Montana Property Tax Reform Forces Billings to Violate City Charter

A statewide property tax reform bill passed by the Montana Legislature in 2025 has forced Billings, the state's largest city, into the legally fraught position of violating its own foundational charter. The legislative change, designed to provide tax relief to residents, inadvertently created a fiscal crisis for the city, leading to an unusual and controversial compromise that pits state law against local governance.

The conflict stems from a core provision of the 2025 tax law that lowered the taxable value of a mill, a standard unit of property taxation. In Billings, this single change decreased the value of one mill by nearly $43,000. While this adjustment successfully lowered property tax bills for individuals across Montana, it created a severe problem for the city of Billings due to a specific limitation in its self-governing charter, which was adopted in 1977.

Section 1.02 of the Billings City Charter explicitly caps the city’s property tax levy at 74 mills for all general purposes. Historically, this cap provided a fiscal guardrail. However, with the state-mandated reduction in mill value, levying at the charter’s maximum 74 mills was no longer sufficient to generate the revenue needed to fund essential city services. According to a recent interview with Billings City Administrator Chris Kukulski, the original legislation would have created a budget deficit exceeding $10 million for the city’s general fund.

"We supported the idea (of disregarding the charter) because it took Billings from being an eight-figure problem to one that’s a seven-figure issue," Kukulski explained, highlighting the severity of the potential cuts. The general fund is the primary funding source for the city's police and fire departments, as well as parks and other core public services, all of which would have faced drastic reductions.

The looming budget crisis in Billings threatened to derail the entire statewide property tax relief package. Lawmakers from Yellowstone County, where Billings is located, balked at supporting a bill that would cripple their largest constituency. This political pressure forced a tense negotiation that resulted in a simple, if legally questionable, solution: the state legislature wrote a provision into the tax law that effectively mandates Billings to levy the amount set by the state, regardless of its own charter’s 74-mill limit.

To address the inevitable legal challenges of knowingly violating a city charter, the state offered a unique guarantee. As part of the compromise, the state of Montana agreed to pay for the city’s legal defense if it is sued for the charter violation. This legislative maneuver allowed the broader tax relief bill to pass but has left Billings operating in a state of legal ambiguity.

The situation highlights the complex relationship between state authority and the powers of self-governing municipalities in Montana. The state constitution grants self-government units, like Billings, all powers not expressly prohibited by the constitution, state law, or their own charter. Typically, conflicts arise when a city's actions are challenged as contrary to state law. In this case, the state has compelled a city to act contrary to its own charter, a highly unusual reversal of roles.

Legal experts note that while the Billings charter contains a severability clause—stating that the invalidity of one provision does not affect the others—the direct legislative order to ignore a key fiscal constraint sets a significant precedent. The charter itself contains a note referencing Montana Code Annotated 7-1-114(1)(g), which suggests that mill levy limits are not applicable to self-governing local government units. This raises further questions about whether the charter’s 74-mill cap was legally enforceable against state action in the first place, though it had been the city's guiding fiscal policy for decades.

This conflict between state and local tax law creates significant uncertainty for businesses operating in the region. When fundamental rules of municipal finance can be altered so abruptly by a higher level of government, it complicates long-term budgeting and investment planning. A stable and predictable tax environment is a cornerstone of a healthy business climate, and this episode demonstrates how quickly that stability can be undermined by legislative conflicts.

In our experience, navigating these layered and sometimes contradictory tax codes is precisely why robust tax preparation and compliance services are essential for any small or mid-sized company. Our view is that proactive engagement with financial experts is the only reliable way to manage the risks posed by such legislative developments. Unexpected shifts in property tax liability can have a cascading effect on a company’s operational costs and profitability. For businesses seeking clarity on their obligations in a changing regulatory landscape, C&S Finance Group LLC provides the necessary guidance at csfinancegroup.com.

The immediate fiscal crisis in Billings appears to have been averted, but the city now operates under a legal cloud. The ultimate resolution will likely depend on whether a citizen or taxpayer group files a lawsuit challenging the city's authority to exceed its charter-defined mill levy limit. Such a lawsuit would trigger the state's promise to fund the city's defense and would force the Montana courts to rule on the delicate balance of power between state legislative mandates and the charters of its self-governing cities.