Harold G. Neumann v. Department of Revenue

BEFORE THE STATE TAX APPEAL BOARD
OF THE STATE OF MONTANA
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HAROLD G. NEUMANN, )
) DOCKET NO.: PT-1997-139
Appellant, )
)
-vs- )
)
THE DEPARTMENT OF REVENUE ) FINDINGS OF FACT,
OF THE STATE OF MONTANA, ) CONCLUSIONS OF LAW,
) ORDER and OPPORTUNITY
Respondent. ) FOR JUDICIAL REVIEW
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The above-entitled appeal was heard on August
19, 1998, in the City of Kalispell, Montana, in accordance
with an order of the State Tax Appeal Board of the State of
Montana (the Board). The notice of the hearing was given
as required by law. The taxpayer, Harold Neumann,
presented testimony in support of the appeal.
The Department of Revenue (DOR), represented by
property valuation specialists Mollye Faulkner and Mary
Brown, presented testimony in opposition to the appeal.
Testimony was presented, exhibits were received, time
allowed for the receipt of post hearing submittals, and the
Board then took the appeal under advisement; and the Board
having fully considered the testimony, exhibits and all
things and matters presented to it by all parties, finds
and concludes as follows:

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FINDINGS OF FACT
1. Due, proper and sufficient notice was given
of this matter, the hearing, and of the time and place of
the hearing. All parties were afforded opportunity to
present evidence, oral and documentary.
2. The property which is the subject of this
appeal is described as follows:
Personal property, various items of equipment:
including but not limited to lathes, milling
machines, power mills, band saw, and welders.
3. For the 1997 tax year, the DOR appraised the
subject property at a value of $533,745. (Exhibit F)
4. The taxpayer appealed to the Flathead County
Tax Appeal Board requesting a reduction in value to
$200,903.
5. The county board denied the appeal.
6. The taxpayer then appealed that decision to
this Board.
7. The DOR has made a revised assessment on the
subject property.
TAXPAYER'S CONTENTIONS
Mr. Neumann stated his business started as a hobby in
his garage, and for a period of time he acted as an equipment
broker. He testified that the bulk of the machinery was
acquired gradually over a period of several years. He stated

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that most of the equipment he purchased from dealers was used,
and none was purchased at auctions. He also testified that
some of the pieces were made by himself, making it difficult to
place an actual acquired cost on those particular pieces.
Mr. Neumann testified he had not furnished the DOR
with a completed business property reporting form. Instead he
provided a hand-written list containing the price of the
equipment. He stated that, until the hearing before the CTAB,
he was not aware of the reporting requirements. He also
testified he was advised by someone close to him to wait for
the DOR to send him an assessment.
Mr. Neumann argued the acquisition cost for the
personal property was less than the value placed on each item
by the DOR. He provided invoices and/or purchase orders for
the various pieces of equipment (Exhibits 2 through 15). He
also included an invoice for a bandsaw that was not included on
the DOR’s estimated assessment (Exhibit 13).
Mr. Neumann testified he had requested an independent
appraisal of the machinery from Morton Machinery Company that
was based solely on information he furnished to Morton. He
stated that, when he requested the assessment, all equipment
was represented to be in good to average condition for its age.
Morton Machinery Company supplied him with a fair market value
of the various pieces of equipment (Exhibit 16).

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At the conclusion of the hearing, Mr. Neumann agreed
to furnish the Board and the DOR each with a copy of the
depreciation schedule used in preparation of his income tax
returns.
DOR'S CONTENTIONS
The DOR made repeated attempts to obtain the cost
information from the taxpayer. The DOR mailed Mr. Neumann a
personal property reporting form along with instructions to
fill out the form and return it to the Flathead County DOR
office. Ms. Faulkner also testified that she sent the taxpayer
reminder letters in February and March, 1997. The taxpayer
failed to return the personal property reporting form, and the
DOR performed an estimated assessment for the subject property.
Ms. Faulkner testified the DOR was unsure as to many of the
particulars concerning the property such as age, purchase date,
or purchase amount. Ms. Faulkner stated she used 1995 as the
year acquired on the estimated assessment. The CNC machinery
was valued based on a ten-year life and the milling machinery
was valued based on a 15-year life.
Ms. Faulkner testified the taxpayer had not been
assessed a penalty due to an oversight on her part.
BOARD’S DISCUSSION
Mr. Neumann did not argue that the property was not
subject to taxation. His disagreement was merely with the

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market value as determined by the DOR. The invoices and
purchase orders presented by the taxpayer would indicate that
the value placed on the equipment by the DOR was more than
twice the actual cost paid by the taxpayer; however, in order
to accurately determine market value, Ms. Faulkner stated that
the DOR must have information on the acquisition costs of each
piece of machinery as well as the date of acquisition. Without
these two important components, it is impossible to determine
an accurate value for the subject property.
Mr. Neumann did furnish the necessary information
shortly after the conclusion of the hearing, providing the DOR
with the correct information to assess properly the subject
property for taxation for the tax year 1997. The DOR’s post
hearing submission utilized the numbers provided to them by the
taxpayer. The values set by the DOR from those numbers were
provided to this Board as $274,914 for the subject personal
property. A cooperative atmosphere insofar as completion of
the personal property reporting form would have been helpful in
arriving at the value initially.
This appeal is, therefore, granted in part and denied
in part and the decision of the Flathead County Tax Appeal
Board is hereby modified.
CONCLUSIONS OF LAW
1. 15-8-301, MCA. (1) The department may require
from a person a statement under oath setting forth specifically

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all the real and personal property owned by, in possession of,
or under the control of the person at midnight on January 1.
The statement must be in writing, showing separately:
(a) all property belonging to, claimed by, or in the
possession or under the control or management of the person;
(b) all property belonging to, claimed by, or in the
possession or under the control or management of any firm of
which the person is a member;
(c) all property belonging to, claimed by, or in the
possession or under control or management of any corporation of
which the person is president, secretary, cashier, or managing
agent;
(d) the county in which the property is situated or in
which the property is liable to taxation and, if liable to
taxation in the county in which the statement is made, also the
city, town, school district, road district, or other revenue
districts in which the property is situated;
2. 15-8-306, MCA. Upon discovery, any property
willfully concealed, removed, transferred, or misrepresented by
the owner or agent thereof to evade taxation must be assessed
at not exceeding 10 times its value, and the assessment so made
must not be reduced by the county tax appeal board.
ORDER
IT IS THEREFORE ORDERED by the State Tax Appeal Board
of the State of Montana that the subject personal property
shall be entered on the tax rolls of Flathead County by the
assessor of that county at the 1997 tax year value of $274,914
as determined by the Department of Revenue.
Dated this 16th of December, 1998.
BY ORDER OF THE
STATE TAX APPEAL BOARD
________________________________
PATRICK E. McKELVEY, Chairman
( S E A L )

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________________________________
GREGORY A. THORNQUIST, Member
LINDA L. VAUGHEY, Member
NOTICE: You are entitled to judicial review of this Order in
accordance with Section 15-2-303(2), MCA. Judicial review may
be obtained by filing a petition in district court within 60
days following the service of this Order.