HELENA — Montanans will soon be seeing their first property tax bills under the new “homestead” tax system approved in the 2025 state legislative session. In the meantime, though, legal action is challenging that system altogether.
On Wednesday, a state district judge in Bozeman held oral arguments in a lawsuit by three current and former Republican state senators, against Senate Bill 542, one of the main pieces of property tax legislation passed last year. The plaintiffs in that case filed a second lawsuit just last week.
(Watch the video for more on the legal challenges.)
SB 542, together with House Bill 231, completely reshaped property tax rates in Montana. For 2025, they created graduated tax rates – with higher-value properties paying higher rates – and provided a one-time property tax rebate of up to $400. Starting in 2026, they created “homestead” rates, with lower rates on Montanans’ primary residences, long-term rentals and small commercial properties, but higher rates on properties that don’t qualify.
Senate Majority Leader Sen. Tom McGillvray, R-Billings; Sen. Greg Hertz, R-Polson; and former Sen. Keith Regier, R-Kalispell, first sued in January. That initial challenge claimed the way SB 542 was structured and passed violated the Montana Constitution. The bill originally froze property valuations for two years. During the legislative process, lawmakers completely removed that language and converted it into a vehicle for homestead rates and rebates.
The plaintiffs say that process violates a constitutional prohibition against a bill being “so altered or amended on its passage through the legislature as to change its original purpose,” as well as a requirement that bills appropriating state money contain “but one subject.”
“The taxpayers of Montana – a bill started out with a rational purpose of freezing their property tax, then they got a bait and switch to raise property taxes, and the payoff was, ‘Hey, we'll give you a $90 million rebate,’” McGillvray told MTN Wednesday.
The second suit focuses on the policy in the law. The lawmakers argue residential properties that qualify for homestead rates and those that don’t are all part of the same property tax “class” – and that the Montana Constitution doesn’t allow state leaders to set different tax rates for properties that are in the same class.
“You can't pick winners and losers within a class or people or class of properties,” said McGillvray.
Gov. Greg Gianforte signed SB 542 into law, and his office has responded to the lawsuits by pointing to statistics estimating the reform led to tax cuts for 80% of Montana homes.
“While the governor's office typically does not comment on active litigation, the governor is disappointed in the effort to invalidate the tax rates applied in the 2025 tax year and roll back about $95 million in property tax rebates claimed by Montanans last year, resulting in higher property taxes for Montanans,” a spokesperson said in a statement to MTN.
McGillvray called the governor’s arguments “a straw man.”
“Isn't there a better way to look at the entire classes of property tax and level them out so everybody is treated equally – and not just level them out, but level them out in such a way as to attract new property,” he said.
In the first lawsuit, plaintiffs and the state are currently seeking summary judgment. District Judge Andrew Bruener gave both sides until Nov. 13 to submit proposed orders, and he will await those submissions before taking action.
The second lawsuit has not yet had an initial court hearing.
Property tax bills for the upcoming year are set to go out to residents from county treasurers' offices around Oct. 31.
