Covenant Investments v. Dept. of Revenue

Covenant Investments, Inc. v. Dept. of Revenue, 2013 MT 215 (Aug. 6, 2013) (5-0) (Morris, J.)

Issue: Whether the district court properly determined that section 15-7-111, MCA, mandating a six-year tax cycle, violated Covenant’s right to equal protection.

Short Answer: No.


Facts: Covenant owns property for residential subdivision development in Gallatin County. Section 15-7-111, MCA, requires the reappraisal of residential property every six years. The department valued Covenant’s property in 2008 at $17.6 million, and used that appraisal to establish Covenant’s tax liability for the ensuing six years. Covenant challenged the appraisal, and the Gallatin County tax assessment board reduced it to $13.7 million. Covenant then petitioned the State Tax Appeal Board (STAB) for a further reduction. Based on evidence of artificially high sales prices for the first four parcels in the subdivision, STAB ordered the department to further reduce the value.

Covenant further challenged the 2008 assessment by presenting evidence that its property value had decreased from 2008 to 2010. It argued that it was being forced to pay an inequitable share of taxes and that § 15-7-111, MCA, violated its right to equal protection. STAB rejected that claim, and Covenant appealed to the district court.

Procedural Posture & Holding: The district court determined that the department’s failure to conduct a mid-term reevaluation of property values caused some to pay more than their fair share of taxes and others to pay less. Finding this outcome was not rationally related to the legislative purpose of § 15-7-11, MCA, the district court held that the statute violated Covenant’s right to equal protection, and ordered the department to conduct mid-term appraisals. The department appeals, and the Supreme Court reverses.

Reasoning:  Any cyclical revaluation plan will create temporary disparities among individual property valuations. The Court has previously held that these disparities do not violate equal protection as long as they are not intentional, systematic, arbitrary or fraudulently discriminating. The Montana Constitution requires only periodic attainment of equality in tax treatment. ¶ 18.

Moreover, Montana courts are not at liberty to amend statutes. By requiring the department to conduct mid-term evaluations of property value, the lower court improperly exercised legislative power by inserting a provision into the statute.