House passes property tax relief and reform package, creates legacy earnings fund and raises PRC to $1,600

The North Dakota House of Representatives adopted the conference committee report and passed House Bill 11-76 on a final vote of 86 yeas and 4 nays, approving a broad property tax relief and reform package for the legislative assembly.

Representative Hedlund, the bill carrier, told members House Bill 11-76 is the property tax relief and reform measure for the session and outlined major conference committee changes. “The bill provides for a $1,600 PRC,” Hedlund said, referring to the primary residence credit. Hedlund also said the conference increased the PMOV from 7% to 8%, directed allocations of legacy earnings after bond payments (30% to the highway distribution fund, with the remainder to a newly created Legacy Property Tax Relief Fund), and removed an expansion of the homestead tax credit that had appeared in an earlier Senate version.

The bill raises the primary residence credit to $1,600 per eligible primary residence and removes certain voter-approved-levy language from the credit provisions. It also includes timeline changes to the application period for the primary residence credit per county association suggestions and carves out specific levy limitations and exemptions: taxes levied to pay bonds were added to the list of levies exempt from the 3% cap, and townships were removed from the cap because they budget annually. The conference committee also separated school levies (splitting the existing 70-mill general fund authority into a 60-mill local contribution and a 10-mill purpose levy) and added an integrated formula to provide gap funding if valuation increases force a school district to reduce its levy under the 3% cap.

Representative Hedlund said the conference included an appropriation of $408,900,000 to the Legacy Property Tax Relief Fund to pay for the measures and added a legislative tax reform and relief advisory committee to study various implementation issues. Hedlund emphasized the adopted language on bonding and transfers, and he urged members to pass the bill. “I think we did the best we can could with caps,” Hedlund said in support.

Members questioned mechanics and equity. Representative Hoverson asked whether the caps applied to local subdivisions and Hedlund clarified that the 3% cap applies to taxing districts’ total dollars compared with prior collections rather than to each individual property’s valuation. Representative M. Nelson asked whether valuation increases by property class (residential, commercial, agricultural) were addressed; Hedlund said the bill does not cap valuation increases and that the 3% limit applies to the dollars a political subdivision can apply relative to last tax collections, which could result in different effects across property classes.

The House also considered an alternative property-tax bill, House Bill 11-68, which the sponsor described as an alternative package offering a $1,000 PRC and other variations; the House later defeated HB 11-68 by a vote of 13 yeas to 77 nays. Representative Louder and other speakers on the alternative bill described differing approaches to caps and buy-downs but the chamber ultimately rejected that alternative.

With final passage, HB 11-76 enacts statutory changes to multiple sections of the North Dakota Century Code related to legacy funds, property classifications, credits and levy rules. The bill passed with the emergency clause; administrative implementation, eligible household counts and any additional deficiency appropriations will be handled by the Tax Commissioner and other agencies as provided in the enacted language.