When it comes to property taxes, Montana taxpayers who disagree with their property tax assessment must follow a statutorily prescribed appeal process.[1] Following a discretionary opportunity to meet with the Montana Department of Revenue in an informal review to see if the tax dispute can be resolved without a tax appeal, the taxpayer must first appeal her property tax assessment to the County Tax Appeal Board (“CTAB”), a local board designated to hear property valuation tax appeals in the county where the property is located.[2] If the CTAB decision is unfavorable to the taxpayer, then she can seek relief from the Montana Tax Appeal Board (“MTAB”), which is a three-member board appointed by the governor and confirmed by the state senate.[3] If MTAB fails to render an acceptable decision to the taxpayer, then she can seek judicial review of MTAB decision in Montana state district court.[4]
What happens when a Montana taxpayer loses at CTAB and MTAB after following all the property tax appeal procedures, but the district court finally awards her a reduction in property value on judicial review? A joyous moment of vindication for the taxpayer? Not necessarily.
If the district court re-weighs the evidence, re-determines the credibility of witnesses, and overlooks the substantial facts that supported MTAB’s ruling, then the decision of the district court may be overturned and MTAB’s ruling may be reinstated by the Montana Supreme Court. This scenario played out in in a decision handed down by the Montana Supreme Court.
In Peretti v. State of Montana, Department of Revenue[5], taxpayers disputed the property assessment of their lakefront property in picturesque Flathead County, Montana, and appealed their property tax assessment to CTAB. The taxpayers received a slight reduction in assessed value but exercised their right to appeal the CTAB’s decision to MTAB. MTAB found in favor of the Montana Department of Revenue after considering the Department’s evidence, which included appraisers and computer generated appraisal models. MTAB was not impressed by the taxpayer’s valuation witnesses and did not find them credible. The taxpayers’ witnesses included a licensed real estate appraiser and an expert “with math and physics credentials and experience modeling land valuation computer software.” The appraisers’ testimony included three comparable sales (whereas the Department had 29), reliance on certain data sales not permitted under Montana law, and certain assumptions based on subjective assessments about what a future buyer might do. MTAB concluded the taxpayer’s other expert completely misunderstood the computer model and his other criticisms were inaccurate.
However, upon judicial review of the MTAB decision by the state district court (venued in the Flathead County where the taxpayers resided), the district court reversed the MTAB’s decision, ordered the MTAB to accept the taxpayer’s valuation and for the Department to return any taxes paid by the taxpayers under protest. Id. at ¶ 13.
At first glance, this appears to be a sweet come from behind win for the taxpayer, with the state district court judge in the taxpayer’s home county reversing the bureaucratic tax authorities and handing victory to the taxpayer. However, Part 2 of this article will examine why the taxpayer cannot always readily rely on the courts to overturn the administrative tax boards.
Taxpayers are encouraged to contact Jared Le Fevre with questions about tax appeals. Mr. Le Fevre can analyze and advise as to the best prospects and methods for appealing property tax.
Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
[1] Mont. Code Ann. §§ 15-15-101, 15-15-104, 15-2-301, 15-2-303.
[2] Mont. Code Ann. §§ 15-15-101, 15-15-102.
[3] Mont. Code Ann. §§ 15-15-104, 15-2-101, 15-2-301.
[4] Mont. Code Ann. § 15-2-303.
[5] 373 P.3d 447, 2016 MT 105.