Property Tax Reappraisal
In 1975, the legislature required the Department of Revenue to administer and supervise a program for the revaluation of taxable property on a cyclical reappraisal cycle every five years. Revaluations - more commonly called reappraisal cycles - are designed to insure that all property is taxed on current structural, market and income information. (15-7-111, MCA)
Since that time, Montana has completed reappraisals in 1985, 1992, 1997 and 2003. The reappraisal of all property in the state is the Montana Department of Revenue's largest and most difficult undertaking. It involves more than 941,900 individual parcels of property, including 54 million acres of agricultural and forest land.
All taxable property contained in classes three, four and ten is reappraised. Class three property includes agricultural land and non-qualified agricultural land (20 to 160 acres). Class four includes residential, commercial, and industrial land and improvements, and improvements on agricultural and forest land. Class 10 includes forest land.
Property owners in the affected classes are impacted by the results of the reappraisal. Local governments, which use property tax as a revenue source, are also impacted.
Over the years, the Montana Legislature has enacted several laws to mitigate the effects of value increases due to these reappraisals. This includes implementing a "phase-in" of value, creating a partial exemption and reducing the tax rate.
2003 Law Changes to Mitigate Reappraisal Effects
Senate Bill 461 was passed by the 2003 Montana Legislature to mitigate reappraisal effects.
- The 2003 reappraisal cycle resulted in an increase in residential class 4 property value overall by 21.4%, commercial class 4 property value overall by 23.2%, and class 3 agricultural land value overall by 15.3%.
- Prior to Senate Bill 461, statute required that an increase in assessed value be phased in over a 6-year period; the tax rate remained constant at 3.46%; the exemption for residential class 4 property remained at 31%; and the commercial class 4 exemption remained at 13%.
- Senate Bill 461 retains the 6-year phase-in of reappraisal values, with the 2003 reappraisal being phased in over 6 years. An example of the phase-in for the fifth year of the 6-year period is as follows:
- (Reappraisal Value - Value before Reappraisal) X .1667 per year = Phase-in Amount
- Value before Reappraisal + Phase-in Amount = Phase-in Value
- $200,000 - $170,000 $30,000 X (.1667 X 5 years) = $25,005
- $170,000 + $25,005 $195,005
- Senate Bill 461 further mitigates the effects of reappraisal by increasing exemption amounts for residential and commercial class 4, while reducing the tax rate on class 3 and 4 property from 3.46% to 3.01% over a 6-year period.
The reduced tax rate for Class 3 and 4 property is shown in the following schedule:
| Tax Year | Tax Rate |
| 2003 | 3.40% |
| 2004 | 3.30% |
| 2005 | 3.22% |
| 2006 | 3.14% |
| 2007 | 3.07% |
| 2008 | 3.01% |
The "homestead" and "comstead" exemptions that exempt a portion of the Phase-in value of Class 4 residential and commercial properties from taxation are shown in the following schedule:
| Tax Year | Residential Exemption |
Commercial Exemption |
| 2003 | 31.0% | 13.0% |
| 2004 | 31.4% | 13.3% |
| 2005 | 32.0% | 13.8% |
| 2006 | 32.6% | 14.2% |
| 2007 | 33.2% | 14.6% |
| 2008 | 34.0% | 15.0% |
- Senate Bill 461 allowed for additional property tax assistance for owners who met certain property tax increases and income requirements. Residential properties that had an increase in taxable value of at least 24%, and a tax liability increase of $250 or more, are eligible for the additional tax assistance if household income
is below $75,000. Under the income requirements set in the bill, the following taxable value caps apply:
- If the household income of the eligible residence is less than $25,000 per year, the taxable value increase is capped at 24% over 6 years.
- If the household income of the eligible residence is between $25,000 and $50,000 per year, the taxable value increase is capped at 30% over 6 years.
- If the household income of the eligible residence is between $50,000 and $75,000 per year, the taxable value increase is capped at 36% over 6 years.
