Montana's Senate Taxation Committee has taken significant steps toward property tax reform, aiming to balance the needs of local governments with the financial relief for taxpayers. During a meeting on March 21, 2025, the committee discussed an amendment to Senate Bill 117, which proposes changes to how property tax increases are calculated and how newly taxable properties are treated.

The amendment modifies the existing formula that allows local governments to increase property taxes by half the rate of inflation. Instead, it proposes that local governments can now utilize the full rate of inflation, capped at 4%, averaged over the past three years. This change is designed to provide local governments with more stable funding, addressing concerns that previous limitations were detrimental to those entities that do not experience growth.

One of the key features of the amendment is the adjustment in how newly taxable properties contribute to local tax revenues. Under the new proposal, 75% of the tax revenue from newly taxable class 4 properties, which include smaller businesses and homes, will be allocated to local governments. For other property classes, this percentage is capped at 50%. This structure aims to ensure that local governments can maintain essential services while also providing tax relief to existing taxpayers.

Additionally, the amendment introduces a reserve account for local governments, allowing them to set aside 10% of the revenue from newly taxable properties. This reserve is intended to provide a financial cushion in case of significant revenue losses, such as the shutdown of a major taxpayer like a pipeline. The reserve can be used to mitigate the impact on local services and prevent drastic tax increases for remaining taxpayers.

The committee also addressed concerns regarding property tax abatements, emphasizing that if properties are abated, the remaining taxpayers may not receive the same level of relief. This aspect of the discussion highlighted the need for careful management of tax incentives to ensure fairness across the tax base.

Overall, the proposed amendment represents a compromise aimed at addressing long-standing issues in property tax calculations while providing a framework for local governments to adapt to changing economic conditions. The committee's discussions reflect a commitment to finding solutions that benefit both local governments and taxpayers, ensuring that essential services can be maintained without overburdening residents. As the bill moves forward, stakeholders will be watching closely to see how these changes will impact property tax dynamics across Montana.