Department of Revenue v. Clinical Associates, Ltd.

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BEFORE THE STATE TAX APPEAL BOARD
OF THE STATE OF MONTANA
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THE DEPARTMENT OF REVENUE )
OF THE STATE OF MONTANA, )
) DOCKET NO.: PT-1998-10
Appellant, )
)
-vs- )
)
CLINICAL ASSOCIATES ) FINDINGS OF FACT
OF GREAT FALLS, ) CONCLUSIONS OF LAW,
) ORDER and OPPORTUNITY
Respondent. ) FOR JUDICIAL REVIEW
)
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The above-entitled appeal came on regularly for hearing
on the 21st day of April, 1999, in the City of Great Falls,
Montana. The taxpayer was represented by Betsy Rushworth, Ph.D.
The Department of Revenue (DOR) was represented by Sue
Williams and Sharon Miller of the Cascade County Assessor’s Office.
The subject property involved in this appeal is:
Personal property located in Cascade County,
State of Montana (Assessor ID number 1053600).
FINDINGS OF FACT
1. For the 1998 tax year, the DOR appraised the subject
personal property at a value of $6,929.
2. The taxpayer appealed to the Cascade County Tax

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Appeal Board on June 19, 1998 requesting a reduction in value to
$3,763, stating "Clinical Associates ceased to be an entity on 3-
15-98. The two partners at that time moved to other and separate
locations, starting businesses in the new locations on 3-16-98.
Personal property was sold for $2,508.75 to other parties with
$509.34 worth of additional property going to the office of Betsy
Rushworth, Ph.D. and $744.92 going to Lynn Johnson, Ph.D.”
3. The Cascade County Tax Board, in its August 13, 1998
decision, reduced the value of the subject personal property to
$4,676, stating: "After hearing testimony and reviewing exhibits,
the Board finds the taxpayer’s list of assets (Exhibit #1) to be
the actual inventory as of January 1, 1998 with a value of
$4,676.00. This appeal has been adjusted to reflect this value.”
4. The DOR then appealed that decision to this Board on
September 10, 1998, stating: “The CTAB decision is contrary to law
and administrative rule.”
DEPARTMENT OF REVENUE CONTENTIONS
The DOR agent testified that the decision of the Cascade
County Tax Appeal Board was appealed to this Board for the reason
that Montana statutory law and administrative rule was not adhered
to by the local board.
DOR Exhibit A is a copy of Section 15-8-201, MCA, stating

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in pertinent part:
General assessment day. (1) The department shall,
between January 1 and the second Monday in July in each
year, ascertain the names of all taxable inhabitants and
assess all property subject to taxation in each county.
The department shall assess property to the person by
whom it was owned or claimed or in whose possession or
control it was at midnight of the preceding January 1. .
DOR Exhibit B is a copy of 15-6-122, MCA, which states in
pertinent part:
Business equipment tax on business personal property. A
personal property tax applied to any class of personal
property, excluding livestock, described in this part
that belongs to, is claimed by, or is in the possession
of or under the control or management of a sole
proprietor, firm, association, partnership, business,
corporation, or limited liability company is a business
equipment tax.
DOR Exhibit C is a copy of ARM 42.21.158 relating to property
reporting time frames:
(1) Taxpayers having property in the state of Montana on
January 1 of each year must complete the statement as
provided for in 15-8-301, MCA. . .
DOR Exhibit D is a copy of ARM 42.21.154 relating to the
valuation of furniture and fixtures:
(1) The market value of furniture and fixtures is
determined by multiplying an indexed depreciation factor
times the installed acquired cost of the property. . .
(Emphasis supplied). The indexed depreciation is the
product of the trend factor (based on age and category of
property) times the depreciation factor from the
appropriate table.

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DOR Exhibit E is a copy of a document entitled “Reminder
to Return Personal Property Reporting Form” form sent by the DOR to
the taxpayer. This form was returned to the DOR by the taxpayer on
April 3, 1998 with the handwritten notation “No additions or
deletions.”
DOR Exhibit F is a copy of the DOR’s 1998 summary of
value form detailing Clinical Associates’ business equipment
holdings, dated April 10, 1998. This summary of value form shows
the 1998 market value of the subject personal property.
DOR Exhibit G is a copy of the DOR’s 1997 summary of
value form detailing Clinical Associates’ business equipment
holdings, dated March 21, 1997. This summary of value form shows
the 1997 market value of the subject personal property. The second
page of this exhibit is a copy of the taxpayer’s 1997 submission to
the DOR with certain items of personal property highlighted with
the notation “Items highlighted in green are no longer at Clinical
Associates. All else is still there.” The DOR agent stated that
these items were removed from the 1998 summary of value sheet. The
stated purpose of this exhibit was to reiterate that the acquired
year and the acquired cost of the subject items of personal
property were established and have been on record for the years
1996, 1997 and 1998 and that, according to ARM 42.21.154, the

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installed acquired year and acquired cost on January 1 determine
market value for personal property subject to taxation.
TAXPAYER’S CONTENTIONS
The taxpayer’s representative, Dr. Betsy Rushworth, testified
that the business entity challenging the DOR’s assessment in the
present appeal, Clinical Associates, formed in the fall of 1993 and
disbanded on March 15, 1998. The issue on appeal, therefore, is
the taxpayer’s contention that the business associates were left in
the position of having to pay taxes for the remainder of 1998 on
business equipment which no longer served the business entity
(Clinical Associates) which existed on January 1, 1998, but only up
to and including March 15 of that year.
Taxpayer’s Exhibit 1 is a listing of the business personal
property items that were “closed out” when Clinical Associates
dissolved, the disposition of those items, and the value assigned
to each item by Dr. Rushworth. This exhibit also contains a
listing of items sold by Clinical Associates to various entities
and private parties, the date of sale and the amount of each sale.
Dr. Rushworth testified that the taxpayer’s values were derived
from the use of DOR depreciation schedules. Exhibit 1 also
contains a copy of a September 30, 1998 letter from the taxpayers
to the Cascade County Treasurer advising that the 1998 taxes were

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being paid under protest and a copy of the September 17, 1998
letter from the State Tax Appeal Board to the taxpayers
acknowledging receipt and acceptance of the Department of Revenue
appeal of the Cascade County Tax Appeal Board decision.
When asked by the Board how she arrived at her requested
value of $3,763.01, she responded, “I added up all of the items
that were on the list that the Department probably gave to us, or
I added up the value of everything that we had at the beginning of
1998, assessed a value to each of those things, depreciated over
the time that we had had those items and came up with a total of
$2,508.75. . . perhaps to that, because these were the prices that
we got from the sale of items, so I must have added $2,508.75 to
the assessed value of those items that Dr. Johnson and I retained
for our own use but what we retained. . . so, I am assuming that if
I add all these things up that it would add up to $3,768. I came
up with $4,665. Oh, I bet what I did was I did not include the
value of those items that went home.”
DISCUSSION
The primary issue before this Board appears to be the
taxpayers’ contention that Clinical Associates was left in the
position of having to pay taxes for the remainder of 1998 on
business equipment which no longer served the business entity

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(Clinical Associates) which existed on January 1, 1998, but only up
to and including March 15 of that year.
The Board finds that neither statutory law nor administrative
rule allows the DOR to prorate or to apportion a tax burden based
upon the number of months during each year that items of personal
property are actually in the possession of the owner as of January
1, general assessment day pursuant to 15-8-201, MCA. Nor does
administrative rule or statutory law allow the sale price of assets
at the time of business liquidation to be adopted as the market
value for those personal property items.
The DOR has satisfactorily demonstrated that it has used the
method of valuation prescribed by law and by administrative rule:
installed acquired cost and acquired year based upon information
provided by the taxpayer.
There was a discussion during the hearing before this Board
concerning the acquired year of an office telephone system valued
by the DOR at $3,490. This telephone system was leased in 1990 for
that value. The lease expired in 1995 and the taxpayers were given
the option to buy the equipment for $1, which they opted to do.
The taxpayer argued that the acquired year should have been
reported as 1990. The Department of Revenue agent agreed. The
Board will order that, for the tax year in question (1998), that

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the acquired year of 1990 for the telephone system shall be adopted
and the appropriate depreciation allowance applied.
CONCLUSIONS OF LAW
1. The State Tax Appeal Board has jurisdiction
over this matter. 15-2-301 MCA.
2. 15-6-122, MCA. Business equipment tax on business
personal property. A personal property tax applied to any
class of personal property, excluding livestock, described in
this part that belongs to, is claimed by, or is in the
possession of or under the control or management of a sole
proprietor, firm, association, partnership, business,
corporation, or limited liability company is a business
equipment tax.
3. 15-8-201, MCA. General assessment day. (1) The
department shall, between January 1 and the second Monday of
July in each year, ascertain the names of all taxable
inhabitants and assess all property subject to taxation in
each county. (2) The department shall assess property to: (a)
the person by whom it was owned or claimed or in whose
possession or control it was at midnight of the preceding
January 1; . . .
4. ARM 42.21.158 Property Reporting Time Frames. (1)

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Taxpayers having property in the state of Montana on January
1 of each year must complete the statement as provided for in
15-8-301, MCA.
5. ARM 42.21.154 Valuation of Furniture and Fixtures. 1.
The market value of furniture and fixtures is determined by
multiplying an indexed depreciation factor times the installed
acquired cost of the property. . . the indexed depreciation
factor is the product of the trend factor (based on age and
category of property) times the depreciation factor from the
appropriate table.
6. The appeal of the Department of Revenue is hereby
granted and the decision of the Cascade County Tax Appeal
Board is hereby reversed.

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ORDER
IT IS THEREFORE ORDERED by the State Tax Appeal Board of
the State of Montana that the subject personal property shall be
entered on the tax rolls of Cascade County by the Assessor of said
County at the value determined by the Department of Revenue upon
amendment of the acquired year of the telephone system as discussed
above.
The appeal of the Department of Revenue is hereby
granted, with the correction to the acquired year of the telephone
system made, and the decision of the Cascade County Tax Appeal
Board is hereby reversed.
DATED this 8th of June, 1999.
BY ORDER OF THE
STATE TAX APPEAL BOARD
______________________________
GREGORY A. THORNQUIST, Chairman
( S E A L ) _____________________________
JAN BROWN, Member
____________________________
JEREANN NELSON, Member

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NOTICE: You are entitled to judicial review of this Order in
accordance with Section 15-2-303(2), MCA. Judicial review may be
obtained by filing a petition in district court within 60 days
following the service of this order.

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CERTIFICATE OF SERVICE
The undersigned hereby certifies that on this 8th day of
June, 1999, the foregoing Order of the Board was served on the
parties hereto by depositing a copy thereof in the U.S. Mails,
postage prepaid, addressed to the parties as follows:
Attn. Dr. Betsy Rushforth
Clinical Associates of Great Falls
906 7th Street South
Great Falls, Montana 59401
Office of Legal Affairs
Department of Revenue
Mitchell Building
Helena, Montana 59620
Assessor’s Office
Cascade County Courthouse
Great Falls, Montana 59401
Nick Lazanas
Cascade County Tax Appeal Board
Courthouse Annex
Great Falls, Montana 59401
_________________________
DONNA EUBANK
Paralegal