Department of Revenue v. Steven Brian Leland,

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BEFORE THE MONTANA TAX APPEAL BOARD F ILE UD

SEP 11 2020
Montana Tax Appeal Board

STATE OF MONTANA,
DEPARTMENT OF REVENUE, CASE No: PT-2020-5

Appellant, FINDINGS OF FACT,

CONCLUSIONS OF LAW, ORDER,
v. AND OPPORTUNITY FOR
STEVEN BRIAN LELAND, JUDICIAL REVIEW
Respondent.
STATEMENT OF THE CASE

The Montana Department of Revenue has appealed a decision made by the
Gallatin County Tax Appeal Board concerning the subject property of Steven Brian
Leland’s value. Taxpayer appealed to the Gallatin County Tax Appeal Board, who heard
his case on December 18, 2019, and found the Taxpayer overcame the DOR presumption

of correctness. The GCTAB granted the Taxpayer’s requested value.
ISSUE TO BE DECIDED

The value of the subject 11.625 acres of land will be decided. The Montana
Department of Revenue has appealed to re-establish their assessed value of the land at
$270,691. The Taxpayer’s requested land value on appeal is $1,122, and the same value
was found by the County Tax Appeal Board to be market value.

PROPERTY DESCRIPTION

The subject property is located at 1142 Barnard Ridge Road, Story Hills
Subdivision, Lot 30, S05, T02 S, R06 E, and includes 11.625 acres. The property
geocode is 06-0799-05-2-05-10-0000. The property is in neighborhood 206.003.N

Gallatin County near Bozeman, Montana.

EXHIBIT LIST
The Board admitted the following exhibits submitted by the. Taxpayer:

Ex. 1: Montana Cadastral Map showing Lots 27, 29, 30, and 31 with access roads;

Ex. 2: Montana Cadastral Map showing the topography and elevation of the
subject property area; |

Ex. 3: Montana Cadastral Summary page for Barnard Land & Livestock L.P.
property, Lot 31 in the same Dept. neighborhood of 206.003.N;

Ex. 4: Montana Cadastral Summary page for Barnard Land & Livestock L.P.
property, Lot 29;

Ex. 5: Montana Cadastral Summary page for Barnard Land & Livestock L.P.
property, Lot 30;

Ex. 6: Montana Cadastral Summary page for Barnard Land & Livestock L.P.
noting All Roads location with legal description;

Ex. 7: Montana Cadastral Summary page showing information for Lot 27 in the
same Department’s neighborhood of 206.003.N;

Ex. 8: Letter from attorney Amy C. McNulty with Tarlow, Stonecipher, Weamer,
& Kelly PLLC related to access issues with the Leland property. Four issues were
covered: 1) No express easement to Lot 30; 2) No dedication of road leading to Lot 30; 3)
Current license agreement for access across Lot 21 is revocable at any time; 4) Proposed

temporary construction access license agreement can be revoked at any time;

Ex. 9: Three-page letter from Matthew Engel, the Project Manager with Barnard
Land & Livestock, explaining the easement history allowing the previous owners, the
Story’s, access, but does not give access to future owners of the subject property or

adjacent lots;
Ex. 10: Leland’s copy of the License Agreement dated June 15, 2009, between

Taxpayer and Barnard Land & Livestock, LP, granting temporary, revocable access by
footpath;

Ex. 11: Taxpayer’s Market Value Calculations page;

Ex. 12: One-page copy of Montana Code Annotated 2019, Title 15. Taxation 15-

8-111 titled Appraisal-Market Value Standard- Exceptions; and

Ex. 13: Fidelity National Title Insurance Company April 29, 2019 letter to
Lelands, written about the access issue with the subject property and enclosed payment of
full policy limit to the Leland’s noted in Condition #5 of their business policy. This
resolved the claim by Lelands against the title insurance policy that indicated access to

the property when they purchased it in the 1980’s.

The Board admitted the following exhibits submitted by the DOR:

Ex. A: Barnard Land & Livestock purchases of neighborhood parcels, time
trended to the January 1, 2018 lien date, with location map; and

Ex. B: Leland Computer Assisted Land Pricing model (CALP) pages containing

two large charts and multiple pages specific to the chart.
FINDINGS OF FACT

1. To whatever extent the foregoing findings of fact may be construed as conclusions

of law, they are incorporated accordingly.

N

Taxpayer purchased the subject parcel in the 1980s with title insurance providing

access to the land. Gallatin CTAB minutes from 12.18.2019 hearing.

Taxpayer submitted permits to construct a small residential dwelling in 2009. At
that time, his neighboring landowner, Tim Barnard, informed him that no right of way
access to the subject property had been recorded, thereby making the subject land

effectively “landlocked.” Taxpayer Ex 9.

Taxpayer hired an attorney to pursue the access matter with Fidelity National Title
Insurance Company, the title company from the original sale. Fidelity exercised their
contractual option to pay the taxpayer the limit of the policy, thus admitting they had
erred in guaranteeing taxpayer that access to the property was recorded. Taxpayer Ex

8,13.

Taxpayer received temporary, revocable access to his property from Barnard to

walk to his land. Taxpayer Ex 9,10.

Taxpayer presently has no legal right to have or confer access to the subject land
beyond the access by foot with revocable rights by Barnard without reason and with a

30-day notice. Taxpayer Ex 10.

Taxpayer testified he had not asked his neighbor, Mr. Barnard, to grant him access

to his property by the existing roadway. MTAB Hrg. 25:6.

Access to the land is limited to the Taxpayer presently, and the marketability of

the subject land is called into question without any legal access to sell with the land.

Taxpayer Ex. 8, 9.

JURISDICTION AND STANDARD OF REVIEW

9. The Department of Revenue filed a timely appeal of the GCTAB decision to the
MTAB. Therefore, this Board maintains jurisdiction to hear and decide this matter.

Mont. Code Ann. §15-2-301(1)(b).

10. _ This Board hears CTAB appeals de novo. CHS Inc. v DOR, 2013 MT 100. “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. As such, this matter will be reviewed without merit to the GCTAB hearing and

subsequent decision. Id.
CONCLUSIONS OF LAW

11. To whatever extent the following conclusions of law may be construed as findings

of fact, they are incorporated accordingly.

12. “All taxable property must be assessed at 100 percent of its market value except

as otherwise provided.” Mont. Code Ann. §15-8-111(1).

13. “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 to
sell and both having reasonable knowledge of relevant facts.” Mont. Code Ann. §15-
8-111(2)(a).

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

15. “Sales Comparison Approach — One of the three traditional approaches to value
by which an indication of the value of a property is arrived at by compiling data on
recently sold properties which are comparable to the subject property and adjusting
their selling prices to account for variations in time, location, and property
characteristics between the comparable sales and the subject property.” Montana
Department of Revenue Appraisal Guide, Property Assessment Division, Valuation

Date January 1, 2018.

16. “Asa general rule, ... the appraisal of the DOR is presumed to be correct, and the
taxpayer must overcome this presumption. The Department of Revenue should, on the
other hand, bear a burden of providing documented evidence to support its assessed
values.” Carey v. DOR, 2018 Mont. Tax App. Bd. PT-2018-9; citing Workman v. The
Department of Revenue of the State of Montana, 1997 WL 37203; citing Western
Airlines, Inc. v. Catherine J. Michunovich, et al, 149 Mont. 347, 428 P.2d 3 1967.

17. “If the owner of any land and improvements is dissatisfied with the appraisal as it
reflects the market value of the property as determined by the department... the owner
may request an assessment review by submitting an objection on written or electronic

forms provided by the department for that purpose.” Mont. Code Ann. §15-7-
102(3)(a).

18. This Board’s jurisdiction is limited to hearing and adjudicating matters in the
current tax cycle. Mont. Code Ann. § 15-2-306. Consideration of past tax cycle

refunds is under the purview of the Board of County Commissioners. Mont. Code

Ann. § 15-16-603.

19.

20.

21.

22.

The essence of the Departments’ case focuses on their effort to account for lack of
access to the property by assigning an influence factor. That influence factor reduced
the property value by 21%, which they argue was the most defensible method to
account for the Taxpayer’s lack of access to the subject property. Dept. Ex. B.

Mont. Code Ann. §15-2-306. shows the MTAB only maintains the statutory
authority to accept, deny, or adjust property valuations, and order refunds for taxes

paid under protest for the current property tax cycle. /d.
CONCLUSION

First, we decline to uphold the DOR’s value of $270,691, which hinged on an
influence reducing value by 21% for lack of access. We find that influence to be
unsupported by the evidence and testimony in this case. The DOR expert witness
testified influence F was applied infrequently around Gallatin County. Evidence
presented indicates that when influence factor F is used, the typical situation is for
land lacking a road or lacking a passable road. DOR’s own caption for the F
influence factor is “unimproved location,” words that do not adequately describe the
total lack of access to this property. We don’t find temporary foot access to be

marketable to another buyer.

No testimony was offered attesting to any formal definition of the F influence.
Without a definition or some other foundation supporting its application here, we
decline to accept that influence as accurate where it is uncontested that there is no
transferable legal access whatsoever. The -21% influence DOR applied seems to be

used on land that has no road or a bad road to it, not land that has no legal access.

23. Legal access is a precursor to marketability of land. Without that influence, the
lack of access to this land is disregarded, and the DOR failed to carry their burden of

the presumption of correctness.

24. Second, we decline the Taxpayer's request to reclassify the subject as non-
qualified Ag land, which by the Taxpayers math, would value the 11.625 acres at
$1,122. That value seems artificially below market value, considering he paid over
$8,000 for the land four decades ago, and other exhibits show sales of adjoining land

considerably higher value than $1,122.

25. Further, the Board finds it surprising that the taxpayer testified he has not asked

Barnard for access.

26. This Board is now left with the task of finding market value for this land. We have
evidence in the record of four examples of what Barnard has been willing to pay on
recent sales. Based on an average of those sales, we find a more reasonable indication

of the market value of this property is $74.682.

27. It was apparent from the evidence and testimony in this case that there is one
person who could utilize this land at its highest and best use because he is the only
person who controls access to the subject, Mr. Barnard. He has acquired all the land
surrounding the subject in a series of recent transactions and therefore is the most
likely future buyer. Based on that logical assumption, we look to what that buyer

would be likely to pay the Taxpayer as the best indicator of the market value of this

property.

28. The record includes several concrete examples of validated purchases of land
around the subject property, all by Barnard. This information gives the Board
evidence of what the land is worth. We chose to consider the four sales closest to the

subject, which was, in three of those cases, adjoining the subject land. Those sales

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were also of similar land size and topography to the subject. The sales data in
evidence was also time trended to the lien date, giving this Board confidence of those

trended sale prices as the best indicators of value.

29. Using the average of the four Barnard purchase prices surrounding the subject,
time trended to the lien date, yields an average sale price per acre of $6,424. That is a
defensible value approximating what Barnard would be likely to pay for the subject

land. Applying that price to the subject 11.625 acres results in a land value of
$74,679.

ORDER

The DOR shall value the subject property, consisting of 11.625 acres, at
$74,679.00 for Tax years 2019 and 2020.

Ordered September 11, 2020.

Dift MeL —

David L. McAlpin, Chairman
MONTANA TAX APPEAL s0al

Steve Doherty, Board Member
MONTANA T, PEAL BOARD

Eric Sters, Board Member
MONTANA TAX APPEAL BOARD

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. MCA §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, Order, and Opportunity for Judicial Review to be sent by United
States Mail via Print and Mail Services Bureau of the State of Montana on September 11,

2020 to:

Dave Burleigh

Montana Department of Revenue
P.O. Box 7701

Helena, Montana 59604-7701

Steven Brian Leland
528 N. Bozeman
Bozeman, Montana 59715

Gallatin County Tax Appeal Board
c/o Pamela Hamlin

311 West Main Room 306
Bozeman, MT 59715

Kory Hofland, Property Assessment Division
Montana Department of Revenue

P.O. Box 7701

Helena, MT 59604-7701

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hon Ledna

Lyn Cochran, Legal Secretary
MONTANA TAX APPEAL BOARD