SENATE BILL NO. 146
INTRODUCED BY ELLIS A
BY REQUEST OF THE INTERIM PROPERTY TAX COMMITTEE
A BILL FOR AN ACT ENTITLED: "AN ACT IMPLEMENTING ACQUISITION VALUATION; PROVIDING FOR THE ACQUISITION VALUATION FOR CERTAIN REAL PROPERTY AND IMPROVEMENTS; LIMITING THE ANNUAL CHANGE IN THE VALUE, FOR TAX PURPOSES, OF CERTAIN REAL PROPERTY AND IMPROVEMENTS; PROVIDING PENALTIES FOR PROPERTY THAT ILLEGALLY RECEIVED ACQUISITION VALUE TREATMENT; PROVIDING FOR NOTIFICATION OF CHANGES IN THE VALUATION OF PROPERTY; CONTINGENTLY SUBMITTING TO THE ELECTORATE THE AUTHORIZATION FOR IMPLEMENTATION OF THE ACQUISITION VALUE METHOD OF PROPERTY VALUATION; AMENDING SECTIONS 15-6-134, 15-7-102, 15-7-103, 15-7-111, 15-7-112, 15-7-113, 15-7-114, 15-8-111, 15-10-412, AND 15-36-323, MCA; PROVIDING FOR CONTINGENT VOIDNESS AND FOR TRANSITION; PROVIDING AN EFFECTIVE DATE AND AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
NEW SECTION. Section 1. Assessment of class four property. (1) Except as provided in subsection (3) or (4), class four property is reassessed as of January 1 in each tax year by adjusting the assessed value of the property as of December 31 of the preceding tax year by the lesser of the following:
(a) 1% of the assessed value of the property for the prior year; or
(b) the percent change in the consumer price index as defined in 15-30-101.
(2) The assessed value of a class four property may not exceed the market value of the property. If the assessed value of a class four property exceeds the market value of the property, the assessed value must be reduced to the market value.
(3) (a) Whenever the ownership of a class four property changes, the property must be assessed on January 1 following the change in ownership at the value at which the property changed ownership, provided the change in ownership was an arms-length transaction.
(b) If a change in ownership of a class four property occurs but is not an arms-length transaction, the department shall determine the market value of the property and the market value as determined by the department becomes the assessed value of the property on January 1 following the change of ownership.
(4) Property that newly qualifies as class four property must be assessed as of January 1 of the year following qualification as class four property. After qualification and assessment as class four property, the assessed value of the property must be adjusted annually as provided in subsection (1)(a) or (1)(b).
(5) (a) Whenever there is a change, addition, or improvement to a class four property, the change, addition, or improvement must be assessed at market value as of January 1 after the change, addition, or improvement is substantially completed.
(b) A change, addition, or improvement does not include replacement of a portion of class four property damaged or destroyed by misfortune or calamity whenever the market value of the damaged or destroyed portion as replaced is not more than 125% of the market value of the damaged or destroyed portion. The value of any replaced class four property or portion of class four property that is in excess of 125% of the market value of the damaged or destroyed property is considered to be a change, addition, or improvement. Replaced class four property with a market value of less than 100% of the original property's market value must be assessed pursuant to subsection (6).
(c) (i) Changes, additions, or improvements include improvements made to common areas or other improvements made by the owner or by an owner association, provided the improvements directly benefit the class four property.
(ii) Any changes, additions, or improvements described in subsection (5)(c)(i) must be assessed initially at market value, and the market value must be apportioned among the parcels benefiting from the improvement. After initial assessment, the changes, additions, or improvements must be assessed as provided in subsection (1).
(6) Whenever property is destroyed or removed and not replaced, the total assessed value of the property must be reduced by the assessed value attributable to the destroyed or removed property. For tax years following a reduced assessment resulting from the destruction or removal of property, the remaining property must be assessed as provided in subsection (1).
(7) (a) Whenever class four property ceases to qualify as class four property, the department shall reassess the property as provided in 15-8-111.
(b) The value determined by the department under subsection (7)(a) is the assessed value of the property as of January 1 of the year following the disqualification of the property as class four property.
(8) (a) For the purpose of this section, a change in ownership means any sale, foreclosure, or transfer of legal title or beneficial title in equity to any person, except as provided in subsection (8)(b), and includes:
(i) for any class four property owned by a corporation, a partnership, an S. corporation, as defined in section 1361 of the Internal Revenue Code (26 U.S.C. 1361), or an association organized under Title 53, except a corporation described in subsection (8)(a)(ii), at each point in time when more than 50% of the interest in the corporation, partnership, or association has changed ownership since the most recent change of ownership, regardless of the identity of the buyer or seller of the interest. In establishing the basis upon which the 50% determination is made, the department shall, upon each valuation of the property for the purposes of this section, ascertain the value of the interest. The value of the interest ascertained by the department in this manner is twice the value that must change ownership for a future acquisition revaluation to be triggered.
(ii) for any class four property owned by a corporation, the stock of which is publicly held or publicly traded, at each point in time when more than 50% of the shares of the stock in the corporation have been traded since the most recent change of ownership, regardless of the identity of the buyer or seller of the stock. In establishing the basis upon which the 50% determination is made, the department shall, upon each valuation of the property for the purposes of this section, ascertain the number of the shares of stock that have been issued in the corporation. The number of shares ascertained by the department in this manner is twice the number of shares that must be traded for a future acquisition revaluation to be triggered.
(b) There is no change of ownership if:
(i) subsequent to the change or transfer, the same person is the owner of the class four property and:
(A) the transfer of title is to correct an error; or
(B) the transfer is between legal and equitable title;
(ii) the transfer is between husband and wife, including a transfer to a surviving spouse or a transfer due to a dissolution of marriage; or
(iii) upon the death of the owner, the transfer is between the owner and another for whom the property will qualify as class four property within 1 year of the death of the owner, provided that the new owner was legally or naturally dependent upon the deceased owner immediately prior to the deceased owner's death.
(9) Only property that qualifies as class four property is subject to this section. No portion of property that is classified and assessed solely on the basis of character or use pursuant to 15-6-133 or 15-6-143 is subject to this section. Whenever property is classified and assessed under 15-6-133 or 15-6-143 and contains class four improvements under the same ownership, the portion of the property consisting of the residence and area immediately surrounding the residence or of other class four improvements must be assessed separately for the assessment to be subject to the class four assessment provisions of this section.
(10) If a property qualifies as class four property, but the qualification is limited to the property owner's proportionate interest in the class four property, the provisions of this section apply only to the owner's proportionate interest.
(11) (a) Erroneous assessments of class four property assessed under this section may be corrected as provided in subsection (11)(b) or (11)(c), as applicable.
(b) If an error is made in arriving at any annual assessment under this section due to a material mistake of fact concerning an essential characteristic of the property, the assessment must be recalculated for every year for which the error was made.
(c) If changes, additions, or improvements are not assessed at market value as of the first January 1 after the changes, additions, or improvements were substantially completed, the department shall determine the market value for the changes, additions, or improvements for the year they were substantially completed. Assessments for subsequent years must be corrected, applying this section if applicable. If an assessment is revised pursuant to 15-8-601, the corrections made pursuant to this subsection must be used to recalculate the taxes due.
(12) (a) Except as provided in subsection (12)(b), if the department determines that for any year or years within the prior 10 years the owner of property classified as class four property was not entitled to the class four property assessment limitation granted under this section but was granted the class four property assessment limitation under circumstances other than those described in subsection (12)(b), the department shall have recorded in the public records of the county within which the property is located a notice of tax lien against any property owned by the owner in the county, and the property must be identified in the notice of tax lien. Property liened under this subsection (12)(a) that is located in this state is subject to the unpaid taxes, plus a penalty of 50% of the unpaid taxes for each year and 15% interest for each year or portion of a year that the tax remains unpaid.
(b) Whenever an owner of class four property who was not entitled to assessment under this section inadvertently receives the assessment limitation pursuant to this section, the assessment of the class four property must be corrected as provided in subsection (11), and the property owner is not subject to the unpaid taxes, penalties, or interest that otherwise would have been due if not for the inadvertent error.
(13) Whenever a class four property that is commercial in nature has not, within the previous 20 years, changed ownership as described in this section, the department of revenue shall appraise the property at its current market value, which value becomes, on the next January 1, the new base value for the property. For the purposes of this subsection, apartments and other multifamily residences having three or more units are considered commercial in nature.
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). The 1 acre must be valued at market value.
(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% [the percentage rate applicable to class four property
that is in effect for the tax year preceding the year this act is effective] of its market value as determined under [section 1].
(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 as determined under [section 1] 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).
(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 15-7-102, 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) except as provided in subsection (1)(b), change in valuation; or
(iv) addition or subtraction of personal property affixed to the land.
(b) After the first year, the department is not required to mail the notice provided for in subsection (1)(a)(iii) if the
change in valuation is the result of an incremental change in valuation caused by the phasing in of a reappraisal under [section
1].
(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 the levied mills;
(iii) an estimate of the current year's taxes based on the prior year's mills; and
(ii)(iv) a statement that the notice is not a tax bill.
(d) Any misinformation provided in the information required by subsection (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) 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 4. Section 15-7-103, MCA, is amended to read:
"15-7-103. Classification and appraisal -- general and uniform methods. (1) It is the duty of the department of revenue to implement the provisions of 15-7-101 through 15-7-103 by providing:
(a) for a general and uniform method of classifying lands in the state for the purpose of securing an equitable and uniform
basis of assessment of said lands for taxation purposes;
(b) for a general and uniform method of appraising city and town lots;
(c) for a general and uniform method of appraising rural and urban improvements;
(d) for a general and uniform method of appraising timberlands.
(2) All lands shall must be classified according to their use or uses and graded within each class according to soil and
productive capacity. In such the classification work, use shall must be made of soil surveys and maps and all other pertinent
available information.
(3) All lands must be classified by parcels or subdivisions not exceeding 1 section each, by the sections, fractional sections, or lots of all tracts of land that have been sectionized by the United States government, or by metes and bounds, whichever yields a true description of the land.
(4) All agricultural lands must be classified and appraised as agricultural lands without regard to the best and highest value use of adjacent or neighboring lands.
(5) In any periodic revaluation of taxable property completed under the provisions of 15-7-111 after January 1, 1986 [the
effective date of this act], all property classified in 15-6-134 must be appraised on its market value in the same year. The
department shall publish a rule specifying the year used in the appraisal as provided in [section 1].
(6) All sewage disposal systems and domestic use water supply systems of all dwellings may not be appraised, assessed,
and taxed separately from the land, house, or other improvements in which they are located. In no event may the The sewage
disposal or domestic water supply systems may not be included twice by including them in the valuation and assessing them
separately."
Section 5. Section 15-7-111, MCA, is amended to read:
"15-7-111. Periodic revaluation of certain taxable property. (1) (a) The department of revenue 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.
(b) Property in class four must be valued each year as provided in [section 1].
(c) The revaluation of class three, four, and ten property is complete on December 31, 1996. The amount of the change
in valuation from the 1996 base year for each property in classes three, four, and ten must be phased in each year at the rate
of 2% of the total change in valuation.
(2) The department shall value and phase in the value of newly constructed, remodeled, or reclassified property in class three or ten in a manner consistent with the valuation within the same class and the values established pursuant to subsection (1). The department shall adopt rules for determining the assessed valuation and phased-in value of new, remodeled, or reclassified property in class three or ten within the same class.
(3) Beginning January 1, 2007, the department of revenue 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, 2010, 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 6. Section 15-7-112, MCA, is amended to read:
"15-7-112. Equalization of valuations. (1) The Except as provided in subsection (2), the same method of appraisal and
assessment shall must be used in each county of the state to the end that comparable property with similar true market values
and subject to taxation in Montana shall have has substantially equal taxable values at the end of each cyclical revaluation
program hereinbefore provided.
(2) The department shall use the method of appraisal and assessment provided in [section 1] for class four property in each county of the state to the end that the assessed value of class four properties are equalized on the basis of acquisition value as adjusted under [section 1] as authorized in Article VIII, section 3, of the Montana constitution."
Section 7. Section 15-7-113, MCA, is amended to read:
"15-7-113. Program exclusive. No A program for the revaluation of property shall may not be implemented for taxation
in any county other than as prescribed in 15-7-111 through 15-7-114 and [section 1]."
Section 8. Section 15-7-114, MCA, is amended to read:
"15-7-114. Law supplemental. Sections 15-7-111 through 15-7-114 and [section 1] are intended to be supplementary to and are not intended to repeal 15-7-103."
Section 9. 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. Value determined in this manner is evidence of an arms-length transaction.
(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) the value of property in 15-6-134, under class four, is assessed as provided in [section 1]; and
(d) as otherwise authorized in Titles 15 and 61.
(4) For purposes of taxation, assessed value is the same as appraised value.
(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 15-6-133 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) 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 10. 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 levied in each taxing unit for the 1996 previous 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)(b) transfer of property into a taxing unit;
(d) subdivision of real property;
(e) reclassification of property;
(f)(c) increases in the amount of production or the value of production for property described in 15-6-131 or 15-6-132;
or
(g) transfer of property from tax-exempt to taxable status; or
(h)(d) revaluations caused by 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)(3) 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 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.
(5) (a)(4) Except as provided in subsection (5)(d), if a taxing unit's taxable valuation decreases from the 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 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 A taxing unit may levy additional mills by
following either the procedure provided for in subsection (7)(a) (6).
(6)(5) The limitation on the amount of taxes levied does not apply to the following levy or special assessment categories,
whether or not if they are based on commitments made before or after approval of 15-10-401 and 15-10-402 November 3,
1998:
(a) rural improvement districts;
(b) special improvement districts;
(c)(a) levies pledged for the repayment of bonded indebtedness, including tax increment bonds;
(d) city street maintenance districts;
(e) tax increment financing districts;
(f)(b) satisfaction of judgments against a taxing unit; or
(g) street lighting assessments;
(h)(c) revolving funds to support any categories specified in this subsection (6) (5).;
(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)(6) The limitation on the amount of taxes levied does not apply in a taxing unit if the voters in the taxing unit
approve at the tax election an increase in tax liability.:
(i) 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; or
(ii) by a vote pursuant to this subsection (7)(a)(ii). The approval or rejection of a levy that does not follow the procedure
in subsection (7)(a)(i) is decided in the following manner:
(A) determine the total number of qualified electors of the taxing unit from the list of electors supplied by the county
registrar for the election;
(B) determine the total number of qualified electors who voted at the taxing unit election from the tally sheets for the
election; and
(C) calculate the percentage of qualified electors voting at the election by dividing the number determined in subsection
(7)(a)(ii)(A) by the number determined in subsection (7)(a)(ii)(B).
(b) When the calculated percentage in subsection (7)(a)(ii)(C) is 40% or more, the levy is considered to have been
approved and adopted if a majority of the votes are cast in favor of the proposition, otherwise it is considered to have been
rejected.
(c) The election provisions of this section do not apply to school levy elections.
(8) (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.
(9) 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.
(10) 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.
(11)(7) 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 11. 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 levied in each taxing unit for the 1996 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; or
(h) revaluations caused by:
(i) expansion, addition, replacement, or remodeling of improvements;
(ii) periodic revaluation pursuant to 15-7-111; or
(iii) changes in valuation authorized in [section 1].
(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 an increase in the taxable valuation or in the actual tax liability on individual property as a result of:
(a) revaluations caused by:
(i) expansion, addition, replacement, or remodeling of improvements;
(ii) periodic revaluation pursuant to 15-7-111; or
(iii) changes in valuation authorized in [section 1];
(b) reclassification of property;
(c) transfer of property into a taxing unit;
(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 an individual property into a new or different taxing unit; or
(f) conversion of the individual property from tax exempt to taxable status.
(5) 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 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.
(5)(6) (a) Except as provided in subsection (5)(d) (6)(d), if a taxing unit's taxable valuation decreases from the 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 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 by following
either procedure provided for in subsection (7)(a) (8)(a).
(6)(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 (6) (7);
(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)(8) (a) 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:
(i) 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; or
(ii) by a vote pursuant to this subsection (7)(a)(ii) (8)(a)(ii). The approval or rejection of a levy that does not follow the
procedure in subsection (7)(a)(i) (8)(a)(i) is decided in the following manner:
(A) determine the total number of qualified electors of the taxing unit from the list of electors supplied by the county registrar for the election;
(B) determine the total number of qualified electors who voted at the taxing unit election from the tally sheets for the election; and
(C) calculate the percentage of qualified electors voting at the election by dividing the number determined in subsection
(7)(a)(ii)(A) (8)(a)(ii)(A) by the number determined in subsection (7)(a)(ii)(B) (8)(a)(ii)(B).
(b) When the calculated percentage in subsection (7)(a)(ii)(C) (8)(a)(ii)(C) is 40% or more, the levy is considered to have
been approved and adopted if a majority of the votes are cast in favor of the proposition, otherwise it is considered to have
been rejected.
(c) The election provisions of this section do not apply to school levy elections.
(8)(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);
(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.
(9)(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 1996 revenue.
(10)(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.
(11)(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."
Section 12. 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 voted levy, as described in 15-10-412(7) 15-10-412(6), for which additional mills were levied in fiscal
year 1990."
Section 13. 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 voted levy, as described in 15-10-412(7) 15-10-412(8), for which additional mills were levied in fiscal
year 1990."
NEW SECTION. Section 14. Codification instruction. [Section 1] is intended to be codified as an integral part of Title 15, chapter 7, part 1, and the provisions of Title 15, chapter 7, part 1, apply to [section 1].
NEW SECTION. Section 15. Contingent submission to electorate. If [LC 217] is approved by the electorate, this act shall be submitted to the qualified electors of Montana as provided in Title 13, chapter 1, MCA, at the tax election to be held in 2001, by printing on the ballot the full title of this act and the following:
SHALL THE PROPERTY TAX BE INCREASED ANNUALLY IN THE FOLLOWING MANNER?: THE VALUE, FOR TAX PURPOSES, OF REAL PROPERTY AND IMPROVEMENTS IN CLASS FOUR WILL BE BASED ON THE ACQUISITION VALUE METHOD OF PROPERTY VALUATION ALLOWED IN ARTICLE III, SECTION 3 OF THE MONTANA CONSTITUTION.
[] FOR increasing the property tax base through the use of acquisition value as the basis for property taxation of certain property.
[] AGAINST increasing the property tax base through the use of acquisition value as the basis for property taxation of certain property.
NEW SECTION. Section 16. Contingent voidness. (1) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then [sections 10, 12, and 14] are void.
(2) [Sections 11 and 13] are void if the contingency in subsection (1) does not occur.
NEW SECTION. Section 17. Effective date -- applicability. (1) Subject to [section 16], if approved by the electorate, this act is effective January 1, 2002, and applies to tax years beginning after December 31, 2001.
(2) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid and if [LC 217] is approved by the electorate, then this act is effective January 1, 2001, and applies to tax years beginning after December 31, 2000.
NEW SECTION. Section 18. Transition. (1) Except as provided in subsection (2), on [the effective date of this act], the department of revenue shall assess all property in class four, under 15-6-134, as provided in [section 1].
(2) To effect the transition, the department of revenue shall assess all class four property subject to the acquisition method of valuation at a base year value for the property for tax year [the year in which this act is effective]. The base year value is defined as:
(a) if the property existed as class four property on December 31, 1992, the market value of the property as of January 1, 1993; or
(b) (i) if the property existed as class four property on December 31, 1992, but changed ownership, as provided in [section 1], after December 31, 1992, the sales price of the property, provided the sale was an arms-length transaction, plus the value due to any change in use, classification, or reclassification, plus the value of any addition, remodeling, improvement, or destruction to the property after December 31, 1992, as of the date of the change; or
(ii) if the character of the property changed after January 1, 1992, due to a change in use, classification, or reclassification or due to addition, remodeling, improvement, or destruction other than by natural disaster, the change in value due to the change in use, classification, or reclassification or due to addition, remodeling, improvement, or destruction to the property after December 31, 1992, as of the date of the change.
(3) Whenever a sale is determined by the department of revenue to have been other than an arms-length transaction, the department shall appraise the property at market value as of the date of the transaction and the value established by the department is the base year value for the purposes of assessment and taxation.
(4) For each year after the base year value of the property has been established under subsection (2) or (3), the department of revenue shall adjust the value as provided in [section 1].
(5) Notwithstanding the provisions of [section 1(5)(a)], a change in value pursuant to this section for tax year [the year in which this act is effective] applies for tax purposes beginning January 1, [the year in which this act is effective].
- END -
Latest Version of SB 146 (SB0146.01)
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Status of this Bill
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