High Value Homes Claim Tax Benefit Intended For Working Farms And Ranches
Author: Eric Dierich, Montana Free Press Deputy Editor
High-Value Homes Claim Tax Benefit Intended for Working Farms and Ranches
Eric Dietrich
Montana Free Press Deputy Editor
This article was published on the Montana Free Press website.
I’ve learned a couple of things working as a data reporter and editor at Montana Free Press. One is that numbers are often mind-numbingly boring. Another is that, in the right circumstances, they can put your jaw on the floor.
A project we published in collaboration with High Country News this week, looking at how thousands of high-value homes claim a property tax benefit intended to support working farms and ranches, produced several of those jolting moments.
To recap that story: Most Montanans who own houses pay taxes on the home lots beneath the structures they live in based on how much state tax officials think that land would be worth if put up for sale, a figure that’s often north of $100,000 for even modest lots. Agricultural land, in contrast, is taxed based on how much the state thinks someone can earn farming or ranching it, a figure that’s typically much, much less. As a result, if an owner can persuade the state revenue department their home should be classified as a farm, they can typically save hundreds or thousands of dollars a year on their tax bill.
While researching the story over the last six months, HCN reporter Nick Bowlin and I learned that the annual farm income threshold necessary to secure an agricultural tax designation, $1,500, hasn’t been updated since 1986. That was one jaw drop.
Later, I calculated the effective land tax rate for smaller properties, those less than 20 acres. Non-vacant residential properties in that size bracket typically paid about $1,609 an acre in annual land taxes. The number for small agricultural properties? $6.61 an acre. That pennies-on-the-dollar disparity knocked my jaw even lower.
Then, I figured I should take a look at the Bozeman-area property where Gov. Greg Gianforte makes his home. His house and garage, valued at $1.3 million, sit on 11 acres of land along the East Gallatin River. While the governor pays a four-figure tax bill on the structures, I calculated that his agricultural designation means the 11 acres cost him only about $66 a year in land taxes — less than what 97% of Montana’s urban homeowners are taxed for their home lots. At that point I resigned myself to needing a good orthodontist.
Our reporting indicates that the governor is part of a large class of exurban and rural property owners who have found a way to claim a tax benefit that’s by and large unavailable to Montanans who own homes in towns and cities. It looks to me like many of those rural property owners exist in a gray area that blurs the lines between a working farm and luxury real estate. The governor’s office, I should note, told us Gianforte and his family use their Bozeman-area land, which includes other parcels, to grow barley and alfalfa and board horses and mules.
I should note, too, that both Republican and Democratic lawmakers have expressed frustration with the state’s current ag tax rules. As we discuss at some length in this week’s story, a few of them have been working on bills that could make it harder to qualify for the agricultural designation and increase land taxes on ag properties in high-value areas. Because those measures could raise taxes significantly on those who benefit from the current system, however, even proponents of those bills seem skeptical about their prospects of making it to the governor’s desk. But then again — who among us hasn’t been shocked before?
