Montana legislators, lobbyists make property tax progress behind the scenes

Lawmakers and lobbyists are working hard to deliver a property tax relief bill to Montana residents, but much of that work is outside of public view.

There are still a number of proposals in play from both sides of the aisle, some of which may be combined or modified, but the momentum behind any bill or concept is changing from hour to hour at the Legislature.

Most lawmakers and the governor are in agreement: Providing property tax relief is one of the most important tasks before them this session, particularly because property tax bills are set to rise again after a dramatic spike in recent cycles.

Because of the complicated and rigid way Montana levies property taxes, it is difficult to provide relief for homeowners without costing the state hundreds of millions of dollars or forcing other people — such as business owners, corporations or farmers — to pay more in taxes.

Lawmakers have said over and over that "there's no perfect solution."

As the Montana Legislature enters its final weeks, there is still deep disagreement on the philosophies behind how to deliver property tax relief. Amid the chaos, a select few legislators and business lobbyists are having private conversations behind closed doors and in the hallways about how to get their preferred property tax relief bill over the finish line.

"If you think the Legislature is floor debate, it's not. The Legislature is conversations in the hallway," said House Majority Leader Steve Fitzpatrick, R-Great Falls. "Always has been, always will be."

The factions forming on certain concepts and bills are not clean cut, and there are still a number of property tax relief methods in play.

Business friendly?

Some groups, including nearly all Democrats and many Republicans, see rate cuts as the key method to lowering residential property taxes. But lobbyists for large businesses are "swarming," said Great Falls Republican Rep. George Nikolakakos, and they are vehemently discouraging the rate cut proposals from advancing because that method would shift some of the tax burden onto their business clients. And this debate comes amid lingering frustration from the last reappraisal cycle when residents bore the brunt of the property tax increases while large businesses saw relatively small jumps in their property tax bills.

Legislators amend major bills, breaking a weeks-long standstill on MT property tax reform

Both Todd O'Hair, the president of the Montana Chamber of Commerce, and Bob Story, executive director of the Montana Taxpayers Association, whose members include large businesses, are some of those lobbyists. They say they are not on board with any bill that would cut residential taxes and therefore raise taxes on their member businesses.

"We can’t stand a property tax shift on businesses," O'Hair said.

Those lobbyists, some hardline Senate Republicans and a few others are interested in a perpetual rebate through Senate Bill 90. In its current form, the bill would provide $239 as a rebate to homeowners, an amount that many say does not go far enough. Proponents, however, say they want to increase the amount and like that it does not shift the tax burden onto businesses.

A document titled "Montana 2025 Legislative End Game Bill Tracking Report" circulating among some lawmakers and lobbyists and obtained by the Montana State News Bureau labeled SB 90 "the business lobbies [sic] attempt to kill all prop tax reform that touches them." The report was authored in part by Rep. Llew Jones, the Conrad Republican and one of the primary engineers of the state budget, who is also opposed to SB 90.

"It is not a structural fix, thus not real," the document continues. "Keep it tabled if possible, otherwise it looks real and gets a veto."

That effort appears to be working: SB 90 is currently paused in the process — or what is referred to as "tabled" — after a committee voted it down and two attempts this week to keep the bill moving failed.

"I don't think anyone's gonna give up on that [bill]," said Rep. Terry Falk, R-Kalispell.

Staging area

Those who are not interested in SB 90 are working to put their preferred property tax relief methods into Senate Bill 542, what was an inconspicuous bill that was previously being referred to as "Plan D" by its sponsor, Sen. Wylie Galt, R-Martinsdale. The proposal would freeze all property values for two years in an effort to stave off impending increases.

But that simplicity was part of Galt's calculus. SB 542 is titled "An act generally revising tax laws," giving it a broad staging area for other policy ideas to enter through amendments. SB 542 has had four hearings so far which have averaged five minutes, and now it appears to be morphing into the main vehicle for property tax relief.

"I have enough experience around here that I knew having a wide title was a good idea," Galt said.

The "End Game" document also noted SB 542 as a key tax reform bill.

"Ensure movement through Appropriations. Assess vote counts to maintain momentum," the document reads.

There are bipartisan negotiations happening to put the key parts of House Bill 155 — the Democrats' flagship property tax relief bill — into SB 542 by adding a tiered rate system that applies higher tax rates on higher-value homes. The Senate on Thursday voted down HB 155 with no public debate.

No clear path forward for property tax relief in final days of MT legislative session

Another amendment, a 42-pager from Jones, would place the major property tax relief proposal from the Governor’s Property Tax Task Force into SB 542. That legislation, House Bill 231, is meant to lower property taxes on primary residences, long-term rentals and tens of thousands of commercial businesses. It seeks to make up the lost tax revenue largely by increasing the tax burden on short-term rentals, like Airbnbs, and second homes.

"People are running around with various staffers trying to get different amendments on it on whatever day of the session it is," said Story, who also served in the Legislature from 1995 to 2009.

A property tax debate did break out into the open on Thursday evening when HB 231 hit the Senate floor, but not before Sen. Dave Fern, D-Whitefish, acknowledged that "there's been a lot of conversation in the hallways" and "a lot of conversations with lobbyists."

The bill was lambasted by multiple lawmakers for being too complicated, for how it impacts certain communities and for how many staff it would take to implement. It failed on a tie vote.

Home stretch

The negotiations and what the property tax legislation looks like is "evolving rapidly," Jones explained.

"In the end, this is not unusual," Jones said of the last-minute sprint on the most anticipated legislation of the session.

The House Taxation Committee is set to vote on SB 542 in the coming days, at which point there will be more clarity on where the Legislature stands, committee member Rep. Jonathan Karlen, D-Missoula, explained Thursday.

"Things change fast," Karlen said.