Montana Second-Home Tax Heads to Court Amid Claims State ‘Bought’ Passage With Rebates

The Montana bipartisan property tax reform that resulted in lower bills for nearly 80% of homeowners there and a $400 rebate is headed to court, after three Republican state lawmakers filed suit last week against one of the two bills responsible for relief.

The plaintiffs—Senate Taxation Committee Chair Greg Hertz, Senate Majority Leader Tom McGillvray, and former Sen. Keith Regier—are arguing that the bill violated procedural requirements of the state constitution, effectively buying passage after support for the first proposals stalled.

“During the 2025 legislative session, supporters of a massive property tax restructuring bill faced a stark reality: Their controversial legislation was dying. Their solution? Buy its passage with $90 million in cash rebates to Montana voters—a scheme they planned in advance and executed through legislative subterfuge,” the complaint, published by the Montana Free Press, reads.

The plaintiffs also allege that their property tax bills went up in 2025, or they expect to see a rate increase in 2026, with Hertz alleging a near 50% spike in his 2025 bill for his $2.9 million primary residence.

If successful, the court challenge could force the state to revert back to its old ways and reverse the changes that gave many longtime homeowners relief from high property tax burdens.

The legal challenge

The suit reads as equal parts procedural drama and personal beef, accusing lawmakers of using behind-the-scenes tactics to rescue a flailing bill.

“SB 542’s supporters did exactly what the Constitution forbids,” the complaint reads. “They took a dying, 40-page property tax rate restructuring bill—one that the House Speaker himself called a ‘Frankenstein’ bill—and bought its passage by bundling it with an appropriation for $90 million in one-time cash rebates.”

They're referencing the rocky summer that SB 542 and HB 231 had. While initially introduced as separate bills with separate aims, the two bills became intertwined in the last days of the 2025 legislative session to pull off the property tax relief that Montana Gov. Greg Gianforte had promised.

In their final iteration, SB 542 became an implementation bill, lowering taxable values for most modest residences by raising taxes on higher-value homes and businesses. That change set the stage for the full multitiered homestead system implemented by HB 231, set to take effect in 2026.

To support their claim, the plaintiffs point to internal Microsoft Teams messages between state Rep. Llew Jones, one of the architects of the tax reform, and Megan Moore, a legislative research analyst. 

The messages, they argue, show “premeditated deception,” including “title shopping” and “strategic bundling” intended to repackage the bill in a way that would win enough support to pass.

These practices, the plaintiffs say, violate the state’s constitutional requirements for laws to “contain but one subject,” and bar them from being “so altered or amended on its passage through the legislature as to change its original purpose.”

The shifting tax burdens in the state

The lawsuit marks the latest flashpoint in Montana’s ongoing debate over who should shoulder the state’s growing property tax burden.

In the wake of pandemic-era migration and a surge of out-of-state buyers—many bringing cash and bidding up prices—Montana home values soared, dragging assessed values and property tax bills upward.

In 2024, California buyers alone collectively owned more than $9.5 billion in Montana residential real estate, according to a Realtor.com® analysis of Montana Department of Revenue data. That’s over 5% of the state’s taxable property market—yet they contributed just 3.54% of the residential property tax base in 2023.

That mismatch helped fuel legislative efforts to retool the system, particularly by raising taxes on second homes and high-value properties, often owned by part-time residents or investors, while shielding primary residences and long-term rentals.

But that carve-out created winners and losers, and two of the three plaintiffs in the suit say they’re on the losing end.

McGillvray and Regier both cited second homes—cabins that don’t qualify for the bill’s homeowner or long-term rental exemptions—as examples of how SB 542 shifted the tax load unfairly. According to the complaint, both of their cabin’s tax rates rose from 1.35% to 1.9% as of Jan. 1, 2026.

What would happen if ruled unconstitutional

If the court finds SB 542 unconstitutional, it’s still unclear how or how fast Montana property tax bills might change.

The lawsuit targets just one of the two bills in the 2025 tax reform package, but it’s widely seen as the half with sharper consequences: It set new tax rates, created carve-outs for primary residences and long-term rentals, and raised rates on second homes and high-value properties.

Hertz told the Montana Free Press he hopes the court will force the state to revert to its 2024 tax code, giving the legislature another shot at reform in 2027.

But unwinding the law could put many homeowners in limbo, especially those who saw significant relief under the new rules. State Department of Revenue estimates show that homes valued under $1.7 million generally benefited from a lower effective tax rate. In most counties, the typical homeowner saved hundreds of dollars annually.

By contrast, Hertz claims his 2025 property tax bill for his $2.9 million home jumped nearly 50%.

Whether the court would order a full rollback, or a narrower fix, remains to be seen.