HOUSE BILL NO. 108

INTRODUCED BY E. SWANSON, S. STANG, S. BARTLETT, T. BECK, J. BOHLINGER, R. BUZZAS,

C. CHRISTIAENS, P. CLARK, V. COCCHIARELLA, T. DELL, B. DEPRATU, S. DOHERTY, D. ECK,

J. ELLINGSON, R. ERICKSON, T. FACEY, E. FRANKLIN, K. GILLAN, B. GLASER, G. GOLIE,

M. GUGGENHEIM, T. HAGENER, J. HARP, H. HARPER, D. HARRINGTON, J. HURDLE, G. JERGESON, C. JUNEAU, B. KRENZLER, M. LINDEEN, J. LYNCH, D. MAHLUM, J. MANGAN, G. MATTHEWS,

B. MCCARTHY, L. MCCULLOCH, W. MCNUTT, K. MESAROS, L. NELSON, R. PECK, J. QUILICI,

B. RANEY, S. ROSE, G. ROUSH, B. RYAN, T. SCHMIDT, D. SHEA, M. SPRAGUE, B. STORY,

C. SWYSGOOD, L. TAYLOR, J. TESTER, C. TUSS, M. WATERMAN, C. WILLIAMS, B. WILSON

BY REQUEST OF THE INTERIM PROPERTY TAX COMMITTEE

A BILL FOR AN ACT ENTITLED: "AN ACT MITIGATING THE IMPACTS OF PROPERTY REAPPRAISED FOR TAX PURPOSES BY PROVIDING A PARTIAL EXEMPTION OF MARKET VALUE FOR RESIDENTIAL AND CERTAIN COMMERCIAL PROPERTY AND BY REDUCING THE TAX RATES APPLICABLE TO PROPERTY IN CLASSES THREE AND FOUR ; EXPANDING TAXPAYER NOTIFICATION REGARDING CHANGES IN APPRAISAL; INSTATING FOR THE TAX YEAR BEGINNING JANUARY 1, 1999, THE 1996 APPRAISED VALUE OF PROPERTY IN CLASSES THREE, FOUR, AND TEN; REQUIRING THE DEPARTMENT OF REVENUE TO REAPPRAISE ALL PROPERTY IN CLASSES THREE, FOUR, AND TEN BY JANUARY 1, 2002; REVISING THE TAX LIMITS; AMENDING SECTIONS 15-6-134, 15-7-102, 15-7-111, 15-8-111, AND 15-10-412, MCA; PROVIDING FOR CONTINGENT VOIDNESS; AND PROVIDING EFFECTIVE DATES AND A RETROACTIVE APPLICABILITY DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

Section 1. Section 15-6-134, MCA, is amended to read:

"15-6-134. Class four property -- description -- taxable percentage. (1) Class four property includes:

(a) except as provided in subsection (1)(f) or (1)(g), all land, except that specifically included in another class;

(b) except as provided in subsection (1)(f) or (1)(g), all improvements, including trailers, manufactured homes, 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 that exceeds the exemption amount described in subsection (2)(d)(i) of any improvement on real property, including trailers, manufactured homes, 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;

(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.

(f) single-family residences, rental multifamily dwelling units, and appurtenant improvements, including trailers, manufactured homes, or mobile homes; the parcel of land upon which single-family residences, rental multifamily dwelling units, and appurtenant improvements are situated; and leasehold improvements; and

(g) commercial buildings and the parcel of land upon which they are situated.

(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) of this section is taxed at 3.5% of its market value.

(b) (i) Property qualifying under the property tax assistance program in subsection (1)(c) is taxed at the rate provided in subsection (2)(a) 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 . 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).

(d) Property described in subsection (1)(f) is taxed at 3.5% of:

(i) 35% of the first $200,000 or less of market value of the property; and

(ii) 100% of the market value of the property in excess of $200,000 of market value.

(e) Property described in subsection (1)(g) is taxed at 3.5% of:

(i) 20% of the first $200,000 or less of market value of the property; and

(ii) 100% of the market value of the property in excess of $200,000 of market value.

(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 2. Section 15-7-102, MCA, is amended to read:

"15-7-102. Notice of classification and appraisal to owners -- appeals. (1) (a) The department shall mail to each owner or purchaser under contract for deed a notice of the classification of the land owned or being purchased and the appraisal of the improvements on the land only if one or more of the following changes pertaining to the land or improvements have been made since the last notice:

(i) change in ownership;

(ii) change in classification;

(iii) change in valuation; or

(iv) addition or subtraction of personal property affixed to the land.

(b) The notice must include the following for the taxpayer's informational purposes:

(i) the total amount of mills levied against the property in the prior year;

(ii) the amount of the prior year's taxes resulting from levied mills;

(iii) an estimate of the current year's taxes based on the prior year's mills; and

(iv) a statement that the notice is not a tax bill.

(c) Any misinformation provided in the information required by subsection (1)(b) does not affect the validity of the notice and may not be used as a basis for a challenge of the legality of the notice.

(2) (a) Except as provided in subsection (2)(c), the department shall assign each assessment to the correct owner or purchaser under contract for deed and mail the notice of classification and appraisal on a standardized form, adopted by the department, containing sufficient information in a comprehensible manner designed to fully inform the taxpayer as to the classification and appraisal of the property and of changes over the prior tax year.

(b) The notice must advise the taxpayer that in order to be eligible for a refund of taxes from an appeal of the classification or appraisal, the taxpayer is required to pay the taxes under protest as provided in 15-1-402.

(c) The department is not required to mail the notice of classification and appraisal to a new owner or purchaser under contract for deed unless the department has received the transfer certificate from the clerk and recorder, as provided in 15-7-304, and has processed the certificate before the notices required by subsection (2)(a) are mailed. The date of mailing is the date reported to the county tax appeal board pursuant to 15-15-101.

(3) If the owner of any land and improvements is dissatisfied with the appraisal as it reflects the market value of the property as determined by the department or with the classification of the land or improvements, the owner may request an assessment review by submitting an objection in writing to the department, on forms provided by the department for that purpose, within 30 days after receiving the notice of classification and appraisal from the department. The review must be conducted informally and is not subject to the contested case procedures of the Montana Administrative Procedure Act. As a part of the review, the department may consider the actual selling price of the property, independent appraisals of the property, and other relevant information presented by the taxpayer in support of the taxpayer's opinion as to the market value of the property. The department shall give reasonable notice to the taxpayer of the time and place of the review. After the review, the department shall determine the correct appraisal and classification of the land or improvements and notify the taxpayer of its determination. In the notification, the department shall state its reasons for revising the classification or appraisal. When the proper appraisal and classification have been determined, the land must be classified and the improvements appraised in the manner ordered by the department.

(4) Whether a review as provided in subsection (3) is held or not, the department may not adjust an appraisal or classification upon the taxpayer's objection unless:

(a) the taxpayer has submitted an objection in writing; and

(b) the department has stated its reason in writing for making the adjustment.

(5) A taxpayer's written objection to a classification or appraisal and the department's notification to the taxpayer of its determination and the reason for that determination are public records. The department shall make the records available for inspection during regular office hours.

(6) If any property owner feels aggrieved by the classification or appraisal made by the department after the review provided for in subsection (3), the property owner has the right to first appeal to the county tax appeal board and then to the state tax appeal board, whose findings are final subject to the right of review in the courts. The appeal to the county tax appeal board must be filed within 30 days after notice of the department's determination is mailed to the taxpayer. A county tax appeal board or the state tax appeal board may consider the actual selling price of the property, independent appraisals of the property, and other relevant information presented by the taxpayer as evidence of the market value of the property. If the county tax appeal board or the state tax appeal board determines that an adjustment should be made, the department shall adjust the base value of the property in accordance with the board's order."

Section 3. Section 15-7-111, MCA, is amended to read:

"15-7-111. Periodic revaluation of certain taxable property. (1) The department shall administer and supervise a program for the revaluation of all taxable property within classes three, four, and ten. All other property must be revalued annually. The revaluation of class three, four, and ten property is complete on December 31, 1996.

(2) Beginning January 1, 1999, or as soon thereafter as practicable, the department shall administer and supervise a program for the revaluation of all taxable property within classes three, four, and ten. A comprehensive written reappraisal plan must be promulgated by the department. The reappraisal plan adopted must provide that all class three, four, and ten property in each county is revalued by January 1, 2002, and each succeeding 3 years. The department shall furnish a copy of the plan and all amendments to the plan to the board of county commissioners of each county."

Section 4. Section 15-8-111, MCA, is amended to read:

"15-8-111. Assessment -- market value standard -- exceptions. (1) All taxable property must be assessed at 100% of its market value except as otherwise provided.

(2) (a) Market value is the value at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.

(b) If the department uses construction cost as one approximation of market value, the department shall fully consider reduction in value caused by depreciation, whether through physical depreciation, functional obsolescence, or economic obsolescence.

(c) Except as provided in subsection (3), the market value of special mobile equipment and agricultural tools, implements, and machinery is the average wholesale value shown in national appraisal guides and manuals or the value before reconditioning and profit margin. The department shall prepare valuation schedules showing the average wholesale value when a national appraisal guide does not exist.

(3) The department may not adopt a lower or different standard of value from market value in making the official assessment and appraisal of the value of property, except:

(a) the wholesale value for agricultural implements and machinery is the average wholesale value category as shown in Guides 2000, Northwest Region Official Guide, published by the North American equipment dealers association, St. Louis, Missouri. If the guide or the average wholesale value category is unavailable, the department shall use a comparable publication or wholesale value category.

(b) for agricultural implements and machinery not listed in an official guide, the department shall prepare a supplemental manual in which the values reflect the same depreciation as those found in the official guide; and

(c) as otherwise authorized in Titles 15 and 61.

(4) For purposes of taxation, assessed value is the same as appraised value, except as otherwise provided in this section.

(5) The taxable value for all property is the percentage of market or assessed value established for each class of property.

(6) The assessed value of properties in 15-6-131 through 15-6-134 and 15-6-143 is as follows:

(a) Properties in 15-6-131, under class one, are assessed at 100% of the annual net proceeds after deducting the expenses specified and allowed by 15-23-503 or, if applicable, as provided in 15-23-515, 15-23-516, 15-23-517, or 15-23-518.

(b) Properties in 15-6-132, under class two, are assessed at 100% of the annual gross proceeds.

(c) Properties in 15-6-133, under class three, are assessed at 100% of the productive capacity of the lands when valued for agricultural purposes. All lands that meet the qualifications of 15-7-202 are valued as agricultural lands for tax purposes.

(d) (i) Property described in 15-6-134(1)(f) is assessed as follows:

(A) 35% of the first $200,000 or less of market value of the property; and

(B) 100% of the market value of the property in excess of $200,000 of market value.

(ii) Property described in 15-6-134(1)(g) is assessed as follows:

(A) 20% of the first $200,000 or less of market value of the property; and

(B) 100% of the market value of the property in excess of $200,000 of market value.

(e) Properties in 15-6-143, under class ten, are assessed at 100% of the forest productivity value of the land when valued as forest land.

(7) Land and the improvements on the land are separately assessed when any of the following conditions occur:

(a) ownership of the improvements is different from ownership of the land;

(b) the taxpayer makes a written request; or

(c) the land is outside an incorporated city or town."

Section 5. Section 15-10-412, MCA, is amended to read:

"15-10-412. Property tax limit -- exception. Section 15-10-402 is implemented as follows:

(1) The limitation on the amount of taxes levied means that, except as otherwise provided in this section, the total amount of taxes levied by each taxing unit is capped at the dollar amount or the number of mills levied in each taxing unit for the 1998 tax year .

(2) The limitation on the amount of taxes levied does not prohibit an increase in the total taxes levied by a taxing unit as a result of:

(a) property improvements or personal property being moved into the geographic area subject to the governmental unit;

(b) new taxes and tax increases approved by voter initiative;

(c) specific taxes while dedicated to payment of public debt either existing on November 3, 1998, or authorized by the voters; or

(d) any specific emergency measure adopted pursuant to Article VIII, section 17, subsection (3)(c), of the constitution.

(3) The limitation on the amount of taxes levied does not prohibit an increase in the total taxes levied by a taxing unit in order to compensate the taxing unit for any loss in the total amount of nonlevy revenue received in 1996 from taxes imposed under Title 15, chapter 23, part 7, and Title 15, chapter 36, part 3, if the increase is approved by the voters at a tax election.

(4) The limitation on the amount of taxes, as clarified in this section, is intended to leave the property appraisal and valuation methodologies of the department 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.

(5) If a taxing unit's taxable valuation decreases from the previous tax year, it may levy additional mills to compensate for the decreased taxable valuation if the additional levy is approved by the voters at a tax election.

(6) The limitation on the amount of taxes levied does not apply to the following levy or special assessment categories if the commitments were made before November 3, 1998, for :

(a) rural improvement districts;

(b) special improvement districts;

(c) levies pledged for the repayment of bonded indebtedness, including tax increment bonds;

(d) satisfaction of judgments against a taxing unit; or

(e) revolving funds to support any categories specified in this subsection (6)

.

(7) After November 3, 1998, 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 at a tax election

.

(8) 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."

Section 6. Section 15-10-412, MCA, is amended to read:

"15-10-412. Property tax limit -- exception. Section 15-10-402 is implemented as follows:

(1) The limitation on the amount of taxes levied means that, except as otherwise provided in this section, the total amount of taxes levied by each taxing unit is capped at the dollar amount or the number of mills levied in each taxing unit for the 1998 tax year, except in a taxing unit that levied a tax in tax years 1993 through 1995 but did not levy a tax in 1996, in which case the taxes levied are capped at the dollar amount due in that taxing unit for the 1995 tax year.

(2) The limitation on the amount of taxes levied does not prohibit an increase in the total taxes levied by 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;

(h) revaluations caused by expansion, addition, replacement, or remodeling of improvements; or

(i) cyclical reappraisal.

(3) The limitation on the amount of taxes levied does not prohibit an increase in the total taxes levied by a taxing unit in order to compensate the taxing unit for any loss in the total amount of nonlevy revenue received in 1996 from taxes imposed under Title 15, chapter 23, part 7, and Title 15, chapter 36, part 3.

(4) The limitation on the amount of taxes, as clarified in this section, is intended to leave the property appraisal and valuation methodologies of the department 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.

(5) (a) Except as provided in subsection (5)(d), if a taxing unit's taxable valuation decreases from the 1998 tax year by 5% or less, 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 1996 tax year in that taxing unit.

(b) If a levy authorized under Title 20 raised less revenue in 1996 than was raised in either 1994 or 1995, 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 1994, 1995, and 1996.

(c) If a levy authorized in 50-2-111 that was made in 1996 was for less than the number of mills levied in either 1994 or 1995, 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 1994, 1995, and 1996.

(d) If a taxing unit's taxable valuation decreases by more than 5% in any year, it may levy additional mills if the voters in the taxing unit approve an increase in tax liability.

(6) 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 (6);

(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.

(7) (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);

(iii) a hospital district, as provided in Title 7, chapter 34, part 21, if authorized by the electorate of the district. A levy for the support of the hospital district may not exceed the 3-mill levy limit authorized in 7-34-2133 unless a voted special levy is authorized under 7-34-2134.

(iv) 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.

(8) 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 1996 revenue.

(9) 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.

(10) 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 7. Contingent voidness. If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [section 5], amending 15-10-412, and [section 9(2)] are void.

NEW SECTION. Section 8. Effective dates. (1) Except as provided in subsection (2), [this act] is effective on passage and approval.

(2) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [section 6] is effective on the date of declaration.

NEW SECTION. Section 9. Retroactive applicability. (1) Except as provided in subsections (2) and (3), [this act] applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1998.

(2) [Section 5] applies retroactively, within the meaning of 1-2-109, to property taxes on and after November 3, 1998.

(3) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [section 6] applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31 of the year prior to the year in which the declaration of invalidity is made.

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