Property prices are surging most everywhere. And when property values rise, taxes — charged based on a percentage of property values — rise right along with them. So, confronting property tax hikes has become a rallying cry in many states.
Montana is no exception. And now, a former Montana legislator has submitted a proposed ballot initiative to halt major tax increases for people who aren’t buying or selling, but just keeping their real estate.
Let’s take a look at how it’s going so far.
How It Started
Montana homeowners are alarmed. What can limit the spikes in Montana’s property taxes? A rise in out-of-staters buying second homes in the state is pushing residents’ taxes up at a startling pace, and the tax rise has to be capped, says lawyer and former lawmaker Matthew Monforton.
Montana, under its present law, appraises home and business properties according to their fair market values every two years or when a given property value rises to a certain point. Given the highly competitive market and low interest rates of 2020-21, values are soaring. Joined by Montana Auditor Troy Downing, Atty. Monforton set out to champion a constitutional initiative to curb these hikes, and create a new system for tax assessors to follow. If all goes according to plan, Montana residents will vote on the issue in the 2022 general election.
The first version of the Monforton-Downing proposal included properties in general. Thus, renters had as much at stake as property owners — because the higher the taxes rise, the more renters are expected to pay so that investor-owners can meet their financial goals. Since that first version was submitted, though, it has been revised to apply only to primary residences.
How It’s Going
Monforton and Downing turned in a revised version at the end of August 2021. The rewritten proposal is designed to relieve some of the tax burden carried by Montana homeowners. Through a ballot measure, the initiative would allow Montana voters to cap their property taxes.
Once a home is capped, property taxes will go up only when owners go to sell. The proposed tax cap would also protect Montana homeowners who convey their home deeds to members of their families, and residents who sell to buy more affordable homes.
The revised initiative would allow the tax cap to protect a Montana homeowner’s primary residence only — not their business real estate. It will not shield vacation homes.
In a nutshell, the measure, in its revised version, will keep property taxes from rising in tandem with higher property values except when the property is sold. Homeowners who hold onto their properties will be shielded from tax hikes that exceed “an annual increase of 2% or the rate of inflation, whichever is lower,” Matthew Monforton said on September 2, 2021.
The revised proposal does allow local authorities to make decisions about other property tax hikes.
Support for Stability
The proposed Montana provision is called an acquisition-value system. In effect, it rewards longtime Montana homeowners by relieving them of hefty tax increases on a regular basis. As a result, it will also keep Montana residents’ housing costs down.
This change would modify the Montana state constitution. Today’s constitution rules out the acquisition-value system by its language stating property value assessments have to be equalized across the board. In contrast, the new system would offer some people tax protections, but not all. Those who keep their homes for extended times, and who watch the values of their homes rise, would be shielded from the stark property tax hikes that have accompanied the home value boom.
The proposal comes at an especially critical time. A large number of Montana home buyers are coming from out of the state, many from the Bay Area and other places in the Northwest and along the West Coast. The pandemic years of 2020 and 2021 have seen a marked trend in which buyers sell homes in densely populated areas, and move to (or buy vacation homes in) destinations with more space. Many are buying homes sight-unseen, after taking virtual tours.
While the rising demand for Montana real estate is great for sellers, it’s not so great for local buyers who face a highly competitive market and have to seek real estate in far-flung areas.
The new ballot proposal could also prevent some residents from leaving the state in search of a lower costs of homeownership. Traditionally, people from Montana move mainly to Washington, Idaho, Oregon, and Texas.
☛ Moving to Texas? Texas has no income tax, but the state makes up for this by imposing above-average property tax rates. A Texas household typically pays 1.69% in property taxes, which translates to around $6,000 a year. Fortunately for Texans, there’s a channel to protest property tax assessments.
Will It Pass?
As California shows us, a state ballot measure to rein in property taxes can be a powerful tool. Can it work in Montana? It could, after running a gauntlet of state review. The formal name for this proposed ballot measure is a constitutional amendment by initiative. Here’s what needs to happen.
First, the officials in the state Legislative Services Division will examine the Monforton-Downing proposal’s new wording, and determine whether to approve it. After that process is complete, the proposal must be examined by the state Attorney General, whose office will apply a legal review. Assuming the measure earns the Attorney General’s nod, the Secretary of State will notify the proposal’s sponsors that it has passed the state’s review. Only at that point are the voter signatures collected.
The measure must garner enough verified signatures, and any proposed constitutional change faces a high threshold to make the ballot. At least 10% of Montana voters, based on the number that voted for the governor in the 2020 general election, must sign in support. Additionally, the signatures must represent at least 10% of voters in every one of the 40 legislative house districts of Montana.
So, the initiative’s backers will go out in early 2022, aiming to collect the 60,000-plus voter signatures need to place it on the November 2022 ballot. Once they can accomplish that task, the measure’s sponsors say, it will pass. Support for the idea is strong and transcends political affiliation.
Property Tax Increases: A Matter for Buyers and Owners Everywhere
Property tax assessments are a serious matter for home buyers throughout the country. If you’re a buyer, check the property taxes on houses for sale. Know, too, when to anticipate tax hikes after your purchase. When you take title to your new home, the transfer is likely to trigger a new valuation for the home, and a tax reassessment.
In some locations, homeowners can challenge their property tax assessments. To learn more, see our guide, How Not to Overpay Your Property Taxes, on Deeds.com.
Supporting References
Christi Jacobsen, Montana Secretary of State: Proposed 2022 Ballot Issues; Constitutional Initiative, Ballot Issue #9 (new submission received Aug. 31, 2021, replacing Ballot Issue #8).
Mike Dennison for KTVH.com (Scripps Media, Inc., Helena, MT): Sponsors Resubmit, Amend Proposed 2022 Initiative to Cap Property Taxes (updated Sep. 2, 2021).
Mike Dennison for KTVH.com (Scripps Media, Inc., Helena, MT): Proposed 2022 Initiative Would Cap Montana Property Taxes, Assessment Values (updated Aug. 17, 2021).
Stacker.com: Where People in Montana are Moving to Most (Jun.26, 2021).
Tessa McLean for the San Francisco Chronicle (SFGate.com): Californians Are Arriving in Montana in Droves. But They’re Not Welcome (Jul. 21, 2021).
Photo credits: Marcus Serrano, via Pexels, and Julia Boldt, via Pixabay.