Montana renters could foot the bill for a property tax blunder, legislators warn

Certain tenants across Montana could soon face increased rents due to a newly discovered mistake in the property tax bills passed during the 2025 legislative session, multiple legislators told the Montana State News Bureau.

The revelation of a significant error in the new laws comes as 2025 property tax bills are being mailed out following a yearslong effort to curb soaring property taxes. Those price tags have skyrocketed in recent tax cycles after residents — rather than large companies — started shouldering the majority of the statewide property tax burden.

Property tax reform topped the list of priorities for Gov. Greg Gianforte during the 2025 session, and lawmakers passed two sweeping bills that made major changes to Montana's property tax system.

The final version of one of those bills mistakenly increased the tax rate for the current year on multifamily parcels, such as apartment buildings. When property taxes rise for landlords, they often raise rents to compensate for those added costs.

“This is an expense [landlords] are going to incur this year,” said Rep. Mark Thane, D-Missoula, one of the key Democrats involved in property tax reform. “It wouldn't surprise me to see some of that passed on to tenants.”

He characterized the 2025 tax cycle as a “year of pain” for landlords and renters.

This error is likely to drive up taxes for higher value multifamily properties the most, but exactly how many people this impacts remains to be seen. That's because the amounts Montanans pay in property taxes are not determined solely by the rates. Tax bills also consist of local mill levies and are a combination of costs such as funding for local schools, public safety and neighborhood improvements like libraries. Depending on property location, the overall tax picture can vary.

But Nate Tollefson, a Missoula-based developer and landlord who manages over 2,000 units that make up a large portion of the city's rental market, said his property taxes went up roughly $1.5 million from 2024 to 2025. Some of his properties increased 35%, 37% and 40%. Tollefson said he plans to raise rents.

“Everything’s expensive already and then your rent goes up another hundred bucks — that hurts,” Tollefson said. “I really feel bad for these renters.”

Gianforte repeatedly urged lawmakers to pass the measures by mid-February to give the Department of Revenue adequate time to implement the changes. Instead, both highly complex bills were passed in the final hours on the last day of the Legislature in late April, despite the fact that the Legislature gaveled in on Jan. 6.

While legislators, lobbyists and state employees knew for months that the session’s most critical goal was providing property tax relief, they did not finalize the bills until the waning days of the session. The delay stemmed from political opposition on multiple fronts and procedural holdups — including one key bill that sat for a month in the Senate Tax Committee. The rush to push through the complex legislation led to the rate mistake for multifamily dwellings, multiple legislators said.

Legislators on both sides of the aisle and all with different philosophies on how to address Montana's outdated property tax system, including those who championed the passage of these bills, admitted the error was a product of the time constraint they backed themselves into.

“It was putting too much pressure on four days,” said Rep. Llew Jones, R-Conrad, who was the main architect and advocate of these property tax bills. “The challenge with any big bill with this many pieces is you just don’t know until it gets applied.”

Outside of multifamily dwellings, the new property tax laws seem to be working as intended, with most residents across Montana seeing a decrease or no increase in their bills, according to initial estimates compiled by Jones.

Thane, Jones and Sen. Greg Hertz, R-Polson, three of the key legislators involved in property tax reform, said they learned of the error in recent weeks as tax bills started going out to homeowners and landlords.

For years, the property tax rate on multifamily dwellings was capped at 1.35%. In the rush to complete the complex reform package, that rate was inadvertently raised to 1.89% when lawmakers, state employees and lobbyists stitched together portions of another bill during the last committee hearing before adjournment.

“That was never the intent, “ Hertz said.

The new property tax laws change the system for 2025 and again in 2026. For the 2025 tax year, the new law implements a graduated rate structure: The first $400,000 of a home's valuation is taxed at 0.76%, the portion between $400,000 and $1.5 million at 1.1%, and the amounts above $1.5 million at 2.2%.

The rate error may have an additional consequence for multifamily dwellings valued above $1.5 million. Because the 1.89% cap doesn’t take effect until $2 million, properties with valuations above $1.5 million may be partially hit with the higher 2.2%. The Department of Revenue did not respond to questions about how it is applying the 2.2% rate to multifamily dwellings.

There are an estimated 1,000 multifamily dwellings over $1.5 million in valuation, and the large majority of those exceed $2 million.

Hertz, who was a thorn in the side of Jones throughout the legislative session and opposed many aspects of the property tax reform that was passed, surmised that the increased taxes will be “passed through to renters most likely.”

“In the rush to amend the bill, they forgot how it would impact multifamily rental units,” he added.

The legislators in the final committee hearing, on the 84th day of an 85-day session, discussed the specific lines that include the mistake, but no one seemed to acknowledge the higher rate figure in the amendment they were considering, despite a warning from Jones of unintended consequences.

“I want to make absolutely sure, absolutely certain ... that this does not have any impacts that are negative,” Jones said in the committee hearing.

That amendment was unanimously passed by a voice vote during the committee meeting on April 29. The final package came in the form of two bills, but is a combination of bits and pieces of different proposals.

“I’m not surprised the tax bill did not go the way we thought it would,” said Sen. Emma Kerr-Carpenter, a Billings Democrat.

In 2026 and for years to come, the tax system will change again, therefore voiding the mistake that is in law for 2025.

Kerr-Carpenter worries that if landlords raise rents for the upcoming tax year to compensate for increased property tax burdens, they won’t lower their rents in years to come even if the tax code lowers their property tax bills after 2025. Tollefson concurred with that theory, expressing skepticism that they would be able to bring rents back down.

Jones, however, floated the idea of providing an incentive in an attempt to ensure that landlords bring rents down in the form of a rebate check for those who never raised rents or would lower them.

While property tax bills are still being mailed out, the new laws seem like they will work as intended (outside of multifamily dwellings), where most homeowners see no increase or a decrease in their property tax bill, and residents who own higher value homes are seeing a smaller bump than they otherwise would.

According to initial estimates by Jones based on Department of Revenue data for most counties, about 89% of residential property statewide will see a decrease or no change in their property tax bill.

“I wish the outcome were different for those multifamily projects,” Thane said.