Property Tax
Click here to download our Understanding Property Taxes brochure.
The Department of Revenue is responsible for ensuring that all property in the state is treated fairly. The department's duties include the appraisal, assessment and equalization of the value of all property in the state for the purpose of taxation.
Most real estate, improvements, and personal property are appraised by Department of Revenue employees in regional offices. The department maintains a presence in each county.
Property owned by companies that is single and continuous and is in more than one county (such as railroads, telecommunications, electric utilities and pipelines) is centrally assessed by the Department of Revenue. The valuation is apportioned to counties and other jurisdictions on a mileage basis, or on another basis determined to be "reasonable and proper."
The rate of tax on the various classes of property and the establishment of the actual classes is a function of the legislature. There are currently twelve classes of property. Local governments determine the mill levy requirements for each taxing jurisdiction. These mill levy requirements include state mills. Using those mill levy determinations, Department of Revenue staff calculate the property tax liability for each property including special district fees and charges.
Approaches Used to Determine Property Value
The Department of Revenue uses three approaches to determine property value.
Cost Approach - The cost approach involves the determination of a replacement cost new for each structure and the deduction of any loss in value due to physical deterioration, and functional or economic obsolescence. The significance of the cost approach lies in the extent of its application. It is the one approach that can be used on all types of construction on each type of property. It is a starting point for appraisers in determining the value of a property. It's the strongest approach in the appraisal of properties where the lack of adequate market and income data limits a reasonable application of the other approaches to value.
Sales Comparison Approach - This approach is the preferred approach for residential property when a sufficient number of sales are available. Market models are developed, in conjunction with a comparable sales analysis, to provide an estimate of the market value of each property. In making that analysis, individual properties are valued using three to five comparable sales. The comparable sales are adjusted to the subject for differences such as square foot of living area, location, year built, date of sale, quality grade, etc. The adjustments for each comparable are then applied to their sale price. The result is an estimate of value for the subject property, based on the adjusted sales of the comparable properties. In reality, it's the same approach that is used in making fee appraisals for lending purposes.
Income Approach (For commercial properties only) - The income approach is essentially the determination of value by capitalizing a stream of income using a rate. In applying the income approach, the appraiser must determine market rents, expenses and appropriate capitalization rates. After the appraiser develops a basic set of income and expense models based on market data for the various types of income producing properties, they use a capitalization rate to convert the income into an estimate of value. The models created reflect current economic trends in specific valuation areas.
The value indications produced for each property by the income approach, sales comparison approach and cost approach are compared and reconciled. The final value for each property is determined based on the approach that is best supported by the available data.
Functions of Property Taxation
The various functions required to accomplish property taxation are identified below. The valuation and taxation functions are currently the responsibility of the state. The tax billing, collection, and reconciliation functions are a county responsibility.
Where Do Property Tax Dollars Go?
Schools and many other services are funded by property tax dollars. This graph illustrates the basic areas where Montana's property tax dollars are used.
