David and Paula Ostby v. Department of Revenue

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BEFORE THE MONTANA TAX APPEAL BOARD

NOV 14 2018

Montana Tax Appeal Board
DAVID & PAULA OSTBY, CASE No: PT-2018-42
Appellants,
FINDINGS OF FACT,
v. CONCLUSIONS OF LAW AND
STATE OF MONTANA, OPPORTUNITY FOR JUDICIAL
DEPARTMENT OF REVENUE, REVIEW
Respondent.

Before the Board is the appeal of David and Paula Ostby from the Gallatin
County Tax Appeal Board decision denying their appeal of the Montana
Department of Revenue’s valuation of the Ostby’s property in that county.
The subject land in this appeal is described as follows: Headlands, $32,
TO01, S, RO6 E, ACRES 0.597, PLAT J-346, LOT 9, geocode 06-0905-32-3-
13-0000; with a common address of 2232 Bucks Run Ct., Bozeman,
Montana. The land comprises 0.597 acres. The following improvements
are on the land: A three bedroom, four full-bath, one half-bath home with
a total gross living area of 4,324 square feet. MDOR Ex. B. The one-story
home with attic was built in 2010. The additions to the home are a 1,426

square foot attached garage, three decks, and two open porches.
ISSUE

The issue before the Board is whether the Department of Revenue (DOR)
correctly determined the value of the land, and improvements for property

tax purposes.

1.

FINDINGS OF FACT

The record includes all materials submitted to the Gallatin
County Tax Appeal Board (GCTAB) and materials submitted to
Montana Tax Appeal Board (MTAB). The matter was considered on
the record without a hearing. All parties were afforded the

opportunity to present additional evidence.

The taxpayers submitted the following exhibits which were

considered by this Board:
a. Exhibit 1: Taxpayer’s Letter: emailed on July 30, 2018
b. Exhibit 2: Taxpayer’s Letter: emailed on September 18, 2018

The following DOR exhibits were submitted, and initially
considered by the GCTAB:

c. MDOR Ex. A: Property Comparison Worksheet

d. MDOR Ex. B: 2018 Property Record Card (PRC) for the Ostbys
e. MDOR Ex. C: Comparison PRC for 1321 Headlands Ct.

f. MDOR Ex Comparison PRC for 2261 Bucks Run Ct.
g. MDOR Ex Comparison PRC for 2247 Bucks Run Ct.

iw MDOR Ex

. D:
. E:

h. MDOR Ex. F: Comparison PRC for 2224 Bucks Run Ct.
.G: Comparison PRC for 2256 Bucks Run Ct.
_H:

j. MDOR Ex Comparison PRC for 2237 Snow Flake Ct.

k. MDOR Ex. I: Comparison PRC for 2218 Snow Flake Ct.

1. MDOR Ex. J: Comparison PRC for 2254 Snow Flake Ct.

m. MDOR Ex. K: 20160108 Realty Trans. Cert. and PRC Lot 15

n. MDOR Ex. L: Comparison of Properties Sold in Headlands

4.

o. MDOR Ex. M: Comparison of Land Sales in Headlands
Subdivision

p. MDOR Ex. N: Aerial View of the Ostbys’ Neighborhood

On July 3, 2017, the Department issued a Classification, and
Appraisal Notice to the Ostbys for the 2017 tax year. MDOR Ex.
AA.

The Department originally appraised the Ostbys’ property
using both the sales comparison and cost approach to value. Though
the sales comparison approach is preferred, it is not feasible where
there is insufficient market data to support the value. MDOR Ex.
II, { 3.1a.

The Department ultimately valued the property using the cost
approach, based on insufficient existing comparable sales in the
same market area as the Ostbys’ property, upon which to build a
defensible comparable sales valuation model. The Department
determined the Ostbys’ land had a value of $184,881, and the
buildings and improvements had a value of $606,810, for a total

assessed value of $791,691. MDOR Ex. B.

The Ostbys filed an AB-26 on July 3, 2017, requesting the
Department conduct an informal review of the value of their
property. MDOR Ex, BB. The appraiser assigned by the Department
to conduct the informal review requested access to the property to
check for any errors in measurement on the property record card, or
changes to the property that would necessitate a change in value.

The Ostbys refused this request. MDOR Ex. JJ, 7.

8.

10.

11.

12.

The Department issued its AB-26 determination letter on
November 8, 2018. MDOR Ex.CC. The review did not result in any

adjustments to the land value or improvement values. Id.

On December 7, 2017, the Ostbys appealed the Department’s
AB-26 results to the GCTAB. MDOR Ex.DD. They contended the
Department’s assessment of both their land and improvements
should be reduced. They requested a land value of $138,000, and a
buildings and an improvements value of $511,000, for a total value

of $649,000.

Although Mr. Ostby brought exhibits to the GCTAB hearing,
they were not allowed to be presented because they had not been
provided to the GCTAB and the MDOR in advance of the hearing as
required by that Board. GCTAB Hr’g Tr., at 40:38-41:05; MDOR
Ex.EE.

The Department compiled Exhibit A at Mr. Ostby’s request
during the AB-26 review; it includes information about the Ostbys’
property and eight of their neighbors’ properties. MDOR Ex. Ju,
417-8. Exhibits B through J are the 2018 property record cards for
those eight properties. These properties’ valuations were reviewed
by the MDOR and were found to be accurate. There were substantial
differences between these properties and the Ostbys’ property,

which accounted for the differences in value of the properties. Jd.

Exhibit K is a Realty Transfer Certificate (RTC) for an April
8, 2016 sale of an unimproved parcel, and the Property Record Card
(PRC) for this parcel, which is in the same subdivision and less than
a block away from the Ostbys’ property. This sale was after the

January 1, 2016 valuation date, and the parcel was not used by the

DOR to value the Ostby’s property during the reappraisal cycle; it
was only submitted by the department at the GCTAB hearing as an
additional measure of support for the accuracy of the assessed value

of the Ostbys’ land. GCTAB Hr’g Tr., at 26:18-27.

13. The Department responded to Mr. Ostby’s request at the
GCTAB Hearing, for a reduction in the property assessment due to
2010 hail damage and for a recharacterization of his deck material,
by noting that an adjustment for these items could not be made
because the appraiser was not allowed to visit the property to
confirm the basis for these requests. GCTAB Hr’g Tr., at 28:10-
28:40; MDOR Ex. JJ, 49-10.

14. After hearing all the evidence and testimony at the May 23,
2018 hearing, the GCTAB denied the Ostbys’ appeal. MDOR Ex.
FF.

15. On June 21, 2018, the Ostby’s appealed the GCTAB’s decision
to the Montana Tax Appeal Board (MTAB). The Ostbys requested
a land value of $138,000, and improvements value of $517,704, for
a total value of $655,704. MDOR Ex. GG. During a telephonic
scheduling conference on July 24, 2018, Mr. Ostby requested that
the MTAB proceed with considering this appeal based on the record,
and without conducting a hearing. The MTAB issued a Notice of
Briefing Schedule on July 25, 2018, allowing the parties to submit
additional information on or before September 6, 2018, with

responses due on or before September 18, 2018. MDOR Ex. HH.

16. The Department filed its Proposed Findings of Fact,

Conclusions of Law and Order on September 6, 2018, incorporating

the exhibits presented at the GCTAB hearing and other relevant

documents including the following:

a. MDOR Ex. AA: 20170703 Assessment Notice

b. MDOR EX. BB: 20170707 Ostby’s AB-26

c. MDOR Ex. CC: 20171108 AB-26 Determination & Packet

d. MDOR Ex. DD: 20171207 Ostby’s Appeal to GCTAB

e. MDOR Ex. EE: 20171212 GCTAB Acceptance Letter

f. MDOR Ex. FF: 20180823 GCTAB Decision

g. MDOR Ex. GG: 20180621 Ostby’s Appeal to MTAB

h. MDOR Ex. HH: 20180725 MTAB Notice of Briefing Schedule
ij MDOR Ex. II: Prop. Assessment Division Procedure 2-3-001.1
j. MDOR Ex. JJ: Affidavit of Dept. Appraiser Sheryl Velishek
k. MDOR Ex. KK: Land Model Sales Information

l. MDOR Ex. LL: Cost Calculations.

17. Although Mr. Ostby was not permitted to submit documents
at the GCTAB hearing, he did submit several letters and documents
for consideration by this Board. This Board made a transcript of the
hearing before the GCTAB which was part of this Board’s review.
See Exhibits 1 and 2.

18. Chief among Ostby’s complaints was that DOR Exhibit K was
used to value his property, and it described a property sold after the
lien date. The DOR submitted credible evidence that this sale was
not used to value the property but was used as supporting evidence.

He also requested corrections to DOR Exhibits Land M. It appeared

that geocodes were transposed. The DOR provided corrected
exhibits. DOR’s evidence resolved any doubt about the procedures

followed. See Exhibits 1 and 2.

19. Ostby complained that some of his neighbors’ properties were
appraised using a market sale approach, while his appraisal used a
cost approach. The DOR submitted substantial credible evidence
that the neighboring properties had insufficient similarities in the
market area to enable the construction of a defensible sales
comparison model. MDOR Ex. DD and GG. Ostby had no answer
to this point. DOR’s evidence adequately justified its process and

the resulting value. See also Exhibits 1 and 2.

20. Ostby contended the DOR had sufficient access to his property
during and after construction to obtain the information necessary to
correct what he characterized as errors made describing his
property. Exhibits 1 and 2. DOR responded that the house was
constructed in 2010, and it is required to revalue such property
every two years. The DOR also responded that it did not have access
to the property during this cycle. MDOR Ex. JJ. Ostby provided no
credible evidence to support his contentions, and on the relative
importance of the alleged errors. The DOR adequately supported

its position.

21. Ostby also complained about the deficiencies in his
neighborhood. According to him the following diminished the value
of his property and should have been considered by the DOR in its
valuation process: he has no basement, he is unable to put in a well
to irrigate (he is on city drinking water), he neighbors a commercial
nursery, his neighbor keeps chickens and geese, his property is 3-5

feet lower than his neighbors, renters live on either side of him, and

nearby lots and improvements are appraised at much lower values
than his property. MDOR Ex. DD and GG, GCTAB transcript
throughout. The taxpayer provided no substantial, credible evidence
of the dollar value impact of each of the deficiencies he identified

and claimed. Exhibits 1 and 2.

To whatever extent the following conclusions of law may be

construed as findings of fact they are incorporated accordingly.
CONCLUSIONS OF LAW

To whatever extent the foregoing findings of fact may be

considered as conclusions of law they are incorporated accordingly.

JURISDICTION AND STANDARD OF REVIEW

The Ostbys timely appealed the GCTAB’s decision to the
MTAB, which has jurisdiction over this case, and may determine the
appeal on the record. Section 15-2-301, MCA. The MTAB follows a
de novo standard of review when hearing matters appealed from a
county tax appeal board. CHS, Inc. v. Mont. State Dept. of Revenue,
2013 MT 100, §29, 369 Mont. 505,299 P.3d 818.

BURDEN OF PROOF

The taxpayer has the burden to prove error in the
Department’s assessment. Section 26-1-401, MCA; Farmers Union
Cent. Exch. v. Dept. of Revenue, 272 Mont. 471, 476, 901 P.2d
561,564 (1995), citing Western Airlines, Inc. v. Michunovich, 149
Mont. 847, 358, 428 P.2d, 3, 7 (1967).

26. However, the DOR cannot rely entirely on the presumption in
its favor and must present a modicum of evidence to support its

assessed values. Id.
ASSESSMENT

27. All taxable property must be appraised at 100% of its market
value. Section 15-8-111, MCA. Market value is the value at which
property would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or sell and both
having reasonable knowledge of relevant facts. Jd. For the taxable
years from January 1, 2017 through December 31, 2018, all property
classified as a single-family residence under §15-6-134, MCA, must
be appraised at its market value as of January 1, 2016. ARM
42,18.124(1)(d).

28. The Department is authorized to use one or more approaches
to value residential property, including the comparable sales or
market data approach and the cost approach. Albright v. State, 281
Mont. 196, 208-09, 933 P.2d 815, 823 (1997).

29. The Department met its burden of proof showing it correctly
valued the Ostbys’ land. The Department properly relied on a land
model using comparable land sales to determine the Ostbys’ land
value. MDOR Ex. JJ, § 12. The DOR’s reliance was in accord with
the law.

30. The Department met its burden of proof showing it correctly
valued the Ostbys’ improvements. The Department relied on the
cost approach to calculate the value of the improvements given the

lack of sufficient comparable sales in the neighborhood upon which

to base such a valuation. Ex. LL. The Taxpayer offered no credible,
substantive evidence to seriously contest this process or the

resulting values.

31. The taxpayers did not meet their burden of proof. They did
not demonstrate with substantial, credible evidence that the DOR

erred either in its process, calculations or eventual values for the

subject’s property.
ORDER
I. David and Paula Ostby’s appeal is denied.
Il. The DOR’s values of the taxpayer's property at 2232 Buck's Run

Ct., Bozeman, Montana, geocode 06-0905-32-3-04-13-0000, for tax
years 2017-2018 is affirmed:

a. The land has a value of $184,881;
b. The improvements have a value of $606,810; and,

c. The total value is $791,691.

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(Hors

sensei

Ordered on November

David L. McAlpin, Chairman
MONTANA TAX APPEAL BOARD

ay
Stephen A. Doherty, Member
MONTANA TAX APPEAL BOARD

a

Valerie A. Balukas, Member
MONTANA TAX APPEAL BOARD

Notice: You may be 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 a judicial review

to facilitate the timely transmission of the record to the reviewing court.

Mont. Code Ann. § 15-2-303(2).

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Certificate of Service

I certify that I caused a true and correct copy of the foregoing Findings of
Fact, Conclusions of Law & Opportunity tor Judicial Review to be sent by
United States Mail via Print and Mail Services Bureau of the State of
Montana on November LE, 2018 to:

David & Paula Ostby
2232 Bucks Run Ct.
Bozeman, MT 59715

Katherine Talley and Brendan Beatty, Legal Services
Montana Department of Revenue

P.O. Box 7701

Helena, MT 59604-7701

Gallatin County Tax Appeal Board
C/o Stephene Kamerman

311 West Main Room 306
Bozeman, MT 59715

Kory Hofland, Property Assessment Division
Department of Revenue

P.O. Box 8018

Helena, MT 59604-8018

lyin Cochran, Paralegal Assistant
ONTANA TAX APPEAL BOARD

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