North Dakota House chamber. (Kyle Martin/For the North Dakota Monitor)
By: Mary Steurer
BISMARCK, N.D. (North Dakota Monitor) – The North Dakota House of Representatives on Tuesday afternoon approved three sweeping packages aimed at reducing property taxes.
All three incorporate some form of cap on year-over-year tax increases and would be funded in part by earnings on the state’s Legacy Fund. One bill focuses mainly on tax reductions for residential property, while the other two would lower taxes for all kinds of property.
Each proposal passed with near-total support from lawmakers.
Rep. Craig Headland, R-Montpelier, chair of the House Finance and Taxation Committee, said he wasn’t sure how the Senate will tackle the three proposals.
Headland said he suspects the Senate will favor the bills that provide relief for all property categories, but could try to merge elements from all three bills into one.
The proposals come after voters initiated a ballot measure last year that would have eliminated property taxes based on assessed value. Although the measure failed, many voters called on the Legislature to do more to reduce property taxes.
House Bill 1176
One major piece of House Bill 1176 expands on the state’s primary residence tax credit, which was originally created by lawmakers in 2023.
As originally written, the bill would have increased the tax credit from $500 to up to $1,550. An amendment approved earlier this month lowered that figure slightly to up to $1,450.
“This bill focuses strictly on residences — strictly on Joe Six Pack’s house, not his lake cabin, not his ag land,” Rep. Mike Nathe, the bill’s primary sponsor, said.
The Bismarck Republican said there are roughly 163,100 primary residences in North Dakota.
The bill would also cap annual property tax increases for local governments at 3% annually.
Nathe acknowledged that the bill is likely to strain some local governments.
It does give them some flexibility, however. For one, local governments would be allowed to “bank” unused tax increases from the five previous years. With approval from voters, they would also be able to exceed the caps for four years at a time.
House Majority Leader Rep. Mike Lefor, R-Dickinson, said that eventually, the primary residence tax credit could be bankrolled solely by Legacy Fund earnings.
“This is a sustainable path — using Legacy Fund for the benefit of our kids and our grandkids,” Lefor said.
The bill also grows two other relief programs, one for seniors and North Dakotans with disabilities, and another for renters.
The bill formerly included income tax cuts, as well, but that was removed in an amendment
House Bill 1176 cleared the House by a vote of 81-10.
The bill incorporates ideas championed by Gov. Kelly Armstrong at the start of the session. Armstrong’s vision is that property taxes could eventually be eliminated for most homeowners through a program funded through Legacy Fund earnings.
The bill only addresses the 2025-2027 budget cycle. It would provide an estimated $503.3 million in tax relief to citizens, Tax Commissioner Brian Kroshus said.
House Bill 1168
House Bill 1168, sponsored by Rep. Scott Louser, R-Minot, would affect residential property as well as agricultural and commercial land.
One portion of the bill reduces what residents pay in property taxes for school districts by about 16%. The state would be responsible for making schools whole for that missing funding.
Like House Bill 1176, House Bill 1168 also includes year-over-year tax caps. Increases to property tax levies would be limited at 3% for all local tax districts except school districts. Tax districts could also bank any unused tax increases, though they would be limited to one year. North Dakotans could vote to permit tax districts to exceed the cap for no more than five years at a time.
Rep. Ben Koppelman, R-West Fargo, said he has reservations about allowing school districts’ taxes to grow proportionally with local property values.
“Me, personally, I think we should apply the 3% cap to schools as well,” Koppelman said.
Louser said he originally envisioned a much larger subsidy of school district taxes, but that the amount was reduced in committee.
“I think this is a good start, and let’s see what happens with our relief package,” he said.
The bill would provide taxpayers an estimated $120.7 million in relief, according to the tax commissioner.
The bill passed by a vote of 88-3.
House Bill 1575
House Bill 1575, sponsored by Rep. Robin Weisz, R-Hurdsfield, would provide property tax relief by reducing the taxable value of all categories.
The tax rate applied to residential properties would be reduced by 2.75%, while the tax rate on agricultural and commercial property would be reduced by 1.5%, according to the proposal.
The bill would also cap all annual property tax increases at 3%. Voters could approve proposals to exceed this cap on the local level for a maximum of six years at a time.
“Everyone’s a taxpayer, so we’re looking at a bill that could give relief to everyone,” said Rep. Jason Dockter, R-Bismarck, who carried the bill on the floor.
Similar to House Bill 1176, House Bill 1575 would grow the homestead tax credit and renter refund program. The bill would provide citizens with estimated tax relief of $703.2 million, according to the tax commissioner.
The proposal passed by a vote of 86-5.
Rep. Karla Rose Hanson, D-Fargo, was among the lawmakers who opposed the bills. During a House Appropriations Committee meeting last week, Hanson said she supports efforts to reduce property taxes, but she disagreed with capping local government budgets.
“I think that sends a message that we as a body don’t trust other elected bodies that are responsible for setting their budgets, and we also don’t trust the voters who elected them,” Hanson said.
