Property tax assessed in a cycle. Most Montana real property is assessed for property tax purposes in two year cycles,[1] meaning that the property is valued every two years and the property tax is levied on the same value for two consecutive years.
Thus, the Montana Department of Revenue is required to assess, a/k/a value for property tax purposes, most real property every two years. The property then retains the same value through the cycle. The most recent property tax cycle was for tax years 2019 and 2020. However, the year for which the value of the property was based was as of January 1, 2018.[2] Montana is a big state with lots of real property. The Montana Department of Revenue needs a year head start to give it time to value the property.
Mid-cycle changes. There are certain cases where the property assessment may be redone during a cycle. Typically, property may be revalued if there is new construction on the property or destruction to the property.[3] ARM 42.20.501(20) discusses reappraisal value and states:
“Reappraisal (REAP) value” means the full 2015 value determined for the current reappraisal cycle pursuant to 15-7-111, MCA, adjusted annually for new construction or destruction. A current year REAP value is the same as the 2015 reappraisal value of the property if there is no new construction, destruction, land splits, land use changes, land reclassifications, land productivity changes, improvement grade changes, or other changes made to the property during 2015 or subsequent tax years.[4]
While this administrative rule doesn’t apply to all property, it demonstrates the principle of when the Montana Department of Revenue can change the value of property midcycle.
Where there is change to the property during the year, the property is valued as of January 1 of the tax year following the change to the property. However, there isn’t any statutory or administrative rule permitting the Department of Revenue to change values of property based only on sale of the property or an increase to the value of property mid-cycle. The Department of Revenue is not empowered to change a value of property mid-cycle only for changes of value or ownership of property.
Recent case involving midcycle reappraisal. In part 2, we will examine a recent case where the Department of Revenue attempted to change the property value of a house midcycle based in part on change in ownership.
Taxpayers with questions about Montana property tax appeals and valuations may contact Jared Le Fevre to discuss.
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. § 15-7-110.
[2] ARM 42.18.121(4). The next reappraisal cycle is for 2021 and 2022, with property values determined as of January 1, 2020.
[3] Mont. Code Ann. § 15-7-112(2); ARM 42.20.501(20); ARM 42.20.504; ARM 42.20.515.
[4] Mont. Admin. R. 42.20.501(2)(emphasis added)