Court upholds 6-year property reappraisals

HELENA — The Montana Supreme Court has upheld a state law that requires the reappraisal of residential properties once every six years, even when property values decline during the cycle.

The case centers on a Gallatin County subdivision owner’s argument that its property values declined by several million dollars between appraisals, causing it to pay more than its fair share of taxes.

State law requires the Revenue Department to revalue properties every six years to determine property taxes.

The justices, in a 5-0 decision, reversed a lower judge’s ruling that the state Revenue Department’s failure to conduct mid-cycle evaluations is a violation of constitutional equal-protection rights because it causes taxpayers to be treated differently.

Some taxpayers such as Covenant Investments Inc. end up paying a disproportionate share of taxes because their property is overvalued, while others pay less because theirs is undervalued, District Judge Holly Brown of Bozeman ruled.

The high court overturned Brown’s decision last week, Lee Newspapers of Montana reported in a story published Thursday. The reappraisal cycle does not violate equal-protection rights, and Brown’s ruling amounted to an improper exercise of legislative power, Justice Brian Morris wrote in the opinion.

Brown “effectively inserted a provision into the statute” to require the Revenue Department to conduct a mid-cycle reappraisal in violation of the state Constitution’s separation of powers provision, Morris said.

The Supreme Court has previously ruled the equal-protection clause does not require immediate adjustments of property values that are based on the latest market trends, and the state Constitution requires “only periodic attainment of equality in tax treatment,” Morris wrote.

“The fact that Covenant’s property may have declined in value during the six-year cycle, and that Covenant may pay taxes, for some portion of the remainder of the six-year cycle, on a valuation greater than 100 percent of its property value, does not violate Covenant’s right to equal protection,” Morris wrote.

Revenue Director Mike Kadas said the court’s decision upholds what the agency has been doing, but doesn’t prohibit it from moving to a shorter cycle — which is a decision for the Legislature.

The agency supported a bill to shorten the cycle to every two years, but it died in a legislative committee this year.

About a half-dozen other lawsuits have been filed against the department raising legal arguments similar to Covenant’s, said C.A. Daw, the Revenue Department’s chief legal counsel.

The agency will seek dismissal of those cases if their attorneys don’t drop them in light of this decision, Daw said.