Senate Finance and Tax Committee rejects two bills that would expand "residential" property classification

The Senate Finance and Tax Committee voted to recommend "do not pass" on House Bill 1152 and House Bill 1232, measures that sought to expand what the tax code counts as residential property. The committee action took place during a committee meeting of the Senate Finance and Tax Committee (date not specified).

The bills sought different changes to the Century Code residential classification. House Bill 12 32 (Representative Grenich) would expand the residential category to include certain undeveloped platted lots and small multi-unit mobile-home groupings, while House Bill 11 52 (Representative Porter) would treat accessory buildings such as a garage built before a home as residential for tax-classification purposes.

Why it matters: the bills would not change a property's underlying true-and-full value but would change the tax classification and therefore the factor applied to calculate taxable value. Linda Swihovic of the North Dakota Association of Counties told the committee that the change would likely reduce the taxable factor (for example, from 5% to about 4.5% in one illustration) and could lower a sample tax bill by roughly $50 on a $50,000 property.

Committee testimony explained the legal background. Bill Wilkin of the North Dakota League of Cities summarized the relevant Century Code language and said commercial property is a "catchall" category for anything not in agricultural, residential, railroad or centrally assessed classes. "Commercial property means all property not included in the classes of property you find in sections 1, 4, 11 and 12," Wilkin said, and he explained that the two bills amend different parts of the same statutory definition.

Linda Swihovic said House Bill 12 32 "would allow us to class vacant residential subdivisions as residential before they're developed," which she said inserts some subjectivity into current practice. She added that tax directors generally assess property with an eye to likely residential use when a lot is in a residential area but that the bills would formalize classifications in statute.

Senators asked how much tax revenue would change. Swihovic ran a quick example for a $50,000 property in Bismarck and said the annual difference would be about $4.68 versus $5.12 — roughly $50 a year at current levy rates. Committee members also discussed how zoning and property-tax classification differ: zoning establishes intended use set by a local political subdivision, while tax classification follows defined statutory rules in the Century Code.

After discussion, Senator Wallen moved a "do not pass" on House Bill 11 52; Senator Powers seconded. The committee roll call recorded the following votes: Chairman Weber — yes; Vice Chair Rommel — yes; Senator Marsali — yes; Senator Patton — yes; Senator Powers — yes; Senator Wallen — yes. The motion carried and the committee recorded a "do not pass" recommendation for HB 11 52.

Senator Wallen then moved a "do not pass" on House Bill 12 32; Senator Rummel seconded. The clerk recorded: Chairman Weber — yes; Vice Chair Rommel/Raul — yes; Senator Marsali — yes; Senator Patton — yes; Senator Powers — yes; Senator Wong — yes. The committee likewise issued a "do not pass" recommendation on HB 12 32.

The committee heard county and assessor perspectives that the change would introduce some subjectivity into classification decisions but would not typically change assessed value calculations. Members asked county tax directors to be available if further detail or consistent statewide guidance is needed.

The committee concluded both bills would not advance with the panel's recommendation and asked that the sponsors or carriers pick them up if they choose to pursue them further in the Legislature.