Lake County commissioner waits for results on injunction
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The Missoulian ran a story on February 2 about an injunction filed by Lake County against the Montana Department of Revenue. If granted, the injunction would stop the Department of Revenue from processing any further applications and granting Temporary Tribal Tax Exemptions on fee properties purchased by the Confederated Salish and Kootenai Tribes. The exemption statute was passed in 2011 by the Montana Legislature. The exemptions, which can last for up to five years, halt property tax collections while the properties move through the process of being placed in trust.
In addition to the injunction, Lake County has introduced into the legislature House Bill 401 that, if passed, would repeal the present law. Testimony on the repeal bill is scheduled before the House Taxation Committee on March 13.
The Department of Revenue’s response to the county’s claims in the injunction regarding the agency’s inability to implement the exemption law effectively is an interesting read.
The head of the Department of Revenue is appointed by the Governor, and the function of the department is to appraise and value properties. Those values are then used by counties to determine property tax bills. The department, for the most part, denied all claims brought forward by the county in the injunction, but in several instances admitted they didn’t have sufficient knowledge or information to admit or deny the allegations. The department denied knowing what kinds of, or how many, properties are exempt in the county or that property taxes are the primary revenue stream for local governments.
Another county claim was that when properties are exempted under the statute, the tax liability is then shifted to the remaining taxpayers in the county or the district. The department denied any knowledge or understanding of how exempting some properties from taxation impacted other taxpayers. For an agency that is supposed to know and understand everything to do with property taxes, the denials in their response to the injunction doesn’t inspire much confidence in the department’s ability to effectively carry out their mission. We suspected that the department had no idea of what the impact to our county had been due to granted exemptions and our suspicions were confirmed in the response.
The county also believes that the Department of Revenue has made legal decisions related to exemptions that were processed that they had no authority to make. The department determined that properties bought by CSKT on Contracts for Deed were, in fact, owned by the tribe. In 2012, at least 26 properties were bought on a Contract for Deed and exempted from taxation. Lake County believes the Montana Supreme Court has ruled that a Contract for Deed is not proof of ownership.
Another administrative decision rendered by the department was that prior years’ taxes for properties that had “timed out” or exceeded the five-year window for being placed in trust could not be collected by the county. The county’s position is that the statute passed by the legislature did not extinguish prior years’ taxes and the County has the ability to reclaim those taxes. Since the implementation of the new law, at least 165 properties in our county have been placed in exempt status. Fifty- seven of the properties “timed out” and have been returned to the tax rolls. Approximately $94,000 of tax revenue was lost on those properties. Six more properties due to “time out” in the next two years will represent over $150,000 of lost revenue. The county will continue to pursue payment of the taxes lost by these two rulings.
The 2011 legislature adopted the exemption bill without knowing what the financial consequences to Lake County property taxpayers would be. We now have the numbers confirming the damage, and it is time for the injunction to be granted and the law repealed.
