Governor signs property tax bills

The office of Gov. Greg Gianforte said Friday that the Montana governor has signed two bills implementing his signature property tax relief package, finalizing the passage of legislation poised to reduce property taxes for many homeowners and long-term rentals, in part by passing hefty increases onto second homes and Airbnb-style short-term rentals.

The signings were announced via a generalized email late Friday that listed a total of 183 bills signed by Gianforte in recent days. In a statement in response to a request from MTFP, the governor’s office said he was “proud” to sign the tax bills “to deliver meaningful and permanent property tax relief for Montanans in the place they call home.”

“The governor is grateful to each member of the Legislature who joined him in delivering meaningful, lasting property tax relief to Montanans,” wrote spokesperson Sean Southard.

Gianforte campaigned on the second-home tax concept during his re-election bid last year. He and other supporters have called the approach a “homestead” measure that would reduce taxes for housing used by permanent residents. They’ve also argued that it’s fair to raise taxes on second homes because those properties are in many cases owned by out-of-state residents who don’t necessarily pay for public services by filing Montana income taxes.

According to projections from the Montana Department of Revenue, the legislation could lower average homeowner taxes 18% when it takes effect in 2026 — while raising bills for second homes and Airbnb-style short-term rentals by a whopping 68%.

The exact impact on individual homeowners will depend on a variety of factors, including the value of their specific property, the composition of their local tax bases, and how the cities, counties and school districts they reside in are setting budgets.

The legislation was developed by House Appropriations Chair Llew Jones, R-Conrad, through a property tax task force established by Gianforte last year. As the measure worked its way through the Legislature, various components and revisions were eventually split across the two bills Gianforte has now signed, House Bill 231 and Senate Bill 542.

Both bills ultimately passed with bipartisan support, overcoming opposition from some Democrats and most hardline Republicans. Concerns from opponents included the possibility of saddling qualifying Montana residents with the second-home tax if they fail to fill out a state revenue department application certifying their home as a primary residence, as well as the potential for higher taxes to fall on family cabins owned by Montanans.

Industry groups also opposed the legislation for its potential to shift higher taxes onto large business properties.

The tax relief measure works by adjusting the rates that convert each property’s market value to the taxable values used to calculate tax bills — essentially determining how much of a home’s value is subject to taxation. Dialing those rates up or down gives lawmakers a way to shift more or less tax burden onto different classes of property. However, because of how most local taxes are calculated, reducing rates on one type of property raises taxes on others, instead of reducing overall collections.

Once implemented, the second-home tax approach will divide residential properties into two tiers, applying higher rates to second homes and short-term rental properties in an effort to backfill residential cuts and minimize spillover onto business properties. The package also includes several rate tiers that lean the tax system harder on high-value homes in an effort to focus more relief on lower-value properties.

Additionally, the package tweaks rates for agricultural and commercial properties, reducing rates on lower-value commercial properties in an effort to shield small businesses from the tax shift.

Homeowners and landlords who rent their properties will have to apply for a “homestead” exemption qualifying them for the lower rates starting in 2026. Homeowners who receive higher tax bills after failing to apply will be able to qualify via an appeals process.

Gianforte had initially pushed lawmakers to pass the tax package early in the legislative session, saying that timing was necessary for the revenue department to implement the second-home tax this year. As debate over tax relief stretched into the session’s closing days, however, supporters added interim tax rates and a $400 rebate intended to tide over taxpayers until the full package takes effect in 2026.

Eric Dietrich is deputy editor of the Montana Free Press, a nonprofit newsroom, and can be reached at edietrich@montanafreepress.org.