Many Montana property tax appeals are lost by the taxpayer due the taxpayer’s failure to present good evidence and to understand basic principles of property and property taxation. Such was the case of the taxpayer in a recent decision of the Montana Tax Appeal Board in Virgina Apts. LLLP v. Montana Department of Revenue.[1]
In the case, the taxpayer had purchased an apartment complex from an estate of a decedent. The apartment complex also contained personal property in the units, like a refrigerator. The taxpayer appealed the assessed value of the apartment property. The first stage of appeal for taxpayers is to requests an informal review conference with the Montana Department of Revenue to discuss the tax assessment, provide additional information to the Department of Revenue, and ask questions of the Department about the property tax assessment.[2] Most property tax challenges are resolved with the Department of Revenue during informal review and do not proceed for further tax litigation.
During the property tax informal review process, the Montana Department of Revenue obtained rental income information from the apartment property and used an income approach to value to appraise the apartment complex. The Montana Department of Revenue typically uses either a market approach to value that looks to comparable sales, an income approach to value that looks at the income the property generates, or the cost approach to value that looks at the cost to build the property, less depreciation and obsolescence, or a combination of the three approaches to value.
At the next level of property tax appeal following an unsuccessful informal review that did not end in a resolution of the tax, the County Tax Appeal Board of the county where the property was located lowered the assessed value to account for some personal property that was exempt from taxation. Under Montana property tax law, business personal property under $100,000 in value is exempt from property taxation.[3] However, this reduction in value was not enough to satisfy the taxpayer. The taxpayer then appealed to the Montana Tax Appeal Board.
As will be discussed in Part 2 of this article, the Montana Tax Appeal Board ruled against the taxpayer. The taxpayer failed to argue basic principles of Montana property law relating to fixtures and personal property, and whether distressed property sales may be used to establish fair market value. Virgina Apts. demonstrates the critical importance of presenting on appeal the correct arguments about property and property tax assessment. If the taxpayer does not do so, the taxpayer cannot expect a good likelihood of winning on appeal.
In Part 2 of this article, I will further discuss the shortfalls in arguments that the taxpayer made during the appeal that strongly contributed to losing the property tax appeal. I will also address practice points that a taxpayer should consider when challenging Montana property tax.
Taxpayers wishing to appeal Montana property tax are encouraged to contact Jared Le Fevre to discuss appeal options and determine the law and facts that would be necessary to prevail on appeal.
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] Case No: PT-2020-14.
[2] Mont. Code Ann. § 15-7-302(3)(a).
[3] Mont. Code Ann. § 15-16-138(4).