Audience members ask questions of Department of Revenue representatives in Great Falls on Monday, July 10, 2023. (Photo by Nicole Girten/Daily Montanan)
GREAT FALLS — Richard Hopkins was one of more than 100 residents to pack a hotel convention center here on Monday to voice frustration over property appraisal notices from the Department of Revenue.
Hopkins said his taxes were going to go up $1,500 or so, without any improvements to his property in the 15 years he’s owned it, and he can’t keep up on his fixed income.
“You’re forcing people out of their home,” Hopkins said to the department representatives present.
Property owners in Montana have been opening their appraisal notices from the Department of Revenue and finding significant increases in their home’s estimated taxable value, as much as 40%. Already, the DOR is being “flooded” with appeals.
However, that increase in taxable value doesn’t translate directly to the additional amounts people will pay in property taxes, and at the meeting, state and city leaders took a shot at explaining the information to frustrated taxpayers.
The situation was foreshadowed during the legislative session, and Republicans and Democrats are still arguing about the right solution. For example, Democrats want an unlikely special session to help taxpayers, but Republicans said that’s not happening.
Monday, Senate Majority Leader Steve Fitzpatrick said there was “zero” chance for a special session.
“This is a political stunt,” said Fitzpatrick, a Great Falls Republican, told the Daily Montanan.
After the meeting, City Commissioner and realtor Joe McKenney said people didn’t walk away from the meeting with the right takeaway — that the estimate sent out by the state is not what people will end up paying. Instead, he said that number is likely to be much lower.
“People are afraid,” McKenney said. “They see this increase in taxable value — sometimes it’s as high as 40% — so they’re hearing that term ‘taxable value,’ and they think that’s what they’re going to be paying in taxes.”
But he said the relationship isn’t direct.
Every two years, the Department of Revenue assesses property across the state. The recent appraisal notices sent out were based on new increases in values, but also on an old part of a formula, the amount of mills local jurisdictions will levy.
And McKenney said the notices were based on 2022 mill estimates and outdated: “That property tax estimate will be lower.”
At the meeting, Mayor Bob Kelly explained the reason why. He outlined the restrictions on cities in raising property taxes at the local level.
“The city is limited,” Kelly said. “We are restricted by how much we can raise taxes, despite the increase in value that your house has.”
Generally, the city can raise taxes by one half of the average rate of inflation over the last three years; Kelly said the only way it can raise additional taxes is through voted levies, such as the recently passed library levy.
Reasons cities may raise taxes
Mayor Kelly said the city can increase taxes for:
- A permissive medical levy to cover medical insurance for city employees
- Raise taxes by one half of the average of the last three years’ inflation
- Newly built property in the city
These mill levy caps are set by the state, which also sets the residential property tax rate.
The legislature got a heads up that the market value appraisals were going to be high this year, with the Revenue Interim Committee receiving a memo from the Department of Revenue that outlined the state’s tax rate would have to drop from 1.35% to .94% of market value to keep the bill neutral for residents.
But the legislature didn’t make that change, and the way to deliver property tax relief was a point of contention between Republicans and Democrats during the session. For example, one proposal from Rep. Jonathan Karlen, D-Missoula, to create a “circuit breaker” income tax credit for property taxes paid failed on the House floor.
Ultimately, the solution passed by Republicans, who hold a supermajority, was a tax rebate property owners have to apply for that would be available for the next two years. The maximum property owners can receive is $675.
As taxpayers started getting appraisals, however, last week, Senate Democrats submitted a letter to Republican Gov. Greg Gianforte requesting a one-day special session to address property taxes. In part, they argued the rebates were not sufficient and included a draft bill that would reduce the residential property tax rate to the neutral .94% of market value, included in the DOR memo from November.
“Again and again Montana Democrats pleaded with Republican legislators and Governor Gianforte to find long-term solutions to unaffordable property taxes,” said Minority Leader Pat Flowers, D-Belgrade, in a statement. “They chose to do nothing, and now Montanans are seeing the consequences of their inaction. We have one more shot to address the issue. I hope that the Governor finally decides to take this seriously.”
Spokesperson for Gianforte Kaitlin Price said in a statement last Thursday that Democrats already voted down the Republican tax rebate solution.
“After dragging their feet and doing nothing on property taxes for the 90-day legislative session, Democrats now want to come back to Helena, eat lobbyists’ steak dinners, and waste taxpayer resources all to do nothing again,” Price said in the statement.
Price said the governor is urging county commissioners and other local leaders to exercise fiscal responsibility and limit the growth of Montanans’ property taxes.
In a phone call, Fitzpatrick also pointed to Democrats voting against rebates and to votes in support of a bill from Sen. Jeremy Trebas, R-Great Falls, that would have eliminated the cap on local mill levies.
“For them to come and say, ‘We want to have lower taxes,’ is nonsense,” Fitzpatrick said.
Fitzpatrick said his appraisal showed a 25% increase in the value of his home, but he doesn’t expect he’ll be paying 25% more in taxes.
“I can certainly understand the angst that people have,” he said. “But I tell them, ‘You know, there’s a formula for it. It probably won’t increase as much as that notice shows.’”
There is an appeals process property owners who think their property hasn’t been accurately appraised can go through by first filling out a form with the DOR.
Three out of four cases are resolved at the county level without further appeal, according to the Montana Tax Appeal Board website.
After the meeting, Katie Kakalecik, area manager with the Department of Revenue, says she expects appeals to be in the thousands this appraisal cycle, saying the department has already been “flooded” with mail.
Kakalecik said people are focused on the number that was sent out, even though it was tied to last year’s mills, but the department can’t control when notices go out and has to go off the information it has at the time.
“There’s a lot of emotion,” Kakalecik said.
Rebates are available for principal residences that have been lived in for at least seven months. Taxpayers have to apply for their 2022 claim between Aug. 15 and Oct. 1 of 2023.
Property owners can start an informal review process with the Department of Revenue by filling out a Form AB-26. If an agreement can’t be reached on the valuation, the appeal goes to the independent county tax appeal board and that decision can be appealed to the Montana Tax Appeal Board.
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