The property tax assessment notice for Class 3 and 4 real property, typically residential and commercial property, typically is sent by the Montana Department of Revenue to the property owner in June of the first year of the two-year real property taxation cycle. The taxpayer should carefully examine the assessment notice for the following points.
- Property classification. All property in Montana is placed in one of 17 different classes for property tax purposes.[1] The classes set forth various tax rates that is the percentage of the property’s assessed value that is subject to tax. For example, residential property is classified as Class 4 property and has a tax rate of 1.35% for residential property valued under $1.5 million and 1.4% for residential property valued over $1.5 million.[2]
- Previous and current assessed value. Most property in Montana is assessed, meaning valued for tax purposes, at 100 percent of its market value.[3] A notable exception to the market value standard is agricultural property, which is valued based on productive capacity.[4] By listing the previous and current year assessed value, the taxpayer can compare the increase or decrease in value from year to year to determine if the change seems warranted, should be investigated further or appealed.
- Previous and current taxable value. Taxable value is determined by multiplying the assessed value of the property by the tax rate determined from the property tax class.
- Prior year millage rate. Mills are used by the taxing authorities to determine actual property tax for funding government operations. A mill is 1/100 of the taxable value. Taxing authorities such as a city, county, school district and others are authorized to levy mills. The property tax due and owing is computed by multiplying the taxable value by the number of mills. Roughly 500 mills are an average amount levied in Montana.
- Estimated general year taxes. The current taxable value is multiplied by the prior year millage to produce the current year’s taxable value. For example, $100 in taxable value x .500 mills=$50 in property tax. Mills are determined yearly, by the second Monday in September or within 30 days of receiving certified taxable values from the Department of Revenue,[5] and thus not available for the current year property tax assessment which typically is sent to taxpayers in June. The previous year’s mills are used to calculate an estimated property tax due.
Practice Point. Property owners should carefully review the assessment notice for agreement classification and value since those determinations drive the property tax due.
Taxpayers with concerns about property tax may contact Jared Le Fevre for an analysis of the assessment notice and to discuss whether the property assessment may be reduced.
About the Author. Jared M. Le Fevre is a 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, 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. § 15-6-101, et seq.
[2] Mont. Code Ann. § 15-6-134(3)(a) and (b).
[3] Mont. Code Ann. § 15-8-111(2)(a).
[4] Mont. Code Ann. § 15-7-201.
[5] Mont. Code Ann. § 15-10-05(1)(a).