HOUSE BILL NO. 385
INTRODUCED BY E. SWANSON
A BILL FOR AN ACT ENTITLED: "AN ACT REVISING THE VALUATION AND TAXATION OF CERTAIN LAND; REVISING THE INCOME CRITERIA BY WHICH LAND MAY BE DETERMINED TO BE AGRICULTURAL FOR PROPERTY TAX PURPOSES; AMENDING SECTIONS 15-6-133, 15-6-134, AND 15-7-202, MCA; AND PROVIDING AN APPLICABILITY DATE."
WHEREAS, land in Montana historically devoted to agricultural uses or growing timber or simply admired as open space is increasingly being subdivided, developed, and used for residential, commercial, or recreational purposes; and
WHEREAS, with the development of previously undeveloped land, Montanans are experiencing a diminution in the quality of life that is especially attractive to people who call themselves "Montanans" and have chosen to stay in or return to the state in seasons of repose; and
WHEREAS, Montanans have long recognized the advisability of extending to agriculture certain special treatment or status but have conscientiously and consistently limited the special treatment or status to activities that are, truly, agricultural in nature; and
WHEREAS, the current practice of fully or partially extending status or preferences to activities that are not truly agricultural in nature, particularly in the context of property valuation and taxation, is providing a substantial incentive to continued if not accelerated subdivision, development, and use of the state's agricultural lands and open spaces; and
WHEREAS, the subdivision, development, and use of Montana's historical agricultural lands and open spaces also require additional public expenditures for improvements, maintenance, and service delivery; and
WHEREAS, the subdivision, development, and use of the state's agricultural lands and open spaces are counterproductive to the quality of life of most Montanans, both in terms of the loss of that space and in terms of paying for the public services that must be extended to newly developed areas.
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 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 15-6-134(2)(a).
(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, 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 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; 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) subsection (1)(f). The 1 acre
must be valued at market value.
(f) 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).
(2) Class four property is taxed as follows:
(a) (i) Except as provided in 15-24-1402 or 15-24-1501 and subsection (2)(a)(ii) of this section, property described in subsections (1)(a), (1)(b), and (1)(e) of this section is taxed at 3.86% of its market value.
(ii) The taxable percentage rate in subsection (2)(a)(i) must be adjusted downward by subtracting 0.022 percentage points each year until the tax rate is equal to or less than 2.78%.
(b) (i) Property qualifying under the property tax assistance program in subsection (1)(c) is taxed at the rate provided in subsection (2)(a)(ii) 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)(i).
(d) Property described in subsection (1)(f) is taxed as follows:
(i) A parcel of land of 20 acres or more but less than 40 acres is taxed at 75% of the taxable rate established in subsection (2)(a)(i).
(ii) A parcel of land of 40 acres or more but less than 80 acres is taxed at 50% of the taxable rate established in subsection (2)(a)(i).
(iii) A parcel of land of 80 acres or more but less than 160 acres is taxed at 25% of the taxable rate established in subsection (2)(a)(i).
(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 15-7-202, MCA, is amended to read:
"15-7-202. Eligibility of land for valuation as agricultural. (1) (a) Contiguous parcels of land totaling 160 acres or more under one ownership are eligible for valuation, assessment, and taxation as agricultural land each year that none of the parcels is devoted to a residential, commercial, or industrial use.
(b) (i) Contiguous parcels of land of 20 acres or more but less than 160 acres under one ownership are eligible for
valuation, assessment, and taxation as agricultural land if the land is used primarily for raising and marketing, as defined in
subsection (1)(c), products that meet the definition of agricultural in 15-1-101. A parcel of land is presumed to be used
primarily for raising agricultural products if the owner or the owner's immediate family members, agent, employee, or
lessee markets not less than $1,500 in annual gross income from the raising of agricultural products produced by the land
derives not less than 15% of the annual gross income of the owner or the owner's immediate family members, agent,
employee, or lessee from marketing agricultural products produced from the parcel or a combination of noncontiguous
parcels. The owner of land that is not presumed to be agricultural land shall verify to the department that the land is used
primarily for raising and marketing agricultural products.
(ii) Noncontiguous parcels of land that meet the income requirement of subsection (1)(b)(i) are eligible for valuation, assessment, and taxation as agricultural land under subsection (1)(b)(i) if:
(A) the land is an integral part of a bona fide agricultural operation undertaken by the persons set forth in subsection (1)(b)(i) as defined in this section; and
(B) the land is not devoted to a residential, commercial, or industrial use.
(c) For the purposes of this subsection (1):
(i) "marketing" means the selling of agricultural products produced by the land and includes but is not limited to:
(A) rental or lease of the land as long as the land is actively used for grazing livestock or for other agricultural purposes; and
(B) rental payments made under the federal conservation reserve program or a successor to that program;
(ii) land that is devoted to residential use or that is used for agricultural buildings and is included in or is contiguous to
land under the same ownership that is classified as agricultural land, other than land described in 15-6-133(1)(c)
15-6-134(1)(f), must be classified as agricultural land, and the land must be valued as provided in 15-7-206.
(2) Contiguous or noncontiguous parcels of land totaling less than 20 acres under one ownership that are actively devoted to agricultural use are eligible for valuation, assessment, and taxation as agricultural each year that the parcels meet any of the following qualifications:
(a) the parcels produce and the owner or the owner's agent, employee, or lessee markets not less than $1,500 in annual gross income from the raising of agricultural products as defined in 15-1-101; or
(b) the parcels would have met the qualification set out in subsection (2)(a) were it not for independent, intervening causes of production failure beyond the control of the producer or marketing delay for economic advantage, in which case proof of qualification in a prior year will suffice.
(3) Parcels that do not meet the qualifications set out in subsections (1) and (2) may not be classified or valued as agricultural if they are part of a platted subdivision that is filed with the county clerk and recorder in compliance with the Montana Subdivision and Platting Act.
(4) Land may not be classified or valued as agricultural if it is subdivided land with stated restrictions effectively prohibiting its use for agricultural purposes. For the purposes of this subsection only, "subdivided land" includes parcels of land larger than 20 acres that have been subdivided for commercial or residential purposes.
(5) The grazing on land by a horse or other animals kept as a hobby and not as a part of a bona fide agricultural enterprise is not considered a bona fide agricultural operation.
(6) The department may not classify land less than 160 acres as agricultural unless the owner has applied to have land
classified as agricultural land. Land of 20 acres or more but less than 160 acres for which no application for agricultural
classification has been made is taxed as provided in 15-6-133(1)(c) 15-6-134(1)(f). If land has been valued, assessed, and
taxed as agricultural land in any year, it must continue to be valued, assessed, and taxed as agricultural until the department
reclassifies the property. A reclassification does not mean revaluation pursuant to 15-7-111.
(7) For the purposes of this part, growing timber is not an agricultural use."
NEW SECTION. Section 4. Applicability. [This act] applies on and after January 1, 2000, to tax years beginning after December 31, 1999.
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Latest Version of HB 385 (HB0385.01)
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Status of this Bill
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