Montana Property Taxpayers Must Have Good Evidence of Market Value and a Knowledge of Law to Succeed on a Property Tax Appeal – Part 2 of 2

Montana Property Taxpayers Must Have Good Evidence of Market Value and a Knowledge of Law to Succeed on a Property Tax Appeal. Part 2 of 2.

The Montana Tax Appeal Board recently ruled against a taxpayer in the case of Virginia Apts. LLP v. Montana Department of Revenue[1] in a Montana property tax appeal. While the taxpayer may have had valid arguments, the taxpayer failed to present the argument using accepted legal arguments and a thorough and convincing presentation of the evidence.

To prevail in a Montana Tax Appeal, it is critical that the taxpayer prepare good evidence and have a basic understanding of property and property taxation. Unfortunately, the taxpayer fell short in the following areas.

A. Windows and the heating boiler are not tax-exempt personal property. The taxpayer argued that these fixtures should be considered non-taxable. Under Montana law, business personal property is exempt from property tax up to $100,000 in market value and then taxed at reduced rates up to $6 million in value.[2] Thus, the taxpayer wishes to have the taxable property classified as personal property rather than real property. But the Board ruled, “No reasonable person would consider these amenities personal property which can be removed from a property on sale and, therefore, not taxable.”[3]The Board further commented, “We find the Taxpayer failed to provide any evidence and little credible testimony that the value of his apartment building’s ‘unattached’ contents is worth the $255,000 he requested that we deduct from his property’s value.”[4]

In situations like these, the taxpayer needs to have an understanding as to what constitutes real vs. personal property and not waste precious taxpayer appeal capital on losing arguments. Further, the taxpayer needs to be mindful that it present solid evidence and credible testimony. While in the right scenario, this testimony may be from the taxpayer themselves, however one should strongly consider a third-party witness to bolster the testimony.

B. An estate sale may be considered a distressed sale. The Department of Revenue assessor determined that the purchase of the property from an estate sale was a distressed sale and therefore could not be relied upon to determine fair market value. While the Board ultimately upheld an income approach to value, the Board cites the record seemingly in favor of an estate sale as being a distressed sale. In such a scenario, the taxpayer should not rely only on their testimony but should rebut with a third-party witness that the sale was arm’s length, for fair market value, and was not a distressed sale.

Practice Point: In order to maximize the chance of winning a property tax appeal, the taxpayer must be prepared with good, solid, factual testimony and a knowledge of the law. Otherwise, the Department of Revenue personnel representing the taxing authority will have a very strong advantage.

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.