Story text is available for republication under MTFP’s standard republication policy. To republish story graphics, contact High Country News at [email protected]. This story also appeared in High Country News On the banks of the Flathead River, along an oxbow southeast of Kalispell, a pair of million-dollar homes sit adjacent to each other on large lots. At a glance, they appear quite similar, each the sort of rural dream house that has become an inescapable part of Montana’s landscape.A look at their tax bills, though, reveals a difference, the result of a singular quirk of Montana’s tax code.One of the two parcels, like most homes in Montana, is classified as residential property. The other, however, is designated agricultural, a category that qualifies it for a tax discount worth thousands of dollars a year.The residential property includes a 2,893-square-foot house and several outbuildings on a 10-acre lot. In 2023, the land was worth $585,000 and the buildings just over $1 million, according to state records. The property tax bill was about $9,100.Next door, the agricultural property, also 10 acres, contains a 3,673-square-foot home along with garages, a dock and other structures, together valued at $1.2 million. A Zillow listing, which indicates that the property was last sold in 2018 and was later available for rent, describes it as a “gorgeous Montana river estate” with a boathouse, a putting green and an orchard. This property’s 2023 tax bill, which was mailed to an address in Florida, was about $2,100 lower than that of its neighbor.If you exclude the taxes levied on all the structures, including the home, the owner of the residential property paid an effective rate of $331 an acre in 2023, an amount similar to nearby residential parcels. Meanwhile, the neighboring agricultural property — putting green and all — paid just $2 an acre.The discrepancy is the byproduct of a tax system designed to encourage farming and ranching and preserve Montana’s agricultural character by taxing agricultural property at much lower effective rates. Unlike most other properties, agricultural land is valued not for its likely selling price, but rather for its agricultural production potential. In recent decades, however, as Montana’s luxury real estate sector has grown, the line between bona fide agricultural operations and high-end residential properties has become increasingly blurry.Photo illustration by Luna Anna Archey / HCNMontana Free Press and High Country News analyzed state property data, combined with public records and aerial imagery, and found that thousands of million-dollar homes benefit from the agricultural tax provision. As of 2023, the most recent year for which detailed data is available from the Montana Department of Revenue, the analysis found that at least 1,882 million-dollar homes received a tax break as fully qualified agricultural property, while at least 1,338 others got a lesser discount through a partial agricultural designation.While those million-dollar properties appear to comply with Montana’s tax law, they illustrate what critics consider the system’s failure to tax luxury real estate fairly. More than half of the properties were located in Gallatin, Flathead, Park and Ravalli counties, all parts of western Montana that have become epicenters of the state’s real estate boom. Many of the owners who get agricultural tax treatment for high-value properties are prominent professionals engaged in non-agricultural careers, including a former Goldman Sachs executive, the CEO of a billion-dollar food service corporation and Montana Gov. Greg Gianforte, a former technology executive. Because of how Montana’s tax system divides the cost of local government services, most of their savings translate into higher bills for other taxpayers. With the 2025 Montana Legislature set to open Jan. 6, both Republican and Democratic lawmakers say they want to tackle rising residential property taxes, which saddled homeowners with a median increase of 21% between 2022 and 2023 following the pandemic-era surge in housing prices. Some lawmakers also say they want to pass bills that would make the agricultural tax system more equitable.Brian Campbell, who runs a cherry orchard and a growers’ co-op on Flathead Lake, would certainly welcome tax reform. In an interview, he said he’s annoyed by the owners of nearby expensive properties who produce just enough agricultural income to qualify for agricultural tax status, clearing a threshold that’s currently set at only $1,500. “There’s people that totally take advantage of this and treat it as just a big loophole in the system,” he said. The agricultural tax issue has simmered in the state Capitol for decades without producing a politically viable solution. A bill that would have tied agricultural tax benefits to federal farm aid eligibility, for example, was voted down during Montana’s 2023 legislative session, spurring its supporters to form a working group to develop more refined proposals for 2025. During a meeting of the group in February, Rep. Mark Thane, D-Missoula, read aloud from a decades-old state memo prepared in 2001.“‘Some buyers are purchasing large ranches for their American dream and taking land out of agricultural production,’” Thane read.He looked up from the memo at his colleagues, who were seated around two long tables in a Department of Revenue meeting room. “Twenty-four years ago,” he said, “that prompted individuals to take a look at this very issue, and here we are, still looking at this issue.” Many Western states give farms and ranches special tax treatments and have encountered similar headaches. In Wyoming, for example, a proposal in the state Legislature to increase the revenue threshold for an agricultural tax break went nowhere in 2022. And a 2011 Denver Post story about a proposal to overhaul Colorado’s agricultural tax system noted that the issue had “vexed” state politicians for “decades.”Those debates are sticky in part because of how tax policy can guide the way land is used across the West. Tax rates help determine whether suburban and rural land is used for farming or ranching, preserved for conservation purposes, or developed into housing and businesses. Proponents of agricultural tax benefits argue that they help keep such land undeveloped and protect farmers and ranchers from often-uncertain commodity markets.Infographic by Luna Anna Archey and Eric Dietrich“There’s an argument that all Montanans benefit from having a vibrant ag economy in Montana, not just for the economic benefits of it being Montana’s largest industry, but it has cultural value for us as Montanans,” said Chuck Denowh, a lobbyist and executive director of the United Property Owners of Montana, who was part of the working group. “As you drive around the state, our ag properties are one of the things that make the state beautiful.”Montana’s tax code, though, is unique in that it allows many properties to qualify for agricultural tax benefits without requiring proof that they are used for agricultural purposes. Colorado, Wyoming, Washington, Oregon and the Dakotas all require landowners to submit applications showing some combination of crop, grazing or land-leasing income. In contrast to other states, any Montana property larger than 160 acres automatically qualifies for the full agricultural tax status, whether or not it demonstrates farm or ranch income. Many mid-sized rural properties — those between 20 and 160 acres — also automatically qualify for a partial agricultural classification, even if they don’t report enough farm or ranch income to qualify for the full tax break. That policy is unique to Montana, according to state analysts. Additionally, the annual production-income threshold that qualifies smaller properties for full agricultural status — currently just $1,500 — represents a low bar for well-off property owners to clear. It hasn’t been updated since 1986.Campbell, who was also a member of the working group, pointed out that a property owner can make $1,500 a year from just a handful of cherry trees. Around Flathead Lake, for example, where planting cherry trees on high-value land is common, the cost of maintaining a few trees is quickly offset by the tax savings. “That’s obviously the motivation behind a lot of little orchards up here,” he said.Montana has about 326,000 non-vacant residential parcels. In comparison, more than 77,000 Montana taxpayers benefit from either the full or partial agricultural tax status of their property, which encompasses more than 50 million acres of land, according to the state revenue department. MTFP and HCN estimate that residential properties smaller than 20 acres had their underlying land taxed at a median effective rate of $1,609 per acre in 2023, while similar properties with a full agricultural designation paid just $6.61.One Montana property that benefits from the full agricultural tax break is Gov. Gianforte’s longtime home on the outskirts of Bozeman. The governor and his family own several parcels there, along the East Gallatin River, including an 11.4-acre property with a house and detached garage that is currently valued by the revenue department at $1.3 million.The Gianfortes’ tax bill for that parcel — about $7,400 in 2023, according to county tax records — briefly became election season fodder when the campaign of the governor’s unsuccessful Democratic challenger, Ryan Busse, published a video interview with the owner of a neighboring property who expressed tearful frustration that her tax bill was rising faster than the governor’s. Her property, which also sits along the East Gallatin, includes two dwellings valued at $1.5 million on a 10.2-acre parcel classified as residential land. It received a tax bill of about $12,200 in 2023, including approximately $826 per acre in taxes on the land.MTFP and HCN estimate that residential properties smaller than 20 acres had their underlying land taxed at a median effective rate of $1,608 per acre in 2023, while similar properties with a full agricultural designation paid just $6.61.Meanwhile, right across the street, the governor paid taxes at $5.75 an acre for his property. Thanks to his agricultural designation, Gianforte’s total land tax in 2023 was about $66 for his 11-acre property. The state’s tax rolls included about 176,000 residential properties with homes on town or city lots that year, most less than a quarter-acre; HCN and MTFP estimate that 97% of their owners paid more land taxes than the governor.Montana’s public records office denied an open records request for the application materials used to justify the Gianforte property’s agricultural status last year, saying they contained income information that the revenue department was required to keep confidential. A spokesperson for the governor’s office said in early December that land owned by Gianforte and his wife, Susan, rotates between irrigated barley and alfalfa production and is also used to board horses and mules. The spokesperson did not answer questions regarding the amount of agricultural income generated by those activities or whether the governor supports changes to the state’s agricultural tax structure.The partial agricultural status available to mid-sized properties without demonstrated agricultural income — formally known as “non-qualified” agricultural land — has been a source of intense debate since its implementation in 1993.The Legislature has loosened qualification requirements for partial status over time, thereby benefiting more property owners in platted subdivisions. As of 2023, roughly 30,000 Montana taxpayers benefited from the category’s tax treatment, according to the revenue department. A 2022 Montana Department of Revenue report demonstrates the difference that even a partial agricultural status can make. In one case, in southwest Montana’s Beaverhead County, department staff identified a situation where a 19.03-acre parcel, just under the threshold to qualify, owed $942 in taxes, while an adjacent 20.09-acre parcel, just over the threshold, owed only $482. Meanwhile, in Gallatin County, a vacant 19.989-acre lot owed $5,821 in taxes, while a nearby vacant lot of 20.011 acres owed just $168.Because the partial agricultural designation provides substantial tax benefits to tens of thousands of property owners, however, efforts to repeal it have met with powerful political headwinds.In 2017, for example, a bill to repeal the category, sponsored by Greg Hertz, then a state representative and now the chair of the Montana Senate’s Taxation Committee, drew so much blowback that he withdrew the proposal before its first committee hearing. Hertz and fellow Republican lawmaker Jeff Essmann, who also worked on agricultural taxation bills that year, recalled that both efforts were deluged with opposition. And Essmann said he expects similar political dynamics to erupt again.“[Tens of thousands of] people that are suddenly going to have to pay market rate on their homes, or do some work to qualify as ag, can generate a lot of phone calls to representatives and kill a bill pretty fast,” said Essmann, who is no longer in the Legislature. “It’s hard when somebody’s got a sweet deal to remove it — that’s just the reality of life,” he added. “But it is a very sweet deal.”Additionally, while eliminating the exemption would raise taxes dramatically for those property owners who currently benefit, it would lower them only slightly for other taxpayers. An analysis by the revenue department estimates that eliminating the partial ag exemption would increase the average qualifying property’s annual tax bill from $3.84 to $42.75 an acre — a $1,167 increase for a 30-acre property. In exchange, the department says, the median residential tax bill would decrease by a mere $33 a year.That’s enough, Hertz said, to convince him the Legislature should just leave the designation alone.“You’re saving somebody a dollar, but increasing somebody’s taxes by several thousand,” Hertz said. “To me, that just doesn’t make sense.”Neil Cornish, a professor of astrophysics at Montana State University, illustrates the tricky ways that current tax policy and possible changes can affect individual taxpayers. In 2020, Cornish bought a former cattle ranch in the Shields Valley, outside the small town of Clyde Park. At the time, it was just under 160 acres, and since Cornish neither farms nor ranches, it qualified for the partial agricultural designation.Cornish, who said the classification initially struck him as “a bit of a weird thing,” recently did a boundary adjustment with his neighbor, boosting his property to just over 160 acres. He did so in order to qualify for an antelope hunting tag that’s available to larger agricultural landowners.Credit: Photo illustration by Luna Anna Archey / HCNBut that seemingly minor adjustment meant that his property now automatically qualified for the agricultural tax break for properties over 160 acres. As a result, he said, his property taxes went “down by a decent amount.” In an interview, Cornish said that the annual taxes on one portion of his land, the 1-acre homesite where his family has built a house and an outbuilding, dropped from about $2,000 to just $40. According to Park County records, Cornish and his wife, Jamie, had a total tax bill of about $8,300 in 2024, down from about $9,400 the prior year. Cornish noted that the recent addition of the two structures offset the agricultural tax savings by boosting his non-land property value.One bill that legislators are putting forward, House Bill 27, would do away with the automatic agricultural tax break, thereby removing Cornish’s tax break unless he can demonstrate sufficient farm or ranch income.That bill would bring Montana in moline with other Western states by requiring landowners like Cornish who want to receive or maintain an agriculture tax break to submit an application documenting a minimum level of farm or ranch income. And that income standard would also increase to at least $4,000 a year.Losing the automatic tax qualification, Cornish said, would push him to consider “getting some agricultural activity going at some point.” He added that generating enough income to surpass the proposed standard “starts to be a more serious endeavor.”That’s precisely the sort of effect lawmakers who are supporting the agricultural tax reform bills hope to have. “What we want to do is generate more ag production,” said Sen. Becky Beard, who led the working group and will serve as the vice chair of the Legislature’s Senate Taxation Committee this year. “If they’re not bona fide ag producers, then we have to look at a more realistic tax classification for those individuals or entities.”Cornish believes large rural properties should get some sort of tax break to encourage preservation of habitat and open space. Large herds of elk, mule deer and antelope pass through his property, he said, which other than a small, out of use hayfield is largely sagebrush and high-desert juniper. “It’s basically like a nature preserve,” Cornish said. “It seems to me that that shouldn’t be taxed the same as a small subdivision.”Lawmakers who helped draft the bills appear to agree. The bill that would end automatic agricultural classifications includes a clause replacing the partial agricultural tax category with one for “idle” land, at a higher effective tax rate.Another draft bill, Senate Bill 4, would increase taxes on homesite land directly underneath high-value homes built on agricultural properties while shielding properties valued at less than the statewide average — potentially raising taxes for property owners like Cornish and the Gianfortes even if they retain their agricultural designation. Colorado passed a similar bill in 2011, reclassifying the land beneath structures that were not “integral” to agriculture as residential. The change was so controversial at the time that at least one county assessor refused to enforce the law.According to an August revenue department analysis, the homesite proposal would increase taxes on more than 6,000 properties statewide, a majority of them in just four counties where land is selling at particularly high market values. In Bozeman’s Gallatin County, for example, the average property classified as agricultural would see a tax increase of $1,248 a year. The department estimates that this change would collect enough extra revenue to save the median residential property $14.05 annually.Montana lawmakers pushing reform efforts face a dilemma: How can the agricultural tax system support farmers and ranchers without creating a system that disproportionately benefits the wealthy? For example, the bill that would require Cornish and other property owners to apply for an agricultural designation would also require them to demonstrate an additional $6 of agricultural income beyond the new $4,000 threshold for each acre they own over 640. It would specify that certain activities don’t qualify as agricultural income, explicitly excluding revenue from, among other things, corn mazes, personal horse boarding, hunting access, dude ranches and some conservation efforts.If the bill passes in its current form, prominent mega-landowners Dan and Ferris Wilks would be among those who would be required to apply to hold on to their agricultural status. The Wilks brothers, who hail from Cisco, Texas, bought holdings in Montana after making a multibillion-dollar fortune in the fracking business. State property data indicates that Wilks Ranch Montana LTD owned 814 parcels totaling 301,732 acres across six Montana counties as of 2024. All of those parcels — including four containing at least a million dollars’ worth of residences or other structures — were categorized as agricultural. With the new qualification standards, the Wilks Ranch would have to demonstrate an annual agricultural income of $1.8 million.Walter Schweitzer, president of the Montana Farmers Union, doubts that the increased income standard would prove a greater hurdle for the state’s larger private landowners than the existing $1,500 threshold. “It’s not that arduous,” he said in an interview. “It wouldn’t be a big deal.”Schweitzer added that while he has no love for the wealth inequality represented by trophy ranches, he does think they can contribute to agricultural communities caught in what he described as a flawed system. Large landowners often lease their land to young farmers or ranchers who are trying to gain a foothold in a difficult industry, he said. He also expressed some fear that the $4,000 income standard could be a challenge for new or small-scale farmers who own little parcels of land and are part-time farmers. Like generations of Montana lawmakers, Schweitzer — whose brother is former Democratic Gov. Brian Schweitzer — said he’s stumped about how best to tackle the issue. “I don’t know,” he said in an interview. “Do you have a good answer to how to close that loophole? Because I would sure like to.”These hard truths loomed over the working group. Even before the bills were written, its members agonized over how to build the political backing necessary to bring them to the governor’s desk, particularly generating support from the state’s agriculture community.Still, making the state’s tax code more equitable is worth a fight, said Rep. Sherry Essmann, R-Billings. Essmann, who is sponsoring the application bill, is married to Jeff Essmann, the former lawmaker who pursued agricultural land tax reform in 2017.“There are people coming in, and they’re taking out perfectly good ag property, or grazing property or ranch property, and using it as their private playgrounds,” she said at the August meeting. “They’re not being taxed at the rate that they should be taxed for this property,” she added. “And I think, honestly, it makes people in Montana look kind of silly that we haven’t figured this out.”The two bills proposed to shift Montana’s agricultural tax system House Bill 27The application bill Would: Require periodic applications to the state revenue department by Montana properties in order to receive a full agricultural tax benefit regardless of property size. Raise the income threshold necessary to prove agricultural use of land from $1,500 to $4,000, plus $6 for each acre beyond 640. Specify types of business activities that do not count toward the agricultural income requirement, excluding revenue from hobby farms, agritourism, equestrian activities and recreational activities, among others. Replace the “nonqualified” partial agricultural designation with an “idle land” designation taxed at a slightly higher rate. Parcels that are 640 acres or larger that do not demonstrate the required agricultural income would also automatically receive the idle land designation. Senate Bill 4The homesite bill Would: Increase property taxes on agricultural properties located on high-value land by changing the tax status of one-acre homesites beneath residences and other structures on properties with the full agricultural tax designation. Those homesites, which are currently taxed as agricultural land, would be taxed at market rate. Include an exemption that shields homesites valued at less than the statewide average. Photo illustrations by Luna Anna Archey/High Country NewsImage credits: Property parcel outlines in Bozeman, Montana, including Gov. Greg Gianforte’s property. Montana State Library; Property tax history for an agriculturally designated property in Kalispell. Screenshot from Redfin; The home on an agriculturally designated property in Kalispell. Screenshot from Zillow; An antler chandelier. Henry Burrows/CC via Flickr; The state seal of Montana. Wikipedia; Home icon. Vectorsmarket15/FlaticonProperty parcel outlines in Kalispell, Montana, including neighbors, one agriculturally designated, the other residentially designated. Montana State Library; Data screenshots from said residentially designated property. Montana State Library; A previous listing of said agriculturally designated property. Screenshot from ZillowHomes in Bozeman, Montana. Dan Nguyen/CC via Flickr; Gov. Greg Gianforte speaks at a bill-signing ceremony at the Montana state Capitol on May 3, 2023. Mara Silvers/Montana Free Press; A grain silo near Miles City, Montana. Tim Evanson/CC via Flickr; The deed of Gianforte’s neighbor that was featured in Ryan Busse campaign ad criticizing the governor’s low tax bill. Screenshot from YouTube; Data screenshots from Gianforte’s property. Montana State Library. LATEST STORIES Montana Supreme Court directs DEQ to study gas plant’s greenhouse gas emissions The Montana Supreme Court’s ruling on Jan. 3 provides a window into how state agencies might study climate impacts associated with large projects in response to the Held v. 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