McLeod Family Trust v. DOR

BEFORE THE MONTANA TAX APPEAL BOARD	nFILED
FEB 112025
IVtontana Tax Appeal Board
MCLEOD FAMDLY TRUST,
Appellant,
V.
STATE OF MONTANA,
DEPARTMENT OF REVENUE,
Respondent.
CASE :PT-2024-24
FmDmGS OF FACT,
CONCLUSIONS OF LAW, ORDER,
AND OPPORTUNITY FOR
JUDICIAL REVIEW
STATEMENT OF THE CASE
This is an appeal of a final decision by the Anaconda-Deer Lodge County Tax
Appeal Board (CTAB) denying the McLeod Family Trust, (Taxpayer) a reduction in
value on the subject property located at 714 Black Bear Lane, Anaconda, Montana
(Subject Property). The Taxpayer appealed that outcome to Montana Tax Appeal
Board (MTAB) on Febmary 27, 2024. We affirm the CTAB's determination.
ISSUE TO BE DECIDED
Whether the CTAB erred in denying the Taxpayer's request for a value
reduction to the Subject Property.
EXHIBIT LIST
The following evidence was submitted at the hearing:
Taxpayer Exhibits:
1. Taxpayers Brief Dated December 5, 2024, and Salient Facts;
2. Property Tax Assessment Analysis;
3. Updated Analysis of Land Assessments; and
4. Three-year tax assessments and Tax Assessment per square foot Land.
DOR Exhibits:
A. Land Model;
1

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
B. Maps;
C. Property Record Card and Photos;
D. Cost Worksheet;
E. Procedure 2-3-001.1;
F. Appraiser Certification; and
G. USPAP Standards 5 and 6.
PROCEDURAL HISTORY
The DOR valued the Subject Property at $731,683 for the 2023/2024 appraisal
cycle, with the land valued at $359,493 and the improvements valued at $372,190. Ex.
C. The DOR sent a Classification and Appraisal Notice to the Taxpayer dated June
30, 2023. MTAB Dkt. 3. The Taxpayer appealed the DOR'S valuation to the CTAB on
July 31, 2023, requesting a land value of $153,200 and an improvement value of
$269,400. Id. The CTAB hearing was held on January 24, 2024, and the CTAB's
decision denying the Taxpayer's application for reduction was sent to the parties on
January 25, 2024. Id. The Taxpayer appealed to MTAB on February 26, 2024, per
Mont. Code Ann. § 15-2-301, requesting a land value of $153,200 and an
improvement value of $269,400, for a total of $422,600. MTAB Dkt. 1. On November
1, 2024, the Taxpayer contacted the Board and requested to submit a brief and
evidence rather than attend the hearing because of health reasons. The Board granted
the Taxpayer's request in an Order Vacating Scheduling Order and Setting New
Schedule, dated November 4, 2024, and proceeded with the hearing as scheduled. The
MTAB hearing was conducted in Helena on November 7, 2024, at which the
following were present:
a. Dave Burleigh, DOR Counsel; Brandon Whitaker, Area Manger; and
Katelyn Thomton, Modeler.
The Taxpayer submitted a brief and evidence on December 6, 2024. MTAB
Dkt. 15. The DOR responded with a brief on December 19, 2024. MTAB Dkt. 16.
The record includes all materials submitted to CTAB, a recording of the CTAB
hearing, all materials submitted to MTAB with the appeal, additional exhibits
2

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
submitted by the parties prior to and at the MTAB hearing, additional briefing and a
transcript of the MTAB hearing.
FINDINGS OF FACT
1. To whatever extent the following findings of fact may be construed as
conclusions of law, they are incorporated accordingly.
2. The Subject Property is a residential property owned by the McLeod Family
Trust, on Georgetown Lake. Ex. C. The Subject Property is located at 714
Black Bear Lane in Anaconda, Montana, and is identified by its geocode 30-
1375-07-3-02-14-0000. Id. The Subject Property is 0.572 acres and includes a
single-family residence 3,216 square feet in total size, with a first floor living
area measuring 1,680 square feet in size, and a basement measured at 1,536
square feet. Id. The Subject Property also includes a framed in porch and a
wood deck. Id.
3. The DOR valued the Subject Property at $73 1,663 for tax years 2023 and 2024,
allocating $359,493 for the land and $372,190 for the improvements. Ex. C;
MTAB Hr'g Tr. 2:18-22. At the Febmary 23, 2024, CTAB hearing, the
Taxpayer requested $153,200 for the land and an improvements value of
$269,400 for a total value of $728,380. MTAB Dkt. 3. The CTAB denied the
Taxpayer's request for a value reduction. Id. The Taxpayer appealed this
decision to MTAB on February 26, 2024, requesting that the Subject Property
be assigned a land value of $153,200 and an improvements value of $269,400
for a total value of $422,600. MTAB Dkt. 1.
4. DOR Lead Appraiser, Brandon Whitaker, testified that he valued the Subject
Property using the cost approach. MTAB Hr'g Tr. 5:17-19. The Subject
Property's land was valued using a land model created by DOR modelers using
Georgetown Lake waterfront tracts. Ex. A; MTAB Hr 'g Tr. 6:8-7:20. The
model uses a base size of one acre and an incremental rate of 0.2530 to adjust
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BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
the value of the land from one acre to 0.572 acres. Id. The base rate for model
230.MJ3.A Georgetown Lake Waterfront Tracts is $526,363, adjusted down to
$359,493. Id. Mr. Whitaker testified that the models fell within the DOR'S
statistical guidelines and are reliable. MTAB Hr'g Tr. 7:22-23.
5. The DOR applied two influences on the Subject Property. Ex A, B; MTAB Hr'g
Tr. 7:22-8:22. The first was a positive influence of 1 14% because the Subject
Property is located in a desirable area of Rainbow Point in Badger Bay, and the
second was a negative influence of 69% because the main access road for
Rainbow Point splits the Subject Property. Id. The DOR presented a map of the
sales, showing how the DOR created the influences. Ex. B; MTAB Hr 'g Tr.
8:23-9:24. Mr. Whitaker also testified that the Subject Property is more
desirable because the lake frontage has deeper water conducive to docking
boats and is not muddy compared to the south shore. MTAB Hr'g Tr. 11:8-19.
6. DOR Modeler, Katelyn Thornton, testified that the influences added together
equaled 0.79 and were then applied to the base rate of the DOR land model,
which resulted in a reduction in value to the Subject Property. MTAB Hr'g Tr.
20:1-16. Ms. Thornton testified that all the land model statistical
measurements, including the influences, were within DOR standards. MTAB
Hr'gTr. 20:22-22:4.
7. The DOR calculated the Subject Property's land value using a land model that
calculated a base rate and an incremental or decremental rate. MTAB Hr'g Tr.
11:23-12:9. Ms. Thomton testified and demonstrated the equation used to
determine the base and decremental rates used to value the Subject Property.
MTAB Hr'g Tr. 21:23-24:24. Using the Subject Property's actual size of 0.572
acres divided by the one-acre base size and the decremental rate of 0.253, the
DOR determined the Subject Property's base land value. MTAB Hr'g Tr.
11:23-12:9; 22:21-24. Next, the DOR multiplied the Subject Property's land
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BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
value by the two influences, a positive influence of 114% and negative
influence of 69% to arrive at the final land value of $359,493. Id.
8. Mr. Whitaker testified that the Subject Property's improvements were valued
using the cost approach. MTAB Hr'g Tr. 12:13-12:9. Due to excessive
adjustments made to the comparable properties in the sales comparison method
and because the comparable properties had high comparability points, Mr.
Whitaker followed DOR procedure 2-3-001.1 and valued the Subject Property
usin^ the cost approach. Ex. E; MTAB Hr 'g Tr. 16: 7-23.
9. The DOR determined the cost of the dwellings and deducted the depreciation
of 22% to get the replacement cost new less depreciation value (RCNLD). Ex.
D; MTAB Hr'g Tr. 12:13-13:9, 14:1-16. The RCNLD is then multiplied by the
county index to adjust for the local cost of constmction. Id. Next, the Subject
Property's value is multiplied by the grade assigned by the DOR appraiser, but
because the Subject Property was given a grade of average, or 1, the value
would be the same when multiplied. Id. The residence of the Subject Property
is valued at $356,520. Id. Mr. Whitaker testified that he then added the
building's additions, including an open porch and a wood deck, which
accounted for an additional $15,670, bringing the total cost of the
improvements to $372,190. Id.
10. Mr. Whitaker testified that the Subject Property was assigned a grade of five
upon visual inspection by a DOR appraiser in 2017. MTAB Hr 'g Tr. 14:20-
15:8. Mr. Whitaker also testified that the depreciation was determined using
the CDU or condition, utility, and desirability of the Subject Property. MTAB
Hr'gTr. 15:11-23.
11. Mr. Whitaker testified that he complied with Uniform Standard of Professional
Appraisal Practice (USPAP) standards five and six related to mass appraisal.
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BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v.STATE OF MONTANA, DEPARTMENT OF REVENUE
MTAB Hr'g Tr. 16:2-9. Mr. Whitaker testified that using USPAP standards one
and two would be incorrect because they relate to individual appraisals of a
single property. Id.
12. Due to health reasons, the Taxpayer could not attend the hearing and submitted
a brief with exhibits as evidence. MTAB Dkt. 13. The Taxpayer argues he has a
long history with the area, dating back to 1973. Id. The Taxpayer has handled
over 300 market sales in the Georgetown Lake area. Id. The Taxpayer argues
that building sites have evolved over the years because of environmental
concerns and the need for approval from the Montana Department of
Environmental Quality. Id. Building sites in the area require a minimum of two
acres for a well and septic, and sites with less than two acres are much harder
to develop. Id. Taxpayer stated that because of environmental factors, larger
sites are more marketable. Id. The Taxpayer requested that the appraisal he
submitted to the Anaconda-Deer Lodge County Tax Appeal Board be
considered in this appeal. Id.
13. The Taxpayer also submitted a price per square foot comparison of the Subject
Property to 14 Leaning Tree Lane. MTAB Dkt. 13. The Subject property has a
price of $14.43 per square foot, and 14 Leaning Tree Lane has a price of $6.79
per square foot and is as much as four times the size of the Subject property. Id.
The Taxpayer also compared the Subject Property's land tax assessment and
price per square foot to comparable properties. Id. The Taxpayer asserts that
the Subject Property has the highest price per square foot among the
comparable properties he used, and the DOR failed to reflect the tme
development potential of the smaller lot. Id.
JURISDICTION AND STANDARD OF REVIEW
14. The Montana Tax Appeal Board is an independent agency not affiliated with
the Montana Department of Revenue. Mont. Const., Art. VIII § 7; Mont. Code
Ann. § 15-2-101. The Taxpayer filed a timely appeal of the DOR'S decision to
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BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
the MTAB. Therefore, this Board maintains jurisdiction to hear and decide this
matter. Mont. Code Ann. §301.
15. This Board may hear appeals de novo. Dept. of Revenue v. Burlington N., 169
Mont. 202, 213-14, 545 P.2d 1083 (1976). "A trial de novo means trying the
matter anew, the same as if it had not been heard before and as if no decision
had been previously rendered." McDunn v. Arnold, 2013 MT 138, ^ 22,370
Mont. 270, 275, 303 P.3d 1279,1282.
16. The Board's order is final and binding upon all parties unless changed by
judicial review. M.ont. Code Ann. § 15-2-301(6).
CONCLUSIONS OF LAW
17. To whatever extent the following conclusions of law may be construed as
findings of fact, they are incorporated accordingly.
18. "All taxable property must be appraised at 100% of its market value...." Mont.
Code Ann. §15-8-111.
19. "[1]n connection with any appeal under [Mont. Code Ann. § 15-2-301], the
Montana board is not bound by common law and statutory rules of evidence or
rules of discovery and may affirm, reverse, or modify any decision. To the
extent that this section is in conflict with the Montana Administrative
Procedure Act, this section supersedes that act." M.ont. Code Ann. § 15-2-
301(5).
20. DOR is entitled to a "presumption of correctness if its decisions are pursuant to
an administrative rule or regulation, and the rule or regulation is not arbitrary,
capricious or otherwise unlawfal." Burlington N., 169 Mont. at 214, 545 P.2d
at 1090. However, DOR cannot rely entirely on the presumption in its favor
7

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
and must present a modicum of evidence showing the propriety of their action.
Western Air Lines v. Michunovich, 149 Mont. 347, 353, 428 P.2d 3, 7 (1967).
21. The Taxpayer bears the burden of proving the error of DOR's decision.
Farmers Union Cent. Exch. v. Dep't of Revenue, 272 Mont. 471, 476, 901 P.2d
561, 564 (1995); Western Air Lines, 149 Mont. at 353, 428 P.2d at 7.
22. '"Assessment formulations' by [the Montana Tax Appeal Board] should be
upheld unless there is a clear showing of an abuse of discretion." Peretti v.
Dep't of Revenue, 2016 MT 105, ^ 15, 383 Mont. 340, 344, 372 P.3d 447, 450
(citing O'Neill v. Dep't of Revenue, 2002 MT 130, If 23, 310 Mont. 148, 155,
49 P.3d 43, 47); see Northwest Land & Dev. v. State Tax Appeal Bd., 203
Mont. 313, 317, 661 P.2d 44, 47 (1983) (overruled on other grounds by DeVoe
v. Dep't of Revenue, 263 Mont. 100, 866 P.2d 228 (1993)).
23. The Board "may not amend or repeal any administrative rule of the
department," but may enjoin its application if the Board concludes the rule is
"arbitrary, capricious, or otherwise unlawful." Mont. Code Ann. § 15-2-301(5).«.
24. The term "unprovements" includes all buildings, structures, fences, and
improvements situated upon, erected upon, or affixed to land. Mont. Code Ann.
§15-l-101(l)(i).
25. "If the appeal is an appeal of the valuation of residential property, the state
board shall consider an independent appraisal provided by the taxpayer if the
appraisal meets standards set by the Montana board of real estate appraisers
and uses values obtained within the timeframe provided for in subsection
(3)(a). The appraisal that is provided by the taxpayer is presumed to establish
assessed value in the state board proceeding unless the department provides
sufficient evidence to rebut the presumption of correctness, including another
independent appraisal or other compelling valuation evidence. The state board
8

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
shall address the taxpayer's independent appraisal and the department's
valuation evidence in the decision." M.ont. Code Ann. § 15-2-301 (3) (b).
26. The Legislature intended the Department to utilize a number of different
approaches or combination of approaches, including the income approach,
sales comparison approach, and cost less depreciation approach, depending on
the market where the appraisals take place, when it assesses property and
estimates market value. Albright v. State, 281 Mont. 196, 208-09, 933 P.2d
815, 823 (1997).
DISCUSSION
27. The Taxpayer did not dispute the value of the improvements, and this order
will only address the land value of the Subject Property. The Taxpayer argued
that the Subject Property's value is considerably higher than the surrounding
properties in terms of price per square foot. The Taxpayer's argument is similar
to the argument put forth in his last appeal, PT-2022-10. The Board finds the
DOR'S appraisal of the Subject Property credible and the Taxpayer's valuation
method unconvincing. The Board upholds the DOR'S value of the Subject
Property.
28. The Taxpayer's appraisal method of dividing the property area by the sale price
or appraised value of a property assumes that all land is valued equally
regardless of acreage and does not consider diminishing returns or economies
of scale. Montana Code Aim. § 15-8-111(3) directs the DOR to use mass
appraisal methods when valuing class four residential property. The DOR uses
verified data to value the land. The comparable properties used to value the
land were within acceptable proximity to the Subject Property, and the
statistical measurements for creating the base acre and decremental rate were
within acceptable standards. Using the base acre method for mass appraisal
where the DOR develops a base acre value and then reduces the Subject
Property's value using the decremental rate is consistent with uniform appraisal
principles whereas the Taxpayer's square foot divided by area method is not.
9

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
29. The Taxpayer argues that smaller properties are more problematic to develop
because of regulations for water and septic. The Taxpayer fails to acknowledge
that as of the lien date for the 2023/2024 tax cycle, the Subject Property is
already developed for water and septic, and a potential buyer would not face
the problems with developing the site. While further development may be
problematic, the Board cannot speculate.
30. The DOR applied two influences that the Board felt were proper. The first
influence was applied due to the Subject Property being situated in a desirable
area. The second influence was applied because the Subject Property has a road
that crosses the property, making it less desirable.
31. While there is inconstancy with the price per square foot values as pointed out
by the Taxpayer, the DOR rebutted that argument in their reply brief, stating
that the Taxpayer picked properties that are significantly larger than the Subject
Property and would have a lower price per square foot lower due to the
principle of economies of scale. The DOR land model uses sales that are much
smaller and more comparable to the Subject Property. Because the comparable
properties used m the Taxpayer's analysis are larger, they would create
inconsistencies, as argued by the DOR.
32. The DOR uses the land model on all similarly situated properties, creating
equity among all the properties in the area. The DOR followed USPAP
standards 5 and 6 for mass appraisal, while the Taxpayer used a method not
recognized in professional appraising. The Taxpayer's "appraisal" submitted to
the Anaconda-Deer Lodge County Tax Appeal Board does not meet the
standards set out by the Montana Board of Real Estate Appraisers and was not
conducted within six months of the lien date. Additionally, the Board did not
adopt the Taxpayer's appraisal for the same reason in the case numbered PT-
2022-10. Lastly, the Taxpayer did not show an error in the DOR'S value. The
Taxpayer merely pointed out inconsistencies with the price per square foot of
10

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
other properties surrounding the Subject Property. For these reasons, the Board
has declined to lower the value of the Subject Property and affirms the
Anaconda Deer Lodge County Tax Appeal Board.
11

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
ORDER
33. The Board denies the Taxpayer's appeal and affirms the Anaconda Deer Lodge
County Tax Appeal Board.
34. For the 2023/2024 tax cycle the DOR will value the Subject property's land at
$359,493 and $372,190 for the improvements.
Dated this 11th day of February 2025.
9^^L 6-
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Travis Brown, Chairman
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Amie Zendron, Member
Notice: You are entitled to judicial review of this Order by filing a petition in district
court within 60 days of the service of this Order. The Department of Revenue shall
promptly notify this Board of any judicial review to facilitate the timely transmission
of the record to the reviewing court. Mont. Code Ann. §15-2-303(2).
12

BEFORE THE MONTANA TAX APPEAL BOARD
MCLEOD FAMILY TRUST v. STATE OF MONTANA, DEPARTMENT OF REVENUE
Certificate of Service
I certify that I caused a tme and correct copy of the foregoing Findings of Facts and
Conclusions of Law to be sent by email and United States Mail via Print & Mail
Services Bureau of the State of Montana February 11, 2025, to:
Jack McLeod
McLeod Family Trust
4310BlacktailLoop
Butte, MT 59701
Dave Burleigh
State of Montana, Department of Revenue
Legal Services Office
P. 0. Box 7701
Helena, MT 59604-7701
Paula Gilbert
State of Montana, Department of Revenue
Property Assessment Division
P.O. Box 8018
Helena, MT 59604-8018
Seanna Zacher, Secretary
Anaconda-Deer Lodge County Tax Appeal Board
800 Main St.
Anaconda, MT 59711-2999
'^^^
Rina SanUerson, Legal Secretary
13