Senate Bill No. 392
Introduced By crippen, harp, foster, devlin, grinde, aklestad, ohs, sliter, mercer, hibbard
A Bill for an Act entitled: "An Act generally revising the laws governing property taxes;
revising limitations on PHASING
IN tax increases; allowing voters of a taxing unit to impose increased taxes up to 2 percent a year; ALLOWING CERTAIN
CITIES AND TOWNS TO INCREASE TAXES BY UP TO 2 PERCENT WITHOUT A VOTE IN THE FIRST TAX
YEAR THAT AN INCREASE IS IMPOSED; revising the tax appeal process; providing for a property tax study
committee; amending sections 15-7-102 15-7-111, 15-10-401, 15-10-402, AND 15-10-412, 15-15-102, and 15-36-323,
MCA; repealing section 15-10-411, MCA; and providing an IMMEDIATE effective date AND A RETROACTIVE
Be it enacted by the Legislature of the State of Montana:
Section 1. 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 department shall mail a notice of the assessment of all property described in 15-6-134 for tax year 1997. (b)(c) 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)(d) Any misinformation provided in the information required by subsection (1)(b) (1)(c) 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) 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. (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 1. SECTION 15-7-111, MCA, IS AMENDED TO READ:
"15-7-111. Periodic revaluation of taxable property. (1) The department of revenue shall administer and supervise a program for the revaluation of all taxable property within the state. The department shall complete this revaluation program by December 31, 1996. A comprehensive written reappraisal plan must be promulgated by the department. The reappraisal plan adopted must provide that all property in each county be revalued by December 31, 1996. The department shall furnish a copy of the plan and all amendments to the plan to the board of county commissioners of each county. The change in valuations determined pursuant to this reappraisal must be phased in at the rate of 2% each year.
(2) Beginning January 1
, 1997 of the year that the previous revaluation is completely phased in, the department of revenue
shall administer and supervise a program for the revaluation of all taxable property within the state at least every 3 years. A
comprehensive written reappraisal plan must be promulgated by the department. The reappraisal plan adopted must provide
that all property in each county be revalued at least every 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 2. Section 15-10-401, MCA, is amended to read:
"15-10-401. Declaration of policy. (1) The state of Montana's reliance on the taxation of property to support education
and local government has placed an unreasonable burden on the owners of all classes
three, four, six, nine, twelve, and
fourteen of property , as those classes are defined described in Title 15, chapter 6, part 1. (2) The legislature's failure to give local governments and local school districts the flexibility to develop alternative
sources of revenue will only lead to increases in the tax burden on the already overburdened property taxpayer. (3) The legislature is the appropriate forum to make the difficult and complex decisions to develop: (a) a tax system that is fair to property taxpayers; and (b) a method of providing adequate funding for local government and education. (4) The legislature has failed in its responsibility to taxpayers, education, and local government to relieve the tax burden on
property classes three, four, six, nine, twelve, and fourteen. (5)(2) The Except as provided in 15-10-412, the people of the state of Montana declare that it is the policy of the state of
Montana that no further property tax increases be imposed on property classes three, four, six, nine, twelve, and fourteen."
Section 3. Section 15-10-402, MCA, is amended to read:
"15-10-402. Property tax limited to
1986 1996 levels. (1) Except as provided in subsections (2) and (3) 15-10-412, the
amount of taxes levied on property described in 15-6-133, 15-6-134, and 15-6-136 Title 15, chapter 6, part 1, may not, for
any taxing jurisdiction, exceed the amount levied for taxable year 1986 1996. (2) The limitation contained in subsection (1) does not apply to levies for rural improvement districts, Title 7, chapter 12,
part 21; special improvement districts, Title 7, chapter 12, part 41; elementary and high school districts, Title 20; juvenile
detention programs authorized under 7-6-502; or bonded indebtedness. (3) New construction or improvements to or deletions from property described in subsection (1) are subject to taxation at
1986 levels. (4) As used in this section, the "amount of taxes levied" and the "amount levied" mean the actual dollar amount of taxes
imposed on an individual piece of property, notwithstanding an increase or decrease in value due to inflation, reappraisal,
adjustments in the percentage multiplier used to convert appraised value to taxable value, changes in the number of mills
levied, or increase or decrease in the value of a mill."
Section 4. Section 15-10-412, MCA, is amended to read:
"15-10-412. Property tax
limited to 1986 levels limit -- clarification -- extension to all property classes exception.
Section 15-10-402 is interpreted and clarified implemented as follows:
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 means that, except as otherwise provided in this
section, the actual tax liability for an individual property total amount of taxes levied by each taxing unit is capped at the
dollar amount due levied in each taxing unit for the 1986 1996 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 1993 through 1985 1995 but did not levy a tax in 1986 1996,
in which case the actual tax liability for an individual property is taxes levied are capped at the dollar amount due in that
taxing unit for the 1985 1995 tax year. (3)(2) The limitation on the amount of taxes levied does not prohibit a further an increase in the total taxable valuation of
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; or
(h) revaluations caused by:
(i) cyclical reappraisal; or
(ii) expansion, addition, replacement, or remodeling of improvements.
(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 levied does not prohibit a further increase in the taxable valuation of the taxing
unit 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)(5) The limitation on the amount of taxes, as clarified in this section, is intended to leave the property appraisal and
valuation methodology methodologies 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 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:.
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 1996 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 1996 tax year in that taxing unit.
(b) If a levy authorized under Title 20 raised less revenue in
1986 1996 than was raised in either 1984 1994 or 1985 1995,
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
1994, 1985 1995, and 1986 1996 ;.
(c) If a levy authorized in 50-2-111 that was made in
1986 1996 was for less than the number of mills levied in either 1984
1994 or 1985 1995, 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 1994, 1985 1995, and 1986 1996. (8) (a)(d) Except as provided in subsection (8)(b) (6)(e), if a taxing unit has levied additional mills under subsection (7)(a)
(6)(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 1996 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 1996. (b)(e) When the taxable valuation of a taxing unit that levied additional mills under subsection (7)(a) (6)(a) or (8)(a) (6)(d)
is equal to or greater than the taxing unit's taxable valuation in tax year 1986 1996, it may not levy additional mills to
compensate for a subsequent decrease in taxable valuation unless the conditions of subsection (7)(a) (6)(a) are satisfied. (9)(7) 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
(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)(8) 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)(9) (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)(10) 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 1996 revenue. (13)(11) 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)(12) 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.
A EXCEPT AS PROVIDED IN SUBSECTION (13)(C), A taxing unit may increase the amount of taxes levied by
up to 2% from 1 tax year to the next tax year if the majority of voters in the taxing unit participating in the election approve
an increase in tax liability. The voted increase may occur without regard to any limitation in this section or any statutory
mill limits. The increase may continue in succeeding years, but an additional increase in taxes levied above the previous
tax year is not allowed without voter approval.
(b) Any increases approved pursuant to
subsection SUBSECTIONS (13)(a) AND (13)(C) may be removed by a vote of the
majority of voters in the taxing unit participating in the election. If the governing body of a taxing unit receives a petition
signed by at least 10% of the voters in a taxing unit, it is required to put the issue of removal of any increases pursuant to
this subsection (13) on the ballot at the next available election.
(C) A THIRD-CLASS CITY OR A TOWN, AS PROVIDED IN 7-1-4111, MAY INCREASE THE AMOUNT OF
TAXES LEVIED BY UP TO 2% FROM 1 TAX YEAR TO THE NEXT TAX YEAR WITHOUT AN ELECTION IN
THE FIRST TAX YEAR THAT AN INCREASE IS IMPOSED. THE UP TO 2% INCREASE MAY OCCUR WITHOUT
REGARD TO ANY LIMITATION IN THIS SECTION OR ANY STATUTORY MILL LIMITS. THE INCREASE MAY
CONTINUE IN SUCCEEDING YEARS.
IN HOWEVER, IN SUBSEQUENT TAX YEARS, ANY ADDITIONAL TAX
INCREASE IS SUBJECT TO THE PROVISIONS OF SUBSECTIONS (13)(A) AND (13)(B). FOR THE PURPOSES OF
THIS SUBSECTION (13), A THIRD-CLASS CITY IS A CITY HAVING A POPULATION OF LESS THAN 5,000 AND
DOES NOT INCLUDE A CITY THAT HAS ADOPTED BY RESOLUTION TO BE A THIRD-CLASS CITY UNDER
THE PROVISIONS OF 7-1-4112(1)." Section 5. Section 15-15-102, MCA, is amended to read: "15-15-102. Application for reduction in valuation. (1) The Subject to subsection (2), the valuation of property may
not be reduced by the county tax appeal board unless either the taxpayer or the taxpayer's agent makes and files a written
application for reduction with the county tax appeal board. The application must be filed on or before the first Monday in
June or 30 days after receiving either a notice of classification and appraisal or determination after review under
15-7-102(3) from the department, whichever is later. If the department's determination after review is not made in time to
allow the county tax appeal board to review the matter during the current tax year, the appeal must be reviewed during the
next tax year, but the decision by the county tax appeal board is effective for the year in which the request for review was
filed with the department. The application must state the post-office address of the applicant, specifically describe the
property involved, and state the facts upon which it is claimed the reduction should be made. (2) For tax year 1997, a taxpayer may appeal the taxpayer's assessed value whether or not the taxpayer filed an appeal for
the reappraisal cycle beginning in 1993." Section 6. Section 15-36-323, MCA, is amended to read: "15-36-323. Calculation of unit value. For the purposes of distribution of oil and natural gas production taxes to county
and school taxing units for production from pre-1985 wells, the department shall determine the unit value of oil and natural
gas for each taxing unit as follows: (1) Subject to the conditions of subsection (3), the unit value for oil for each taxing unit is the quotient obtained by
dividing the net proceeds taxes calculated on oil produced and sold in that taxing unit in calendar year 1988 by the number
of barrels of oil produced in that taxing unit during 1988, excluding post-1985 wells. (2) Subject to the conditions of subsection (3), the unit value for natural gas is the quotient obtained by dividing the net
proceeds taxes calculated on natural gas produced and sold in that taxing unit in calendar year 1988 by the number of cubic
feet of natural gas produced in that taxing unit during 1988, excluding post-1985 wells. (3) The amount of net proceeds taxes calculated under subsections (1) and (2) may not include the amount of taxes that are
attributable to a financial emergency, as described in 15-10-412(10), as that subsection read on December 31, 1996, for
which additional mills were levied in fiscal year 1990."
NEW SECTION. Section 5. Property tax committee. (1) There is an interim property tax committee. The committee
16 12 members. The speaker of the house shall appoint eight SIX house members, four THREE from each
party, and the senate committee on committees shall appoint eight SIX senate members, four THREE from each party.
(2) The committee may study all aspects of the state property tax system and shall prepare a menu of alternatives to revise or reform the property tax system.
(3) In order to provide a wide-ranging series of options for consideration, each individual member of the committee may pursue proposals independently and receive staff assistance on the proposal. The committee may discuss and make suggestions on all proposals. A vote of one-fourth of the members may include a proposal on the menu of alternatives.
(4) The committee may solicit the advice of appropriate persons and entities as the committee considers necessary.
(5) The legislative branch shall provide staff support to the committee. The committee may contract for services as the committee considers necessary.
NEW SECTION. Section 8. Repealer. Section 15-10-411, MCA, is repealed.
NEW SECTION. Section 6. Effective date -- RETROACTIVE APPLICABILITY. [This act] is effective
July 1, 1997
ON PASSAGE AND APPROVAL AND APPLIES RETROACTIVELY, WITHIN THE MEANING OF 1-2-109, TO
PROPERTY TAX YEARS BEGINNING AFTER DECEMBER 31, 1996.