Lakefront property owners could see tax break next year

Owners of lakefront property in Montana will likely see property tax reductions in 2015, according to state tax officials.

Property taxes on lakefront or recreational property in Montana exploded in 2008, as the properties saw dramatic decreases in market value, but the real estate boom was quickly followed by a recession that crippled the American economy.

To deal with this disparity, starting in January the Montana Department of Revenue began the reappraisal process that occurs every six years, and the outlook is good for property-tax reduction in 2015, DOR regional manager Scott Williams said.

“Recreational property was still part of the big bubble in 2008,” he said.

DOR evaluates more than 70,000 properties in Northwest Montana. Some of those properties receive a personal visit from DOR officials, while others are included in a mass appraisal, Williams said.

The 2008 appraisal resulted in tax protests, but in the last few years of this appraisal cycle the protests have died down, he said.

While lakefront and recreational properties saw a large increase in valuation in 2008, the average homeowner in Northwest Montana did not see an increase in property taxes.

In this year’s appraisal process, lakefront properties will see the largest average decreases in Lake County and Flathead County, Williams said. Yellowstone County, which is in the midst of an oil boom, will not see overall property tax decreases, he said.

The six-year appraisal cycle concerns some lawmakers. The Montana Legislature, which convenes next month in Helena, will likely introduce bills trying to set the appraisal process to occur more frequently.

The state doesn’t face a reduction in property tax revenue even if a particular county’s tax revenue falls in one class. Montana counties have the ability to increase the value of the mills they collect to offset any decrease, Williams said.

“The whole goal of a reappraisal cycle is to make sure no specific class of property pays a disproportionate share,” he said.

Some properties, whether residential, commercial or recreational, saw a 30 to 70 percent increase in valuation last appraisal but didn’t see large tax increases.

And for those property owners who don’t like what their tax bill looks like, they can always protest. A protest can be filed with the state tax appeal board, but the property owner must still pay the disputed amount. If the tax bill is ultimately reduced, the property owner receives a refund of the disputed amount. Disputing a tax amount simply does not get the tax removed, Williams said.

Some of the larger commercial property owners in Flathead County protest their taxes every year. Charter Communications has protested its tax bill every year over the last five years, Williams said. Plum Creek and Columbia Falls Aluminum Company are also frequent protesters of taxes and property valuations, he said.

Flathead Lake property owner Don Abbey has protested the taxes on his Shelter Island home the last two years, Williams said. Abbey is seeking to have the valuation on his lakefront property reduced by about $31 million. His tax bill is $367,000.

With the average Montanan property owner paying 1 percent to 1.85 percent taxes, Abbey’s taxes are at 0.08 percent, well below the state average.

The state tax appeal board in Helena recently heard arguments from Abbey and his attorneys whether the state properly assessed Abbey’s home and other structures on Shelter Island. Abbey built the home and boathouse in 2011 and has it listed for sale at $59.5 million, which also includes most of a wooded island near Rollins.

The state says the 24,000-square-foot, three-story home and other improvements on the island, such as a 5,000-square-foot boathouse and apartments, are worth $41.8 million, and the state is basing property taxes on that value.

A Missoula appraiser hired by Abbey said the home and other structures should be assessed at $9.8 million.