Minot- I don't know how to write a bill. There’s the old "Schoolhouse Rock" episode we all saw growing up where Mr. Bill sings to us about how he came to be and would become law. However, few people think about the intricate process of drafting legislation before it even reaches a committee. While that is a story for another day, I have spent the past few weeks studying some existing legislation and forming ideas of my own. That effort has led me to why we are here today: presenting my property tax reform proposal.
In a recent episode of ND Talk, I discussed some of the major proposals that have been put forward for property tax reform. As a critic of some of these plans, I felt it was only fair to present a legitimate alternative—one that offers a fresh, wholly different approach to taxation in North Dakota. (Of course with the caveat I am no where near a professional on this subject.)
For years, North Dakotans have voiced frustration over the unpredictable and overly complex property tax system. The current model, based on assessed market value, can lead to excessive tax increases, especially in high-growth areas. So, I have thrown together a fairly comprehensive overhaul of North Dakota’s property tax structure. This plan introduces real fundamental changes to how property taxes are assessed, ensuring greater fairness, predictability, and hopefully economic sustainability. Despite this starting off as a thought exercise and having no expertise in this field, I outline the components of this reform and how it differs from existing law.
Rolling Average Market Value Assessment
One of the biggest challenges with North Dakota’s current property tax system is its annual market value assessments, which leads to unpredictable tax fluctuations. Property values can rise sharply in a given year, leading to significant tax increases, even if the MILL rates have been lowered. This volatility has led to much of the discontent brewing in the state over recent years.
To address this volatility, my proposal introduces an 8-year rolling average market value assessment. Instead of basing taxes on the most recent market value, this system calculates assessments using an average of the past eight years. This method smooths out sudden spikes, should ensure more predictable tax bills, and effectively acts as a built-in cap on massive fluctuations.
This system offers several key benefits. It reduces the financial shock of market volatility, particularly in areas like Minot where housing prices have risen. Homeowners, especially those with low or fixed incomes, can better anticipate their tax obligations this way. Municipalities also benefit from a more predictable tax base, allowing them to plan long-term budgets more effectively, being able to better estimate revenues year to year.
However, there are challenges to consider. Local governments may see slower revenue growth, as tax assessments will not immediately reflect rising property values forcing them to be more efficient with their budgeting. As well as this unfortunately not leading to an eventual $0 property tax rate. Despite these challenges, the 8-year rolling average assessment model presents a balanced and sustainable alternative to the current system. By promoting tax stability for homeowners while ensuring municipalities have a steady revenue stream, this reform provides a practical path forward for North Dakota’s property tax system.
Usable Square Footage Assessment for Primary Residences
North Dakota’s current property tax system relies on market value assessments, which get added into the equation along with each municipalities Mill rate to find a number for that years property tax. With assessment volatility addressed, the next step is refining how properties are assessed. Under this proposal, all homeowners must declare a primary residence, which would be taxed differently than non-primary residences.
My proposal shifts property tax assessments away from market value and instead bases them on usable square footage—the actual livable space within a home. Under this system, unfinished basements, garages, and attics would be excluded unless they are fully finished and functional. This approach ensures that homeowners are taxed only on the portions of their property they actively use, making the system more equitable.
A tiered tax rate structure would be implemented to further balance the tax burden. The first 1,500 square feet of livable space would be taxed at the lowest rate, with moderate taxation applied to homes between 1,501 and 3,000 square feet. Residences exceeding 3,000 square feet would be taxed at a higher rate, ensuring that larger homes contribute proportionally more while keeping taxes reasonable for smaller properties, with all numbers and rates up for discussion.
While this system enhances fairness, it also presents challenges. Standardizing the definition of “usable square footage” across the state is likely the major hurdle in the way of this phase of the plan. Additionally, different ways to verify must be implemented to prevent misclassification and tax avoidance. Homeowners would be required to declare a primary residence to qualify, ensuring the benefits are directed toward owner-occupied properties rather than secondary holdings.
Overall, this reform promotes greater tax equity by aligning property taxes with actual living space rather than fluctuating market values. It provides homeowners with more stability and predictability, allowing for homeowners to be taxed at a lower rate and save money on their home.
Senior Citizen Property Tax Cap
North Dakota’s senior population faces increasing financial strain as property values rise, often resulting in proportionally higher property tax burdens. While some exemptions exist, there is currently no income-based cap that protects lower-income seniors from being taxed out of their homes. This lack of protection disproportionately affects retirees on fixed incomes, making homeownership increasingly difficult and burdensome for many seniors.
To address this, my proposal introduces a property tax cap for seniors, ensuring that their tax obligations do not exceed 2.5% of their annual income. This reform prioritizes tax equity by aligning tax obligations with an individual’s ability to pay. Seniors would no longer face unpredictable tax increases based solely on fluctuating property values, allowing them to remain in their homes without financial distress. Additionally, tax deferrals could provide much-needed flexibility for those with limited income, reducing the immediate burden while maintaining local tax revenue in the long term.
By implementing a senior property tax cap, North Dakota can provide much-needed stability for its aging population while ensuring homeowners are not forced out of their properties due to rising tax burdens. With thoughtful implementation and oversight, this measure can offer long-term financial security for seniors without compromising local government revenue
Active Farmland Exemption
Agriculture remains a cornerstone of North Dakota’s economy, yet rising property taxes threaten the viability of small and mid-sized farms. Under current law, farmland is taxed based on productivity value, but exemptions are limited, leaving many independent farmers potentially vulnerable to increasing financial burdens.
To support agricultural sustainability, my proposal introduces a two-thirds property tax reduction for actively farmed land. Eligibility would be determined based on documented agricultural activity, ensuring the exemption benefits working farms rather than speculative land holdings.
This reform would apply only to the first 5,000 acres of farmland (or whatever number is determined best), prioritizing support for small and mid-sized operations. Additionally, a family continuation clause would allow farms to be transferred tax-protected to family members for up to 10 years, provided the land returns to active agricultural use. This provision encourages generational farming while preventing large corporate entities from exploiting the exemption.
While this policy promotes fairness and economic stability, challenges must be addressed. Preventing corporate abuse is a key concern, as large agribusinesses may attempt to restructure holdings to qualify. Strict verification measures, such as requiring production records, will be necessary to ensure compliance.
By enacting an active farmland exemption, North Dakota can help preserve family farms, sustain local food production, and maintain the agricultural legacy that is integral to the state’s identity. Good implementation will ensure that independent farmers receive the support they need without unintended loopholes benefiting large-scale corporate interests.
Taxation of Non-Primary Residences
Currently, North Dakota taxes all properties in the same way, without distinguishing between primary residences, rental properties, and vacation homes. This approach does not account for the commercial nature of rental properties or the investment-driven aspects of vacation homes, occasionally burdening primary homeowners while offering advantages to investors.
To create a fairer system, my proposal restructures the taxation of non-primary residences by taxing rental and vacation properties based on land and property size rather than usable square footage. Rental properties would be taxed at a slightly higher rate to reflect their commercial nature, ensuring they contribute fairly to local revenue while maintaining affordability for renters. Property owners would be required to declare non-primary residences annually to ensure accurate classification and taxation. This system establishes a clear distinction between homeowners and investors as well as hopefully encouraging homeownership over investment.
Despite its benefits, this reform poses some obstacles. The administrative burden of managing annual declarations and overseeing compliance may initially require additional resources, though this burden would likely lessen over time. Additionally, the system must be carefully designed to avoid alienating investment in rental properties by imposing excessive tax burdens that could deter development. By implementing a fair and structured tax policy for non-primary residences, North Dakota can balance homeownership incentives with responsible taxation of rental and vacation properties, ensuring that investment properties contribute fairly to local revenue while maintaining affordability and fairness for renters and primary homeowners.
Commercial and Business Property Taxation
While this proposal focuses largely on residential property taxation, commercial and industrial properties require fair and sustainable tax policies as well. To ensure uniformity, businesses and commercial properties would continue to be assessed based on market value but with the new 8-year rolling average, similar to residential properties.
This adjustment provides greater predictability for business owners, preventing sudden tax spikes and allowing for long-term financial planning. We could explore tiered tax rates for small businesses specifically, ensuring that local entrepreneurs don't face a heavy hand while larger corporate entities contribute less, but that is a whole different deep dive...
Taxation of Multi-Unit Housing (Apartments, Condos, and Trailers)
Rental properties play a critical role in housing availability, and their taxation should balance fair contributions with affordability for renters. Under this proposal, multi-unit residential properties (apartments and condos) along with trailer parks would be taxed separately from single-family rental homes.
To prevent excessive tax burdens on renters, small landlords (owning a few units) would be taxed at a standard rate, while large apartment complexes would have tiered tax rates based on size and occupancy. This approach ensures that corporate landlords pay a fairer share without discouraging small rental property owners from staying in the market. Additionally, incentives could be provided for affordable housing units, allowing property tax reductions for landlords who allocate a percentage of their units to low-income renters.
Handling of Tax-Exempt Properties (Churches, Nonprofits, Government Buildings etc)
I feel i should address Tax-exempt properties, such as churches, nonprofits, and government-owned buildings. They all contribute to their communities immensley but do not currently pay into local property tax revenues. As part of a truly fair tax reform, this proposal suggests exploring Payment in Lieu of Taxes (PILOT) programs, where large tax-exempt institutions (such as hospitals) make voluntary financial contributions toward municipal services. This would be largely nominal and would probably contain a fair number of exemptions for anything that doesn't see a high dollar flow go through it.
Additionally, the current exemptions could stay in place, which would be more in line with how the state has operated historically. The PILOT program could be a tool for ensuring large tax-exempt institutions contribute toward local infrastructure without placing undue burdens on smaller nonprofits or community organizations. While maintaining traditional exemptions is likely the best approach for North Dakota, PILOT could be selectively applied to major entities that generate significant revenue while benefiting from local services.
Implementation and Oversight Approach
Successfully implementing these property tax reforms requires a structured and phased approach to ensure fairness, transparency, and sustainability. The first step is legislative action, drafting and passing formal legislation to establish clear guidelines for assessment, taxation, and enforcement. This can't be done in a single yeat, but it can be done in a much shorter timeline that can actually see it be accomplished. To prevent sudden financial disruptions, the new tax policies should be introduced gradually over a two- to three-year period, allowing municipalities, homeowners, and businesses ample time to adjust.
Effective oversight is essential to the success of this plan, necessitating the creation of a statewide monitoring board to ensure compliance, assess impacts, and make necessary adjustments. This board would include representatives from state and local governments to align taxation policies with municipal budgets, homeowner and business advocates to represent taxpayer interests, economic and tax policy experts to evaluate fiscal impacts, and agricultural and rental property stakeholders to address concerns specific to farmland and non-primary residences. While this may seem like a large committee, its broad representation would help guide the transition smoothly. In theory, after a decade of successful implementation, the board could be disbanded, with its remaining responsibilities transferred to existing organizations or departments. Through regular audits, public reports, and ongoing policy refinements, this board (and its successors) would provide the accountability and adaptability needed to ensure the reform’s long-term success. By taking this structured approach, North Dakota can modernize its property tax system in a way that ensures stability for homeowners, fairness for taxpayers, and financial predictability for local governments.
Conclusion
Well, this was fun. If you actually made it this far, you deserve a pat on the back—because this is one of the longest (and possibly most detailed) pieces I’ll write. What started as a thought exercise turned into a full-fledged policy deep dive, fueled by my own frustrations with North Dakota’s property tax system. I know this plan isn’t perfect, and I fully recognize that the usable space approach is unconventional and would require fine-tuning among other things.
On that ND Talk episode, I talked about a perfect world where we wouldn’t have to pay property or income taxes but could still maintain the benefits of a modern, first-world society. Tragically, we aren’t there. But I believe this proposal offers real relief, greater fairness, and much-needed predictability in a system that has become unnecessarily volatile.
If you have thoughts, critiques, or alternative solutions, I encourage you to challenge this proposal. Constructive criticism—especially from those with different perspectives—only strengthens ideas. Maybe this will never reach the people who can enact change, but at the very least, it starts a conversation. And conversations lead to action.
