Lucas Ranch, Inc. v. Mont. Dep't of Revenue

379 Mont. 28

347 P.3d 1249

2015 MT 115

LUCAS RANCH, INC. ; Montana Farm Bureau Federation; and The Montana Taxpayers' Association, Petitioners and Appellants

v.MONTANA DEPARTMENT OF REVENUE, Defendant and Appellee.

No. DA 14–0374.

Supreme Court of Montana.

Submitted on Briefs Feb. 4, 2015.

Decided April 28, 2015.

For Appellants: Michael Green, D. Wiley Barker, Crowley Fleck, PLLP, Helena, Montana.

For Appellee: Daniel J. Whyte, Amanda L. Myers, Special Assistant Attorneys General, Montana Department of Revenue, Helena, Montana.

Opinion

Chief Justice MIKE McGRATH delivered the Opinion of the Court.

¶ 1 Lucas Ranch, the Montana Farm Bureau Federation, and the Montana Taxpayers' Association (“Petitioners”) filed suit against the Montana Department of Revenue (“Department”), in the District Court for the Fourteenth Judicial District, Meagher County. In June 2013, the Department moved for summary judgment. The District Court granted the Department summary judgment and the Petitioners appeal.

¶ 2 The sole issue on review is whether the District Court correctly interpreted § 15–7–111, MCA.

BACKGROUND

¶ 3 In 2009, the Department began the process of reappraising Montana agricultural properties. All residential, agricultural, and timber properties are reappraised every six years. Section 15–7–111, MCA ; Covenant Investments, Inc. v. State, 2013 MT 215, ¶ 4, 371 Mont. 186, 308 P.3d 54. Prior to the 2009 reappraisal, the Department relied on self-reporting by property owners. In 2005, the Legislature provided funding for a systematic reappraisal of agricultural lands by the Department. In the words of Dallas Reese, Department Management Analyst for the Property Assessment Division, “[t]his reappraisal process for agricultural property was the most comprehensive and detailed in almost 45 years.” Aff. Dallas Reese ¶ 7 (April 26, 2010). The Department utilized a number of methods for assessing the land including a geographical information system (GIS), soil surveys from the United States Department of Agricultural Natural Resource Conservation Service (USDA NRCS), a global position system (GPS), an in-depth review of soil types, and aerial photographs. The Department also surveyed landowners, however the response was limited, garnering only about a 10% return rate.

¶ 4 The Department uses a multi-step process for determining the taxable value for the land. First, the Department identifies the land use and categorizes it according to five classifications: grazing land, non-irrigated summer fallow farm land, tillable irrigated farm land, non-irrigated continuously cropped hay land, or non-irrigated continuously cropped farm land. Second, the Department determines the productivity yield using the USDA NRCS soil surveys and calculates production information for each acre of land by classification. Adjustments are made to reflect income that the average Montana farm or ranch could have attained on the land as required by § 15–7–201(7)(e), MCA. Third, the productivity amount is multiplied by an averaged commodity price determined by Montana agricultural statistical data, to arrive at the gross income per acre. Fourth, the Department calculates a net income per acre according to specific Department administrative rules based on the different classification categories. Finally, the net income per acre is divided by the capitalization rate established in § 15–7–201(4)(c), MCA, and the assessed values are totaled and multiplied by the current taxable percentage to arrive at the taxable value for the parcel.

¶ 5 During a six-year cycle, any increases in value from the previous cycle must be accounted for. The Montana Legislature, in an effort to alleviate the tax sting due to fluctuations in value, provided for the phase-in of increases in value from previous cycles. Two values are needed to determine phase-in amounts: the current full market value and the value before reappraisal (“VBR”). The full market value of a property is determined at the beginning of the cycle. The VBR, as defined in Admin. R.M. 42.20.501(25) (2006):¹

the 2002 tax year value adjusted for any new construction or destruction that occurred in the prior year. The VBR for the 2003 tax year and subsequent years is the same as the 2002 tax year value if there is no new construction, destruction, land splits, land use changes, land reclassifications, land productivity changes, improvement grade changes, or other changes made to the property during 2002 or subsequent tax years.

The 2002 tax year value refers to the fully phased-in value from the previous cycle. The phase-in amount is the difference between the full market value at the beginning of the six-year cycle and the full market value from the prior six-year cycle. This amount is phased-in at a rate of 16.66% each year.

¶ 6 The Department initially calculated the VBR based on the 2009 updated classification for all agricultural properties. Subsequently, the Department realized that Admin. R.M. 42.20.502 required it to use the unadjusted 2002 base year value, rather than the newly calculated VBR, for properties that increased in value based on a change in productivity. In 2010, the Department adopted a new rule, Admin. R.M. 42.20.607 (2010), to clarify and distinguish between properties experiencing change due to market fluctuations and those changing due to the actions of the owner. If the increase was due to market changes (i.e., changes in the price of a commodity), the Department used the unadjusted 2002 base year value.² If the increase was due to non-market changes, such as land reclassification,³ the Department calculated a new VBR. The new VBR accounted for the increase in value attributable to the non-market change.

¶ 7 In 2009, the Department reappraised the Lucas Ranch.⁴ The Department concluded that the Lucas Ranch had non-market changes due to reclassification of land and thus required a newly calculated VBR. In February 2010, the Petitioners filed a Petition for Declaratory Judgment and Writ of Mandate, seeking a declaration that the Department improperly assessed their agricultural property for tax purposes and failed to properly phase-in the increases in value from the previous cycle resulting in erroneous taxable values for the Lucas Ranch and all similarly situated landowners. The Department answered, arguing that it properly applied the statute and that Petitioners were not entitled to the 16.66% phase-in due to the reclassification of their land. In April 2010, Petitioners moved for class certification and the District Court denied their motion. The Petitioners appealed to this Court, which reversed and remanded the matter for class certification pursuant to M.R. Civ. P. 23, as permitted by § 15–1–407(2)(a), MCA.

¶ 8 After the case returned to the District Court, the Department moved to dismiss Charles B. Lucas, who was deceased, as well as the Montana Farm Bureau Federation and the Montana Taxpayers Association for failure to represent the class. The Petitioners stipulated to the dismissal of Charles B. Lucas, but objected to the dismissal of the Farm Bureau Federation and the Montana Taxpayers Association. In June 2013, the Department filed for partial summary judgment on the Petitioners' writ of mandate, and later filed a motion for summary judgment. Petitioners then filed a cross motion for summary judgment.

¶ 9 On June 2, 2014, the District Court granted the Department's motion for summary judgment. The District Court declared the remaining motions moot.

STANDARD OF REVIEW

¶ 10 We review a grant of summary judgment de novo, applying the same analysis as the district court pursuant to M.R. Civ. P. 56. Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 36, 345 Mont. 12, 192 P.3d 186 (citations omitted). “Where there is a cross-motion for summary judgment, we review a district court's decision to determine whether its conclusions were correct.” Baxter v. State, 2009 MT 449, ¶ 8, 354 Mont. 234, 224 P.3d 1211 (citations omitted).

¶ 11 Summary judgment is proper when the record shows no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Lorang, ¶ 37; M.R. Civ. P. 56(c). The moving party bears the initial burden of “establishing a complete absence of genuine issues of material fact.” Lorang, ¶ 37 (citations omitted). When determining whether genuine issues of material fact remain, we view the evidence in the light most favorable to the non-moving party. Lorang, ¶ 38 (citations omitted).

¶ 12 If the moving party satisfies its burden, the non-moving party must “set forth specific facts, not merely denials, speculations, or conclusory statements, in order to establish that a genuine issue of material facts does indeed exist.” Lorang, ¶ 39 (citations omitted); M.R. Civ. P. 56(e). Ultimately, if no issue of material fact exists, the Court must decide whether the facts entitle the moving party to judgment as a matter of law. Lorang, ¶ 39; M.R. Civ. P. 56(c).

DISCUSSION

¶ 13 Issue: Whether the District Court correctly interpreted § 15–7–111, MCA.

A. Plain Language of § 15–7–111, MCA

¶ 14 Petitioners contend on appeal that the District Court adopted an interpretation of § 15–7–111, MCA, that ignores the plain language of the statute. Petitioners argue that the statute requires the Department to phase-in the change in value by equal amounts over the six-year cycle as detailed in subsection (3) of § 15–7–111, MCA. Petitioners assert that “reclassification” in the context of § 15–7–111, MCA, refers to changes among classes (i.e. Class 3 to Class 4), not changes within agricultural use (i.e., fallow to irrigated). They argue that even if the Legislature intended to include changes to agricultural use within subsection (2), the Department did not adopt rules to assess the valuation and phase-in value.

¶ 15 This Court interprets a statute first by looking to its plain language. Baxter, ¶ 41; Mont. Sports Shooting Ass'n v. State, 2008 MT 190, ¶ 11, 344 Mont. 1, 185 P.3d 1003 ; State v. Letasky,...