Steven Brian and Theresa W. Leland v. Department of Revenue

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BEFORE THE MONTANA TAX APPEAL BOARD FILE 2

MAY 02 2023
Montana Tax Appeal Board
STEVEN BRIAN AND THERESA W._ | CASE Ne: PT-2022-34
LELAND,
FINDINGS OF FACT,
Appellants, | CONCLUSIONS OF LAW, ORDER,
AND OPPORTUNITY FOR
v. JUDICIAL REVIEW
STATE OF MONTANA,
DEPARTMENT OF REVENUE,
Respondent.
STATEMENT OF THE CASE

This is an appeal of a final decision by the Gallatin County Tax Appeal Board
(CTAB) denying Steven Brian and Theresa W. Leland, (Taxpayers) a reduction in
value on the subject property located at 1142 Barnard Ridge Road, Bozeman. The
Taxpayers appealed that outcome to Montana Tax Appeal Board (MTAB) on October

20, 2022. We affirm CTAB’s determination.

ISSUE TO BE DECIDED
Whether CTAB erred in affirming the Department of Revenue’s (DOR or
Department) appraised value of $89,260.00 for this property.

EXHIBIT LIST
The following evidence was submitted at the hearing:
Taxpayer Exhibits:
1. Letter from Barnard Land and Livestock dated August 23, 2018;
2. Tarlow, Stonecipher, Weamer & Kelly letter;
3. Map and Chart of comparables;

BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

4. Email from DOR regarding grazing land per acre value dated June 1,
2021; .

5. Pastures average chart;

6. Classification & Appraisal Notice;

7. CTAB Appeal with page #2;

8. Property Record Card Lot #29;

9. License Agreement with Barnard Land & Livestock LP;

10. Letter from Barnard Land and Livestock dated 3-2-2020;

11. Property Lease Agreement with Barnard Land and Livestock LP;

12. MT Cadastral Aerial photo;

13. MT Cadastral Topography map.

DOR Exhibits:
A. MTAB Case# PT-2020-5, FOF, COL Opinion;
18 Jud. District Court Cause# DV-20-1225CX Order;
AB-26 and Response;
. Property Record Card;
Photos of subject;

amd oO w

Satellite photos, sales info., market values using alternative

methodology.

PROCEDURAL HISTORY

For the 2021/2022 appraisal cycle, the DOR valued the subject property at
$89,2608,260, with the land valued at $88,200 and the improvements valued at
$1,060. Ex. D. The Taxpayers filed an AB-26, Request for Informal Classification and
Appraisal Review, with the DOR on April 4, 2022, requesting a land value of $7,202
and an improvement value of $1,060. Ex. C. The DOR sent a Form AB-26
Determination Letter to the Taxpayers dated August 18, 2022, denying the Taxpayer’s
request. Jd. The Taxpayers appealed the DOR’s valuation to the CTAB on August 25,
2022, originally requesting a land value of $7,173 and an improvement value of
$1,060. MTAB Dkt. 4. The CTAB hearing was held on October 12, 2022, and the

CTAB’s decision denying the Taxpayers’ application for reduction was sent to the

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

parties on October 12, 2022. The Taxpayers appealed to MTAB on October 20, 2022,
per Mont. Code Ann § 15-2-301, requesting a total value of $7,202. MTAB Dit. 1. The
MTAB hearing was conducted in Helena on January 19, 2023, at which the following
were present: |

a. Steven Brian Leland, Taxpayer; and

b. Dave Burleigh, DOR Counsel; and Laurie Blue, Appraiser; Pam Moor,
Area Manager.

The record includes all materials submitted to CTAB, a recording of the CTAB
hearing, all materials submitted to MTAB with the appeal, and additional exhibits
submitted by the parties prior to and at 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 Taxpayers acquired the subject property in 1985 when they assumed the
previous owner's $8,000 loan. MTAB Ar'g Tr. 11:14-12:2, 14:12-17, 42:22-
43:4, A Bozeman attorney helped the Taxpayers transfer the property and conduct
title work. MTAB Hr'g Tr. 11:14-12:2. The Taxpayers acquired title insurance
when the loan was assumed. Once the access issue was discovered, the taxpayer
was paid $8,000 in acknowledgment that the property had no legal access at the

time of purchase. Id.

3. Taxpayers’ land shares a boundary with seven parcels, six of which have the same
owner. The only way for Taxpayers to access their land by vehicle would be

through an easement over that owner’s property should that owner choose to grant

aneasement. Ex. F.

4. The Taxpayer presented a letter from his neighbor dated August 23, 2018, stating
the Taxpayers did not have legal access to his property. Ex. 1. The prior owner of
the subject property accessed the property through an agreement, but it was never

a
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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND vy. STATE OF MONTANA, DEPARTMENT OF
REVENUE

memorialized in writing. MTAB Hr’g Tr. 9:16-10:4. Further, the platted road near
the subject property which would have provided access to the subject property was
never legally dedicated to the public. Jd. The Taxpayer testified that the properties
had been subdivided to sell but the development of the project went bankrupt when
the sewer and water lines from the City of Bozeman to the subdivision were not
installed due to the discovery of a potential superfund site intersecting the

proposed route of the utilities. /d.

. During the 2019/2020 tax appeal on this property, this Board set the Taxpayer's
land value using the average sales price of land adjoining the subject property. Ex.
A. In the instant appeal the Taxpayer objected to the Board's use of those sales as a
basis for value, claiming the sales had occurred before the buyers discovered the
lack of access, thus stripping away any residential value. MTAB Hr’g Tr. 12:4-14,
14:19-15:23. The Taxpayers appealed the valuation method used by MTAB to
value the property for the 2019/2020 tax cycle to the Montana Eighteenth J udicial
District Court. Ex. B. The District Court denied the Taxpayers petition for judicial
review and upheld the September 11, 2020, MTAB decision. Ex. B. —

In testimony before the Board during the hearing for the current appraisal cycle,
the Taxpayer claimed the property has no residential value because without access
no construction can take place including building a house, installing a septic
system, or drilling a well. Id. A septic permit would only be available with
vehicular access to service the system, and insurance is not available because
emergency services vehicles cannot reach the property. Jd. Because all the
residential value is stripped away without these amenities, the Taxpayer believes
the subject property should be valued equivalently to the neighboring properties

classified as agricultural and used as grazing land. Id.

The Taxpayer testified the only access available to the subject property is by foot
via an access license granted by his neighbor. Ex. 9, MTAB Hr’g Tr. 13:18-14:6,

20:17-21:23. The foot access license is revocable at any time for any reason with a

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v, STATE OF MONTANA, DEPARTMENT OF
REVENUE .

30-day notice. Jd. The Taxpayers accessed their property using the easement
originally thought to be attached to the property via Barnard Ridge Road only
three or four times with a vehicle, but now accesses his structures by use of the
footpath. Jd. Vehicular access is limited to Barnard Ridge Road, which is a field
road presently accessible seasonally and only with permission from the neighbor
on a case-by-case basis. Jd. Taxpayers’ neighbor has agreed to allow transportation
of construction materials over his property and into the subject property for the
Taxpayers to build a dry cabin. MTAB Hr’g Tr. 25:23-26:4. The Taxpayer testified
he had not asked his neighbor for a permanent easement because he knew the

answer would be no. MTAB Hr’g Tr. 23:6-24:2.

The Taxpayers lease the subject land to his neighbor for cattle grazing at a rate of

$1.00 per year. Ex. 11.

The Taxpayers did offer an alternative calculation to estimate the market value of
their land. Based on the assumption the only use of the land to a buyer would be
for grazing livestock, Mr. Leland calculated their grazing land value using the
information he received from the DOR and United States Department of
Agriculture (USDA) data averaging statewide pastureland value in Montana. Ex. 4,
5, 8, MTAB Hr’g Tr. 16:1-18:5. Using this information, the Taxpayers estimated
the subject property value is equal to 88% of the average production for

Montana. Jd. The Taxpayers then multiplied the 88% production by the statewide
average value per acre in Montana estimated by the USDA ($700 per acre) to geta -
total of $619.50 per acre. Jd. The $619.50 per acre was multiplied by the subject
property size (11.625 acres) to reach a land value of $7,201.69, the requested. value
for the subject property. Jd. The Taxpayer also testified the value of the
improvements should be $1 because if all access is revoked via the 30-day notice
provision in the remaining foot access license agreement, the improvements would
be rendered valueless. MTAB Hr'g Tr. 18:21 -I 9:9. The area manager for the
Department testified that the Taxpayers’ method for valuing the property does not |

_ comply with any International Association of Assessing Officers (IAAO) standard

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

or Montana law. MTAB Hr'g Tr. 66:4-6. Further, the USDA agricultural table used
by the Taxpayers to estimate the value of the property is an average per-acre price
for properties statewide in Montana and is too broad to be a reliable way to value
individual properties. MTAB Hr'g Tr. 79: 10-80:14. Using a state average does not
consider the circumstances of the sale or account for price differences between

counties. Jd.

The Taxpayer testified he had built a yurt on the property 15 years ago, but the
wind destroyed the yurt 13 years ago. MTAB Hr'g Tr. 32:22-33:25. After the yurt's
destruction, the Taxpayers started to build more permanent cabins that are still
located on the property today. Jd. The Department believed the only structure on
the property was a yurt when it valued the improvements at $1,060 for the
2021/2022 tax cycle. MTAB Hr'g Tr. 49:5-60:4. The Department did an onsite
inspection triggered by the appeal and discovered the two wooden structures and

the new construction of a foundation and walls for a cabin on the top of the

hill. /d@., Ex. £.

The Department testified it valued the subject property for the 2021/2022 appraisal
cycle using historical sales from the area and the September 11, 2022, MTAB
decision from the previous tax cycle. Ex. A, MTAB Hr’g Tr. 46: 14-48:14, 56:19-
57:20. The Department time trended all sales used to value the subject property to
the statewide lien date of January 1, 2020. Id., MTAB Hr’g Tr. 60:1-3. The
Department appraiser testified the 2021/2022 value of $82,200 placed on the
subject property was fair. MTAB Hr’g Tr. 49: 18-50: 2.

The Area Manager for the Department testified the sales relied upon by MTAB in
the previous tax cycle were the most comparable sales for valuing the subject

property. MTAB Hr’g Tr. 65:19-66:3. The sales were similar in topography and

-were in the same subdivision that was never completed, with similar potential

access issues. Jd.

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND vy. STATE OF MONTANA, DEPARTMENT OF
REVENUE

Under normal circumstances the Department would account for limited access by
applying a negative influence on a property MTAB Hr’g Tr. 66:11-17. The
Department examines the characteristics of all the land sales, up to six years old, in
the area, and looks for reasons a property might sell differently to justify an
influence. /d. To determine the influence factor for land with limited access, the
DOR would seek other sales with limited access for comparison. MTAB Hr'g Tr.
66:11-67:19. If the Department finds a property is selling differently for a certain
reason, such as lack of access as in this case, the Department then extrapolates an
influence percentage reduction for the market area to reflect that negative
influence in the market. Jd. Each model has a different reason for poor access and
the percentages can change depending on the access. Jd. The influence factor can
be applied to other properties which may have similar negative influences. Jd. The
Area Manager testified she was unaware of any property sales in the market area
model without any access. Jd. When developing the poor access influence, the

Department testified all sales were from Gallatin County. MTAB Hr’g Tr. 69:9-
17.

For the 2021/2022 valuation cycle, the Department followed the method for
valuing the property determined by MTAB during the previous appeal and rather
than apply the influence factor to the property's value. MTAB Hr'g Tr. 71:8-

73:3. If the Department had applied the typical negative influence factor generated
by the mass appraisal land model, the subject property value would be valued at

$280,000. MTAB Ar'g Tr. 56:19-25, 82:24-25, 83: 1-2.

JURISDICTION AND STANDARD OF REVIEW
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 Taxpayers filed a timely appeal of the DOR’s decision to the

MTAB. Therefore, this Board maintains jurisdiction to hear and decide this matter.

Mont. Code Ann. § 15-2-301.

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' Code Ann. $ 15-8-111.

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND y. STATE OF MONTANA, DEPARTMENT OF
REVENUE

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. |

The Board’s order is final and binding upon all parties unless changed by judicial
review. Mont. Code Ann. § 15-2-301(6).

CONCLUSIONS OF LAW

To whatever extent the following conclusions of Jaw may be construed as findings

of fact, they are incorporated accordingly.

“All taxable property must be appraised at 100% of its market value....” Mont.

“[I]Jn 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.” Mont. Code Ann. § 15-2-301(5).

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 unlawful.” Burlington N., 169 Mont. at 214, 545 P.2d at
1090. However, DOR cannot rely entirely on the presumption in its favor 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).

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND vy. STATE OF MONTANA, DEPARTMENT OF
REVENUE

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.

“« 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, { 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)).

When construing a statute, it is the Board’s role to “determine what in terms or

- substance is contained in it, and not to insert what has been omitted or to omit

what has been inserted.” State v. Minett, 2014 MT 225, § 12, 376 Mont. 260, 263,
332 P.3d 235, 238; Mont. Code Ann. § 1-2-101. .

In the construction of a statute, the intention of the legislature is to be pursued if
possible. When a general and particular provision are inconsistent, the latter is
paramount to the former, so a particular intent will control a general one that is

inconsistent with it.” Mont. Code Ann. § 1-2-102.

“When faced with a problem of statutory construction great deference must be
shown to the interpretation given the statute by the officers or agency charged with
its administration.” Dep’t of Revenue v. Puget Sound Power & Light Co., 179
Mont. 255, 262, 587 P.2d 1282, 1286 (1978) (citing Udall v. Tallman, 380 U.S. 1,

16 (1965)).

“TT]ax statutes are to be strictly construed against the taxing authority and in favor
of the taxpayer.” Western Energy Co. v. Dep't of Revenue, 1999 MT 289, { 10,
297 Mont. 55, 58, 990 P.2d 767, 769. .

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
| REVENUE

“Administrative agencies enjoy only those powers specifically conferred upon
them by the legislature. Administrative rules must be strictly confined within the
applicable legislative guidelines. Indeed, it is axiomatic in Montana law that a
statute cannot be changed by administrative regulation. We look to the statutes to
determine whether there is a legislative grant of authority.” Bick v. State Dep’t of
Justice, Div. of Motor Vehicles, 224 Mont. 455, 457, 730 P.2d 418, 420 (1986).

“[ A ]dministrative regulations interpreting the statute made by agencies charged
with the execution of the statute are entitled to respectful consideration.” Puget

Sound Power & Light Co., 179 Mont. 255, 266, 587 P.2d 1282, 1288 (1978). -

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).

The term “improvements” includes all buildings, structures, fences, and

improvements situated upon, erected upon, or affixed to land. Mont. Code Ann. §

15-1-101())().

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).

Contiguous parcels of land totaling 160 acres or more under one ownership are
eligible for valuation, assessment, and taxation as agricultural land each year that

none of the parcels is devoted to residential, commercial, or industrial use. Mont.

Code Ann. § 15-7-202.

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
: REVENUE

DISCUSSION |
The Taxpayer brought three new arguments to the Board during this appraisal
cycle to show his property value was incorrect, all variations of the belief that the
value assigned by the MTAB did not fully consider his lack of access. The facts of
the case were substantially the same as in the previous appeal. The essence of this
appeal was that due to the lack of access, the land had virtually no value to a buyer
in the market. The value requested by the Taxpayers was their logical deduction

of the value of the land as grazing land leased to their neighbor.

The Taxpayer’s first new argument was that the comparable sales around him
established by the 2020 MTAB decision as the best indicators of value were not
valid at the time of sale as neither the buyer nor the sellers realized no easement to
access the land being purchased was in place. He reasoned that this claim, if true,
would invalidate the sales as comparable properties, since the buyers and sellers
would not have been fully informed at the time of purchase. Taxpayers argued had
the buyer been fully informed, he would have paid much less, and in turn
Taxpayers’ land should be valued for much less than the average sale price of the
adjoining properties. Mr. Leland speculated that his theory was correct but failed
to submit any evidence or testimony from buyers, sellers, or experts to support this

theory. We decline to adopt the Taxpayer’s argument as it relies primarily on

speculation with no evidence or witness testimony to support it.

The second argument was that assuming his premise that the only use of his land
was for grazing due to the limited access, he offered a method whereby he
believed the MTAB could set'a value equivalent to the value of adjoining
properties classified as agricultural. He was clear that he was not asking for his
land to be reclassified as agricultural, but he wanted to argue for an agricultural
method of valuing his land. Mr. Leland failed to acknowledge that agricultural
land in Montana has a value dictated by statute based on productivity rather than
dictated by market sales. We find his land is properly classified and valued as

market value land using comparable sales. Montana law does not allow the Board

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BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

to assign agricultural values to land which does not meet agricultural standards of

classification.

The Taxpayers offered alternative arguments of value. However, they were .
without legal basis or commonly accepted appraisal standards. These arguments
and efforts were thoughtful and reasonably presented but did not give this Board

the substance to overcome the presumption that the value assigned by DOR is

correct.

Finally, the Taxpayers argue that their land value could not be correct if the
Department can find no comparable sales which lacked any access. While it may
be true that there were no comparable sales which lacked access, neither party
submitted evidence which could have given this Board an alternative basis for
evaluating the market influence of nearly total lack of access and how that may
affect a sale in the market. A market value for the land still must be assigned for
this case to be resolved. In the previous case MTAB used sales which were very.
similar to the subject to estimate market value. We find those sales are the best
available information provided, and we maintain it is the best indicator of value

with the evidence and testimony presented.

12

BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

ORDER
The Taxpayer’s appeal is denied. The Department shall maintain the value of the

subject property at $88,200 for the land and the improvements valued at $1,060 for a
total value of $89,260 for the 2021/2022 appraisal cycle.

Dated this 2nd day of May 2023.

pd Me

David L. McAlpin, Chairman

9 _)

Amie Zendron, Member

ae -
ft,

Travis Brown, 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).

BEFORE THE MONTANA TAX APPEAL BOARD
STEVEN BRIAN AND THERESA W. LELAND v. STATE OF MONTANA, DEPARTMENT OF
REVENUE

Certificate of Service

I certify that I caused a true and correct copy of the foregoing Findings of Facts and
‘Conclusions of Law to be sent by email and/or United States Mail via Print & Mail

Services Bureau of the State of Montana on May 2, 2023, to:

Theresa W. and Steven Brian Leland
528 N. Bozeman Ave.
Bozeman, MT 59715

Dave Burleigh

Montana Department of Revenue
Legal Services Office

P. O. Box 7701

Helena, MT 59604-7701

Kory Hofland
Department of Revenue
Property Assessment Divis
PO Box 8018.
Helena, MT 59604-8018

Gallatin County Tax Appeal Board
Pamela Lammey, Secretary

311 W. Main, Rm 306

Bozeman, MT 59715

Borrtechra—

vy Lh Cochran, Legal Secretary

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