Legislative Committee Tackles Rising Commercial Property Taxes in South Dakota

South Dakota’s commercial property tax landscape is under close examination as the state faces a 47% increase in commercial property tax payments over the past decade. To address this trend, the legislature has established the Study Committee on Property Tax Assessment Methodology, which aims to recommend solutions during the next legislative session in January. This initiative represents the second consecutive year of focused legislative scrutiny on property tax issues.

Representative Drew Peterson, R-Salem, co-chair of the committee, emphasized the importance of creating a fair and equitable property tax system. During the committee’s initial meeting, it was revealed that South Dakotans paid more than $1.6 billion in property taxes in 2023, with commercial properties accounting for a substantial portion. The state’s effective property tax rate of 1.31%, one of the highest in the region, further underscores the financial burden on commercial property owners. As local governments rely heavily on property tax revenues, commercial property owners face increasing tax obligations because of rising valuations and limited alternative revenue sources.

Department of Revenue Secretary Michael Houdyshell highlighted that while local governments can raise property tax collections by 3% or the rate of inflation, plus an allowance for new growth, this often exacerbates the tax burden on commercial properties. Houdyshell outlined potential solutions such as budget cuts for local entities, finding alternative revenue sources like increased sales taxes, and shifting the tax burden to other property classes. However, these measures might simply redistribute the burden rather than reduce it. The committee will continue its work through the summer engaging with stakeholders, including county directors of equalization, agricultural groups, retailers, and realtors, to develop recommendations for a more balanced commercial property tax system.

South Dakota property owners should closely monitor their assessments, which may not reflect these value-inhibiting changes. If your assessment does not accurately reflect your property’s value, please contact Ryan for assistance.