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Tax Protesting CHS?Loses First Round in District Court
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- Created on Sunday, 13 May 2012 09:54
On Friday, April 20, District Court Judge Susan P. Watters rendered her judgment of the CHS complaint and tax protest that has the Laurel School District holding its financial breath.
In essence, CHS lost this round when Watters dismissed the complaint.
Watters' summary judgment addressed CHS's complaints. CHS objected to the appraisal method used by the Department of Revenue (DOR) to assess the value of the refinery. The company also has argued the appraisal failed to equalize CHS's properties with other comparable properties in terms of equivalent distillation capacity. The complaint alleged the CHS properties are appraised at twice the value of other comparable properties in Yellowstone County.
Laurel Superintendent of Schools Tim Bronk received a copy of the decision from Gene Walborn, DOR Business and Income Taxes Division administrator Monday.
In his message to Bronk, Walborn said, "The court agreed with the department's motion to dismiss CHS' District Court complaint. What I'm told this means is that the CHS District Court appeal is over at this level. CHS can appeal this to the Supreme Court, which they have 60 days to do. They can also accept the court's decision and go to the Yellowstone County Tax Appeal Board to request that the valuation case at that level begin. They could also drop all of their appeals and accept the department's determination of market value."
Watters summarized her findings in the complaint issues.
A. CHS has failed to present any genuine issues of material fact in support of its assertion that the method or procedure of assessment or imposition of tax adopted or used by the DOR was improper or illegal.
B. The DOR's alleged failure to equalize CHS's property is a question not properly before this court.
C. The DOR properly assessed CHS within the confines of Montana law.
CHS Laurel Refinery Manager Pat Kimmet expressed CHS's disappointment with the ruling. "We've received the Yellowstone County District Court's order granting the Montana Department of Revenue's motion for summary judgment. The District Court ruled that CHS should continue its appeals through the tax appeal boards rather than the District Court.
"We are very disappointed in this ruling. We continue to believe that the Department of Revenue has improperly assessed the CHS Laurel Refinery at a much higher value than the other comparable area refineries.
"As a refinery that is part of a cooperative owned by farmers, the tax valuation and the decision in our appeal are especially troubling, as excess taxes reduce earnings available to return to the farmers and ranchers who own CHS, many of them located in Montana," Kimmet told the Outlook Tuesday.
At a public forum called by the school district Feb. 1, Walborn said it is likely the protest will go all the way to Montana Supreme Court for resolution, a process that stakeholders, like the school district, said could extend through 2018 or 2020.
However, Watters' decision was not expected until late in 2012. The early decision steps the schedule up a notch.
Watters' decision followed tax appeal hearings at the county and state levels.
At the forum, Walborn said, referring to the District Court decision, "Typically, from our experience, one party isn't going to be happy with that decision. It's very rare that a District Court is going to be able to make both parties happy and, in this case, that just won't happen."
No swift resolution means entities dependent on that tax money — like the Laurel School District — will continue to struggle with funding. Whether or not to draw out up to 100 percent of the protested taxes has been a subsequent topic at Laurel School Board meetings.
CHS, the county's largest tax protester of eight companies seeking relief, has contested on average 61 percent of its bill since 2009, for a total protested amount of $12.8 million. The company must still pay its taxes while the protest is considered, but the money is held in escrow until the protest is settled.
Tax revenues from CHS make up almost half of the Laurel School District budget, said Bronk. The district's budget is about $18 million, with about $12 million in the general fund. School districts can demand release of protested taxes, and the Laurel School District has, drawing about $2.5 million of the $4.5 million in protested taxes due to the district.
If CHS's appeal is successful, the school district will have to repay all or a portion of the money it accessed with interest, said Denise Ulberg, school finance division administrator, Office of Public Instruction (OPI), who discussed how school districts are financed. Ulberg said the money to repay the county could come from the district's reserves — Bronk said reserves are at zero — or a permissive mill levy assessed against the properties in the school district. That would mean a tax increase for property owners in the district, including CHS. The district can also issue bonds to meet its debt.
"We're trying to be cautious about not accessing too much of that protest in case we have to pay it back," said Bronk.
The tax protests effects most taxing jurisdictions in the state.
