Appealing your property tax

Summer is not the only major event that arrives in June of every year. Another annual occurrence is the appearance in mailboxes all over the State of new property appraisals from the Montana Department of Revenue. The receipt of this document is met with trepidation by taxpayers of all sizes. It is the rare occasion that the value of a taxpayer’s property decreases. The more likely circumstance is that the value has increased, sometimes at an alarming rate. When this happens the taxpayer has several options from doing nothing to paying their taxes under protest.

The first option is to just agree that their value is greater this year, maybe due to improvements or additions to the property, or because the market value of similar properties has actually increased. In this case nothing needs to be done, and when the tax bill arrives in November the likely increase is expected. But what if the taxpayer does not agree with the new valuation? What are the options then?

The Montana Constitution and Montana Law give several options to taxpayers to attempt to get relief from what they believe is an erroneous valuation of their property. The drafters of the Constitution required the legislature to create an appeals process independent of the Department of Revenue to appeal issues of appraisal and taxation. They felt it was important for taxpayers to have a venue to question the value that the State put on their properties. Furthermore, the Legislature has created several avenues for taxpayers who think their property values are too high to attempt to get relief. These options include:

—File an appeal (AB-26) for informal review with the Department and seek to convince the appraiser that the value is too high.

—Appeal to the County Tax Appeal Board to have the value lowered following a hearing where both the taxpayer and the Department provide evidence (the ruling from the County Board can be appealed to the State Tax Appeal Board).

—Owners of industrial and centrally assessed property can appeal directly to the State Tax Appeal Board and have their hearing there, but usually have to go through an appeal or negotiation process within the Department of Revenue first. Rulings from the State Tax Appeal Board can be appealed by either party to the Montana District Court, and may ultimately end up before the Montana Supreme Court.

—Pay a portion of their taxes under protest. The taxpayer may decide, in addition to using the aforementioned remedies, to pay the portion of taxes owed that they believe to be in error under protest. This protects that amount of money from being spent by entities of government that receive property taxes. The money is then available to refund to the taxpayer if they are successful in their negotiations or appeal.

Paying taxes under protest, once the proper appeals have been filed, is the legal right of any taxpayer big or small. It protects the contested tax from appropriation until the appeal process is completed. This can cause financial issues for local governments and schools in the case that a large taxpayer pays taxes under protest as part of their valuation appeals process. The law also allows options for taxing jurisdictions to use a portion of the taxes under protest with certain risks, or in the case of schools, forego protested taxes and have their State funding formula adjusted.

No taxpayer, especially large taxpayers take the decision to pay their taxes under protest lightly. In some cases the amount of money involved is in the millions of dollars. The driving force behind this decision is the belief that the Department of Revenue has overvalued their property. This is often based on knowledge of valuations of similar properties both in Montana and in other states. They must pay a portion of their taxes under protest to protect the viability of their business should they be successful in their appeal. It is a right provided to them by law and backed by the intent of the framers of the Montana Constitution. No property owner should be pressured to forego their legal rights just to make budgeting easier for government.

Robert Story is executive director of the Montana Taxpayers Association.