Bill Summary – FastDemocracy

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68th Legislature 2023                                                                                               HB 407.1
                                                  HOUSE BILL NO. 407
                                               INTRODUCED BY D. FERN
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  A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING FOR PROPERTY TAX ABATEMENTS FOR
  AFFORDABLE RENTAL HOUSING; PROVIDING THAT A LOCAL GOVERNMENT MAY CHOOSE TO OFFER
  THE ABATEMENTS; PROVIDING FOR AN ABATEMENT FOR AFFORDABLE MULTIFAMILY RENTAL
  HOUSING WITH FIVE UNITS OR MORE; PROVIDING FOR AN ABATEMENT FOR AFFORDABLE RENTAL
  HOUSING WITH FOUR UNITS OR FEWER OR FOR AN AFFORDABLE ACCESSORY DWELLING UNIT;
  PROVIDING DEFINITIONS; AND PROVIDING AN APPLICABILITY DATE.”
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  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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          NEW SECTION. Section 1.          Definitions. As used in [sections 1 through 3], unless the context clearly
  indicates otherwise, the f ollowing def initions apply:
          (1)      "Accessory dwelling unit" means a self -contained living unit subordinate to and on the same
  parcel as a single-f amily dwelling that includes its own cooking, sleeping, and sanitation f acilities and is created
  within or detached f rom the single-f amily dwelling, including but not limited to an attached or detached garage.
          (2)      "Af f ordable accessory dwelling unit" means a rent-restricted accessory dwelling unit with a
  lease term of 30 days or longer.
          (3)      "Af f ordable multif amily rental housing" means rental housing with a minimum of 5 units and a
  lease term of 30 days or longer f or which 20% or more of units are rent restricted.
          (4)      "Af f ordable rental housing" means one or more rent-restricted units of a multif amily rental
  dwelling with 4 units or f ewer and with a lease term of 30 days or longer.
          (5)      "Gross household income" means all income received by all individuals of a household while
  they are members of the household.
          (6)      (a) "Income" means, except as provided in subsection (6)(b), f ederal adjusted gross income,
  without regard to loss, as that quantity is def ined in the Internal Revenue Code of the United States, plus all
  nontaxable income, including but not limited to:
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68th Legislature 2023                                                                                                HB 407.1
           (i)      the amount of any pension or annuity, including Railroad Retirement Act benef its and veterans'
  disability benef its;
           (ii)     the amount of capital gains excluded f rom adjusted gross income;
           (iii)    alimony;
           (iv)     support money;
           (v)      nontaxable strike benef its;
           (vi)     cash public assistance and relief ;
           (vii)    interest on f ederal, state, county, and municipal bonds; and
           (viii)   all payments received under f ederal social security except social security income paid directly
  to a nursing home.
           (b)      For the purposes of this subsection (6), income is reduced by the taxpayer's basis.
           (7)      "Rent restricted" means the tenant's gross household income is between 60% and 120% of
  area median income f or the county and the tenant's rent is 35% or less of gross household income.
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           NEW SECTION. Section 2.         Affordable multifamily rental housing abatement. (1) A local
  government may provide f or a program f or ab atements f or af f ordable multif amily rental housing as provided in
  this section. The governing body of the county or the incorporated city or town that wishes to of f er the
  abatement shall approve the program by resolution. The governing body may cease the abatement program by
  resolution, but any abatements already granted remain in ef f ect.
           (2)      If approved by the county or incorporated city or town, af f ordable multif amily rental housing that
  meets the requirements of this section is eligible f or an exemption as provided in this section. Eligible af f ordable
  multif amily rental housing is f ully exempt in the f irst year, and, subject to 15-10-420, each year af terward the
  taxable percentage must be increased by 9.09% until the f ull taxable value is attained in the 12th year. In
  subsequent years, the property must be taxed at 100% of its taxable value.
           (3)      (a) In order f or a taxpayer to receive the tax benef its described in subsection (2), the taxpayer
  may submit an application with a project plan and receive approval f or an abatement prior to construction. A
  taxpayer that does not seek approval prior to commencing construction shall apply by March 1 of the year
  during which the benef it is f irst applicable. The governing body of the county or the incorporated city or town in
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68th Legislature 2023                                                                                                  HB 407.1
  which the af f ordable multif amily rental housing is located shall approve the abatement by separate resolution
  f or each property, f ollowing due notice as provided in 7-1-2121 if a county or 7-1-4127 if an incorporated city or
  town and a public hearing. The governing body may not grant approval f or the exemption until all of the
  applicant's taxes have been paid in f ull. Taxes paid under protest do not preclude approval. If a taxpayer
  receives approval of a tax abatement prior to commencement of construction, the abatement does not extend
  to property that is outside the scope of the project plan that was submitted to the governing body with the
  application.
          (b)      The governing body shall:
          (i)      publish due notice within 60 days of receiving a taxpayer's complete application f or the tax
  treatment provided f or in this section;
          (ii)     request a determination as to whether the project plan qualif ies as af f ordable multif amily rental
  housing f rom the county housing authority or municipal housing authority as applicable or, if there is no county
  housing authority or municipal housing authority, f rom county or municipal staf f ; and
          (iii)    conduct a public hearing regarding an application f or the tax treatment provided f or in this
  section and deny or approve it within 120 days of receiving the application as provided in subsection ( 3)(a).
          (c)      If the governing body f ails to hold a hearing or deny or approve the application within 120 days
  of receiving the application, the applicant may seek f rom the district court in the jurisdiction in which the county,
  city, or town is located a writ of mandamus to compel the governing body to make a determination.
          (d)      Subject to 15-10-420 and subsection (3)(f ) of this section, a tax benef it may not be denied af ter
  it has been approved.
          (e)      The resolution provided f or in subsection (3)(a) must include a description of the af f ordable
  multif amily rental housing that qualif ies f or the tax treatment that is to be allowed in the taxing jurisdiction. The
  resolution may provide that real property other than land, personal property, improvements, or any combination
  of these is eligible f or the tax benef its described in subsection (2).
          (f )     Property taxes abated f rom the reduction in taxable value allowed by this section are subject to
  termination or recapture by the local governing body if the ownership or use of the property does not meet the
  requirements of [section 1], this section, or the resolution required by subsections (3)(a) and (3)(e) of this
  section. The recapture is equal to the amount of taxes avoided, plus interest and penalties f or nonpayment of
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68th Legislature 2023                                                                                                 HB 407.1
  property taxes provided in 15-16-102, during any period in which an abatement under the provisions of this
  section was in ef f ect. The amount recaptured, including penalty and interest, must be distributed by the
  treasurer to f unds and accounts subject to the abatement in the same ratio as the property tax was abated. A
  recapture of taxes abated by this section is not allowed with regard to property ceasing to qualif y f or the
  abatement by reason of an involuntary conversion. The recapture of abated taxes may be canceled, in whole or
  in part, if the local governing body determines that the taxpayer's f ailure to meet the requirements is a result of
  circumstances beyond the control of the taxpayer.
           (4)      The taxpayer shall apply to the department f or the tax treatment allowed under subsection (2).
  The application by the taxpayer must be approved f irst by the governing body of the appropriate local taxing
  jurisdiction, and the governing body shall indicate in its approval that the property of the applicant qualif ies f or
  the tax treatment provided f or in this section. On receipt of the f orm with the approval of the governing body of
  the af f ected taxing jurisdiction, the department shall make the assessment change pursuant to this section.
           (5)      The tax benef it described in subsection (2) applies only to the number of mills levied and
  assessed f or local high school district and elementary school district purposes and to the number of mills levied
  and assessed by the governing body approving the benef it over which the governing body has sole discretion.
  The tax benef it described in subsection (2) may not apply to levies or assessments required under Title 15,
  chapter 10, 20-9-331, 20-9-333, 20-9-360, 20-25-439, or otherwise required under state law.
           (6)      Prior to approving the resolution under this section, the governing body shall notif y by certif ied
  mail all taxing jurisdictions af f ected by the tax benef it.
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           NEW SECTION. Section 3.           Affordable rental housing and accessory dwelling unit abatement.
  (1) A local government may provide f or a program f or abatements f or af f ordable rental housing and af f ordable
  accessory dwelling units as provided in this section. The governing body of the county or the incorporated city
  or town that wishes to of f er the abatement shall approve the program by resolution. The governing body may
  cease the abatement program by resolution, but any abatements already granted remain in ef f ect.
           (2)      (a) If approved by the county or incorporated city or town, af f ordable rental housing or an
  af f ordable accessory dwelling unit that meets the requirements of this section is eligible f or an abatement as
  provided in this section. Eligible af f ordable rental housing or an eligible af f ordable accessory dwelling unit is
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68th Legislature 2023                                                                                                HB 407.1
  f ully exempt in the f irst year, and, subject to 15-10-420, each year af terward the taxable percentage must be
  increased by 9.09% until the f ull taxable value is attained in the 12th year. In subsequent years, the property
  must be taxed at 100% of its taxable value.
          (b)      A taxpayer may receive the abatement f or af f ordable rental housing f or a portion of the rental
  housing if all units do not qualif y as af f ordable rental housing. The abatement applies only to the eligible unit's
  share of assessed value.
          (c)      An abatement f or an af f ordable accessory dwelling unit only applies to the value associated
  with the improvement and does not include an abatement f or value of land .
          (3)      (a) In order f or a taxpayer to receive the tax benef its described in subsection (2), the taxpayer
  shall submit an application with a description of the af f ordable rental housing or af f ordable accessory dwelling
  unit and a copy of the lease agreement that shows the monthly rent and includes a signed statement f rom the
  tenant indicating that the tenant's gross household income is between 60% and 120% of area median income
  f or the county and the tenant's rent is 35% or less of gross household income. A taxpayer shall apply by March
  1 of the year during which the benef it is f irst applicable. The governing body may not grant approval f or the
  exemption until all of the applicant's taxes have been paid in f ull. Taxes paid under protest do not preclude
  approval.
          (b)      A city or county that participates in the abatement program provided f or in this section shall
  administer an application and review process f or determining eligibility f or the abatement. The city or county
  shall recertif y annually eligibility f or the abatement by collecting an updated lease agreement and signed
  statement f rom the tenant.
          (c)      Property taxes abated f rom the reduction in taxable value allowed by this section are subject to
  termination or recapture by the local governing body if the ownership or use of the property does not meet the
  requirements of [section 1] or this section. The recapture is equal to the amount of taxes avoided, plus interest
  and penalties f or nonpayment of property taxes provided in 15-16-102, during any period in which an
  abatement under the provisions of this section was in ef f ect. The amount recaptured, including penalty and
  interest, must be distributed by the treasurer to f unds and accounts subject to the abatement in the same ratio
  as the property tax was abated. A recapture of taxes abated by this section is not allowed with regard to
  property ceasing to qualif y f or the abatement by reason of an involuntary conversion. The recapture of abated
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68th Legislature 2023                                                                                                  HB 407.1
  taxes may be canceled, in whole or in part, if the local governing body determines that the taxpayer's f ailure to
  meet the requirements is a result of circumstances beyond the control of the taxpayer.
          (4)      The taxpayer shall apply to the department f or the tax treatment allowed under subsection (2).
  The application by the taxpayer must be approved f irst by the city or county of the appropriate local taxing
  jurisdiction, and the city or county shall indicate in its approval that the property of the applicant qualif ies f or the
  tax treatment provided f or in this section. On receipt of the f orm with the approval of the city or county of the
  af f ected taxing jurisdiction, the department shall make the assessment change pursuant to this secti on.
          (5)      The tax benef it described in subsection (2) applies only to the number of mills levied and
  assessed f or local high school district and elementary school district purposes and to the number of mills levied
  and assessed by the governing body approving the benef it over which the governing body has sole discretion.
  The tax benef it described in subsection (2) may not apply to levies or assessments required under Title 15,
  chapter 10, 20-9-331, 20-9-333, 20-9-360, 20-25-439, or otherwise required under state law.
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          NEW SECTION. Section 4.           Codification instruction. [Sections 1 through 3] are intended to be
  codif ied as an integral part of Title 15, chapter 24, and the provisions of Title 15, chapter 24, apply to [sections
  1 through 3].
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          NEW SECTION. Section 5.           Applicability. [This act] applies to property tax years beginning af ter
  December 31, 2023.
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