North Dakota Property Tax Relief & Reform
The North Dakota House of Representatives has three distinct proposals – HB 1168, 1575 and 1176 – that could reshape the property taxes. A property tax is levied primarily on immovable properties like land and buildings as well as tangible personal property which is movable like vehicles and equipment. Property taxes are the largest source of revenue for state and local governments in the U.S. They help fund schools, roads and police services, among other things.
These bills are intended to reduce the property tax. Together, these bills aim to reduce the property tax. A tax is a mandatory payment collected by local, State, and National governments from individuals and businesses to cover costs of general government goods, services, and activities.
These proposals provide significant relief to property owners but they each have fiscal and structural implications which deserve careful consideration. The Governor Kelly Armstrong’s (R) support for HB 1176 has made it the clear winner amongst the three competing proposals. The bill increases the tax credits for primary residence properties. A tax credit is a provision which reduces a taxpayer’s final tax bill dollar-for-dollar. Tax credits are different from deductions and exclusions, which reduce the taxpayer’s final tax bill by dollar-for-dollar.
increases the maximum credit to $1,250. It does not apply to special assessments or voter-approved levies above a certain threshold. It does not apply to special assessments or voter-approved levies beyond a certain threshold.
These provisions differ slightly from the introduced legislation, via two amendments which lowered the overall primary resident tax credit from its original $1,550 to $1,250 and capped the tax credit at 75 percent of a primary taxpayer’s total levy.Additionally, HB 1176 increases the renters’ property tax refundA tax refund is a reimbursement to taxpayers who have overpaid their taxes, often due to having employers withhold too much from paychecks. The U.S. Treasury estimates nearly three-fourths (73%) of taxpayers have too much tax withheld from their paychecks. This results in millions of dollars in tax refunds. Overpaying tax can be viewed like a loan to the government. On the other hand approximately one-fifth underwithholds; this can happen if someone works multiple jobs, and they do not adjust their W-4 correctly to account for the additional income. Or if spouse income is not properly accounted for on W-4s.
These changes are designed to provide relief to more middle-income homeowners and renters who are affected primarily by the incorporation of property tax burden into rental prices. These changes are designed to extend relief to more middle-income homeowners and renters who are affected primarily through the incorporation of property tax burden into rental prices.
Similar to its legislative alternatives, HB 1176 uses Legacy Fund earnings to fund property tax credits and provide for local revenue needs because of increases to the homestead property tax credit. According to the latest fiscal note, HB 1176 will cost $552.8 in the current biennium. “However, North Dakota’s reliance upon investment returns creates uncertainty, especially in the event of a market downturn, especially with the Trump administration’s recent and possible upcoming Tariffs. This will have a negative impact on investment returns, in addition to the state’s trade-focused economic, as the state is a large exporter of agricultural and energy products.
HB1168 takes a slightly different approach, and does not include direct taxes. A direct tax is imposed on individuals or organizations and cannot be transferred to another payer. Direct taxes, like the personal income tax rate, are often progressive.
credits. It aims to limit the growth in property tax levies instead by capping annual increases for local taxing district–excluding school districts. This is unless voters approve higher increases. HB 1168 stipulates, however, that the levy-limit override must also be approved by 60% of voters in the district during a statewide general or primary election. It also sets a five-year time limit after which the 3 percent levy limit must be observed again in the taxing jurisdiction.
Under this plan, new construction and improvements are excluded from the levy limit, ensuring that levy limits do not hinder growth. Local governments that wish to exceed this cap must obtain voter approval by following the above-described formal process. HB 1168 also reallocates Legacy Fund earnings, but not specifically for tax credits; rather, it redirects a portion of earnings to support general fiscal stability and infrastructure.
Data from the North Dakota Office of State Tax Commissioner shows that between 2013 and 2023, combined urban and rural residential property tax levies increased by 86 percent, an average of roughly 6.5 percent per year. Property tax levies wouldn’t have grown as fast without the levy cap if the 3 percent cap had been in place. New construction, when first added, would of course increase tax collections without being subject to the cap, though future growth of revenues from those properties would be included in cap calculations.Finally, HB 1575 offers a third approach by reducing the taxable value of property statewide. Residential properties are required to receive a 2.75 % reduction in assessed value. Meanwhile, agricultural and commercial properties would receive a 1.5 percent reduction.This reduction applies to all properties but delivers proportionally greater relief to homeowners. This creates a phenomenon known as split-roll taxation, which over time distorts the property market. Renters are also liable for a larger share of the property tax because apartment buildings are classified as commercial property. The bill replaces the primary residence credit with a broad-based valuation reduction. The plan is funded by Legacy Fund earnings, with the state reimbursing local governments for lost property tax revenue.
These three bills reflect different approaches to property tax relief:
HB 1176 prioritizes direct credits and refunds.
HB 1168 focuses on limiting future tax growth.
HB 1575 reduces assessed property values across the board.
Ultimately, levy limits offer the most consistent and economically efficient approach to keeping property taxes in check not just in the present, but long into the future.
Local governments may also face new fiscal pressures and may need to adjust service levels and property tax levy policies or explore alternative revenue sources under these reforms. Alternatives include increasing the city and county sales taxes, which are currently at 2.05 percent combined, on top of the 5 percent statewide
- salestax. A sales tax is imposed on retail sales of both goods and services, and should, in theory, apply to all final consumption. Many governments exempt items like groceries. Broadening the base, such as including grocery, could lower rates. A sales tax should exclude business-to-business transfers that, when taxed cause tax pyramiding.
North Dakota’s financial situation allows it to offer a unique property tax relief. However, policymakers must balance immediate relief with fiscal sustainability and ensure that local governments remain adequately funded in the years ahead. - Stay informed on the tax policies impacting you.
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