Senate passes bill aimed at tax relief for high land values

The Montana Senate on Friday passed a property tax relief bill backed by many Whitefish Lake residents, although the number of homeowners eligible for the tax exemption has been reduced substantially since it was introduced in January.

The chamber voted 33-17, mainly along party lines, to send Senate Bill 94 to the House.

Sponsored by Sen. Keith Regier, R-Kalispell, the measure would benefit residents whose land values are greater than 150 percent of the values of improvements on their property. The proposed property-tax assistance program would cap the taxable land value at 150 percent of the improvements.

Citing the situation for many residents along Whitefish and Flathead lakes, Regier said his bill is intended to address long-time residents with modest houses whose land values — along with their property taxes — have skyrocketed due to the location.

To qualify for the program, a property must be the owner’s primary residence, less than five acres in size and under the possession of the current owner or a blood relative for at least 30 years.

Several residents of Whitefish Lake drove to Helena last month to testify in favor of the original version of the bill, in which the qualification for tax relief and the cap on land values were set at 75 percent of the improvement values.

Lawmakers, however, objected to the original bill, noting the state’s tight fiscal outlook. The Department of Revenue had estimated the measure would have decreased the state’s revenues by more than $1.5 million per year by 2019.

The current version is predicted to cost the state about $180,000 annually. It would also create a tax-shift for local property taxes, meaning the resulting difference in tax collections would be borne by taxpayers that don’t qualify for the program.

The Department of Revenue estimates that the current version of the bill would make the exemptions available for 5,837 property owners in Montana, assuming that 75 percent of the properties meet the primary-residence requirement. Regier has repeatedly disputed that assumption, saying he believes the number of primary residences would in reality be lower, along with the fiscal impact.

The bill originally would have provided the tax exemption for an estimated 20,000 property owners in the state — including about 3,000 in Flathead County and about 1,600 in Lake County.

The department’s director of tax policy and research, Ed Caplis, said Friday that the current version would still apply to a number of properties along Whitefish and Flathead lakes, but that the majority are located in Missoula and Gallatin counties.

“It is a lot of Flathead Lake, Whitefish Lake, but you also have a lot of properties in Missoula where they have older homes but a good location, and the same thing with Bozeman,” Caplis said.

But he added that the lakefront properties are the “most egregious” in terms of disparities between land and improvement values.