increment bonds;
(d) city street maintenance districts;
(e) tax increment financing districts;
(f) satisfaction of judgments against a taxing unit;
(g) street lighting assessments;
(h) revolving funds to support any categories specified in this subsection (9);
(i) levies for economic development authorized pursuant to 90-5-112(4);
(j) levies authorized under 7-6-502 for juvenile detention programs;
(k) levies authorized under 76-15-531 and 76-15-532 for conservation district special administrative assessments;
(l) elementary and high school districts; and
(m) voted poor fund levies authorized under 53-2-322.
(10) The limitation on the amount of taxes levied does not apply in a taxing unit if the voters in the taxing unit approve an increase in tax liability following a resolution of the governing body of the taxing unit containing:
(a) a finding that there are insufficient funds to adequately operate the taxing unit as a result of 15-10-401 and 15-10-402;
(b) an explanation of the nature of the financial emergency;
(c) an estimate of the amount of funding shortfall expected by the taxing unit;
(d) a statement that applicable fund balances are or by the end of the fiscal year will be depleted;
(e) a finding that there are no alternative sources of revenue;
(f) a summary of the alternatives that the governing body of the taxing unit has considered; and
(g) a statement of the need for the increased revenue and how it will be used.
(11) (a) The limitation on the amount of taxes levied does not apply to levies required to address the funding of relief of suffering of inhabitants caused by famine, conflagration, or other public calamity.
(b) The limitation set forth in this chapter on the amount of taxes levied does not apply to levies to support:
(i) a city-county board of health as provided in Title 50, chapter 2, if the governing bodies of the taxing units served by the board of health determine, after a public hearing, that public health programs require funds to ensure the public health. A levy for the support of a local board of health may not exceed the 5-mill limit established in 50-2-111.
(ii) county, city, or town ambulance services authorized by a vote of the electorate under 7-34-102(2); and
(iii) a rail authority, as provided in Title 7, chapter 14, part 16, authorized by a board of county commissioners. A levy for the support of a rail authority may not exceed the 6-mill limit established in 7-14-1632.
(12) The limitation on the amount of taxes levied by a taxing jurisdiction subject to a statutory maximum mill levy does not prevent a taxing jurisdiction from increasing its number of mills beyond the statutory maximum mill levy to produce revenue equal to its 1986 revenue.
(13) The limitation on the amount of taxes levied does not apply to a levy increase to repay taxes paid under protest in accordance with 15-1-402.
(14) A taxing jurisdiction that included special improvement district revolving fund levies in the limitation on the amount of taxes levied prior to April 22, 1993, may continue to include the amount of the levies within the dollar amount due in each taxing unit for the 1986 tax year even if the necessity for the revolving fund has diminished and the levy authority has been transferred."
NEW SECTION. Section 6. Codification instruction. [Section 4] is intended to be codified as an integral part of Title 15, chapter 10, part 4, and the provisions of Title 15, chapter 10, part 4, apply to [section 4].
NEW SECTION. Section 7. Coordination instruction. If Senate Bill No. 100 is passed and approved, then [section 1] of Senate Bill No. 100, amending 15-6-143, is void.
NEW SECTION. Section 8. Effective date -- retroactive applicability. [This act] is effective on passage and approval and applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1996.