Montana farmers who sued the Department of Revenue over the agency’s handling of the last reappraisal say they want nothing to do with the state’s latest tax plan before the Legislature.
The Department of Revenue is backing a proposal to reappraise home, commercial and farm property annually instead of every six years as it does now. Currently, reappraisals are stepped in over six years, increasing every year until the next reappraisal cycle.
The plan, spelled out in Senate Bill 4, calls for a two-year reappraisal cycle in 2015, followed by annual appraisals thereafter. Proponents, like bill sponsor Sen. Jim Peterson, say annual appraisals would help homeowners in hot real estate markets who saw their most recent six-year reappraisals set during the final year of the housing boom. Homes in those markets lost value during the recession, but taxes remained high during the recession's housing bust.
Farmers say that boom-and-bust cycle doesn’t affect their land, which is appraised by production, not market value.
“The reason our members favor a six-year appraisal cycle is they need fixed costs to plan ahead, and one of those fixed costs is their property tax,” said Nicole Rolf of the Montana Farm Bureau Federation.
That is to say Farm Bureau members would favor a six-year appraisal cycle if their taxes were stepped in. The Montana Farm Bureau, the Montana Taxpayers Association and Lucas Ranch of Meagher County are suing the Department of Revenue for skipping the stepped increases and taxing farms and ranches the full amount from the start. The result has been a $25 million overtaxing of Montana farm and ranch property, according to an estimate crafted for the 2011 Legislature.
The Montana Grain Growers Association also opposes the move to annual appraisals.
Revenue officials say farms belong in the new one-year reappraisals with everyone else for two reasons.
"For one, uniformity with every other taxpayer in the state. Two, it's going to be uniform and predictable anyway," said C.A. Daw, the Department of Revenue's chief administrative legal officer.
Farmland appraisals are based on a seven-year Olympic average for production value. If the reappraisal occurs every six years or annually, the seven year Olympic average is still used, Daw said. Other factors, such as soil quality, shouldn't change.
The Montana Farmers Union favors the change to a one-year appraisal, said Chris Christiaens, MFU’s legislative and project specialist.
“We support it. Our convention voted to support it for the simple fact that there were problems with the last six-year appraisal. Values were high before the recession, higher than values were after,” Christiaens said.
Montana Farmers Union members were also burned by the last reappraisal, and many farmers weren’t aware of what had happened until it was too late to protest, Christiaens said. Still, the group decided to back the annual reappraisal plan to see how it works.
Lobbyists for both commercial and farm taxpayers testified against Senate Bill 4 at a Senate Tax Committee hearing Jan. 24. The committee has taken no action against the bill since the hearing, according to state records.
No one at the hearing spoke against appraising Montana homes annually. The chairwoman of the state Tax Appeals Board, Karen Powell, cautioned lawmakers that the bill didn't allow taxpayers to appeal the transitional two-year reappraisal after the first year. She said homeowners often don’t realize the full consequence of their reappraisal until they receive their November tax bill. For that reason, appeals in the second year are common.