Reduce maximum values for certain property taxes levied on owner-occupied single-family dwellings, and to increase the rates for certain gross receipts taxes and use taxes.
Summary
SB 121 would lower the maximum school property tax levy on owner-occupied single-family dwellings to zero for taxes payable in 2026, while leaving levies on agricultural and other non-owner-occupied property in place. The bill pairs that property tax reduction with increases in a broad set of state gross receipts, use, and excise taxes, including the general sales tax rate and taxes on services such as telecommunications, utilities, passenger transportation, rentals, and certain amusement and farm equipment transactions. It also raises the rental vehicle tax and the tax on mechanical or electronic amusement devices.
The bill is structured to use the additional state tax revenue to replace the school funding that would otherwise be lost from eliminating the owner-occupied school levy. It also amends several school finance provisions so that state aid, local effort, and special education funding formulas continue to function with the new levy structure. Most of the tax-rate changes would take effect January 1, 2026, and the school-funding-related amendments are written to be temporary, with the affected code sections repealed on June 30, 2027, causing the law to revert to its prior form unless further legislation is enacted.
Impact
SB 121 would significantly alter South Dakota tax law by reducing the school district general fund levy on owner-occupied single-family homes to zero and increasing multiple state-level consumption and service taxes to offset the lost local revenue. It would amend numerous chapters governing sales tax, use tax, telecommunications tax, utility tax, amusement tax, rental vehicle tax, and school finance formulas, while preserving the existing levy structure for agricultural and other non-owner-occupied property. The bill would also temporarily revise special education and state aid calculations to align with the new local effort assumptions.
Sentiment
The available voting history suggests the bill faced resistance in committee: one vote on a do-pass-amended motion failed 2-4, while a separate motion to defer the bill to the 41st legislative day passed 4-2. That pattern indicates the proposal was controversial and did not have broad committee support at that stage. No committee transcript was provided, so the record shows procedural movement but no detailed public debate in the supplied materials.
Contention
The main point of contention is the bill’s tradeoff between property tax relief for owner-occupied homes and higher statewide taxes on goods and services. Supporters would likely view it as shifting school funding away from homeowners while preserving school revenue, but opponents may object to the broad tax increases, especially the higher sales and use tax burden on consumers and businesses. Another likely issue is the complexity of temporarily rewriting school finance formulas and the short repeal window, which could create uncertainty for school districts, taxpayers, and affected industries.