Property Tax Alert: Montana

February 2007

For Montana property tax purposes, the cost method of valuing a mixed use condominium building was proper while the building was under construction. However, as the building is completed and the character of the individual units is established, the income and sales-comparison methods should be used.

For the 2005 tax year, because sufficient sales and income information was not available, the Department of Revenue used a default statutory appraisal provision and used the construction cost method to appraise the taxpayer's units by first valuing the entire building and then allocating that value to the individual units as per the condominium declaration, based on the net square footage of the units. The allocation, however, produced anomalous results, because in these mixed use buildings there was a wide variance in values per square foot, depending on the unit's use as commercial, residential, or storage, that was not taken into account when looking at just the square footage of the units. Because there were only a few completed units at the time of valuation, however, this method was appropriate during the construction phase.

Please contact Rash & Associates for more information.