Supplemental tax bills heading toward property owners

Last year, during a dispute with Gov. Greg Gianforte over the state's "95 mill" school equalization property tax, officials with 49 of Montana's 56 counties chose to reduce their fall tax bills against the wishes of the Montana Department of Revenue. This month, after landing on the losing side of a November Montana Supreme Court ruling, those counties' treasurers are left with the thankless task of sending supplemental property tax bills to hundreds of thousands of property owners across the state.

The supplemental bills will increase the amounts homeowners and other property owners owe for the second half of calendar year 2023, payments that are due at the end of May. The exact amount will depend on property type and tax valuations, with homes assessed at a market value of $450,000 owing about $104 extra, according to MTFP calculations.

Terri Kunz with the statewide county treasurer's association said in an interview Wednesday that county treasurers are coordinating to send out the supplemental bills in the second half of March so people who own properties in multiple counties will receive notices at roughly the same time.

The 95 mills, which collect about $128 for every $100,000 of a home's assessed property value, are collected statewide to fund part of a state program that equalizes funding between tax-base-rich and tax-base-poor school districts. They represent a minor component of most property tax bills, which also include collections for local school levies and the operation of city and county programs.

The 95 mills became a flashpoint last year after the revenue department's two-year reappraisal cycle for residential properties reported extraordinary tax valuation increases for homes across the state of 40% on median. While the way local government budgets are apportioned among taxpayers means tax bills didn't ultimately rise in direct proportion to that increase, the reappraisals produced widespread concern and did contribute to notable tax increases for many homeowners. According to an MTFP estimate, the median residential property in Montana saw its tax bill rise by 21% in 2023.

The governor and local government officials have sparred repeatedly over the property tax issue in recent years, with the governor trying to blame rising taxes on local government spending, and many local officials arguing that the governor and state Legislature have failed to take state-level action that could ease homeowners' tax burdens.

During last year's tax angst, many county officials came to the conclusion that an obscure provision of the state tax code limits the growth of collections from the 95 mills, which are somewhat distinctive in that they produce a tax in direct proportion to property value. Despite a directive to the contrary from the revenue department and the governor's budget office, the county officials argued they could legally collect the school equalization tax only at a lower, 77.9-mill level. Counties maintained that the difference, about $80 million statewide, could be readily offset by the state's flush General Fund.

The dispute produced months of political back-and-forth as well as several lawsuits, with counties touting their dedication to lightening the load on taxpayers and the governor arguing he was defending an essential piece of the school funding system. The Supreme Court ultimately concluded the lawsuits by ruling in favor of the Gianforte administration, noting that the revenue department had used a consistent methodology for calculating the 95 mills for two decades.

Normally, counties mail property tax bills once a year in the fall, sending notices that specify amounts for fall and spring payments. The Supreme Court ruling, however, came after counties had already sent their fall 2023 mailings with what the court deemed incorrect amounts, necessitating the supplemental bills this spring.

The seven counties that didn't collect the reduced amount for the 95 mill tax, and are now spared from supplemental collections, are Broadwater, Deer Lodge, Glacier, Madison, Meagher, Teton and Toole.

County treasurers said this week that they expect the unusually timed bills to produce widespread confusion among taxpayers.

Missoula County Treasurer Tyler Gernant, for example, said he worries that residents who are accustomed to paying their tax bill once a year may end up in a bind because they discount the new notice, assuming it's either a scam or a notice for a tax bill they've already paid. He said he's particularly worried about snowbird residents who head south for the winter after paying their fall tax bill and who might not be keeping a close eye on their mailbox in Montana.

"Our biggest concern is people aren't going to necessarily know about this," Gernant said.

Unpaid tax bills incur late fees and, in extreme situations that develop over time, can result in owners losing their properties.

While all Montana property owners receive mailed tax bills, most homeowners with mortgages on their properties have their taxes bundled into their monthly housing payments. Gernant and Kunz both said treasurers will notify mortgage companies of the updated tax bills, though Kunz encouraged homeowners to reach out to their banks with questions.

Kunz, who also serves as the Jefferson County treasurer, asked that members of the public who call their local treasurer's office with questions about the new bills keep in mind that the decisions that produced them weren't made by the line staff who will be picking up the phone.

"It's really nobody in our office's fault. We're just doing our best," she said.

"My local team members don't need to get beat up with this," she added.