Background
Plaza West I (PWI) is a commercial condominium building in Kalispell, Montana. After the owners condominiumized the property in 2021, the Montana Department of Revenue (MDOR) continued to use the income approach to appraise individual units. For the 2023/24 tax cycle, however, MDOR switched to the cost approach, asserting it lacked sufficient mass-appraisal model data for commercial condominiums in the Kalispell market. Taxpayers Kenneth O’Brien (as personal representative of the Maxine O’Brien estate) and the Hash Family Trust challenged the switch, arguing they had supplied MDOR with actual rental income data from PWI and the nearly identical adjacent building, Plaza West II (PWII), which was sufficient to trigger the mandatory income-approach requirement under § 15-8-111(5)(b), MCA.
The Flathead County Tax Appeal Board (CTAB) agreed with the taxpayers in April 2024, finding MDOR’s claimed lack of data not credible and ordering use of the income approach with the taxpayers’ $12.59 per-square-foot potential gross income figure, derived from actual rents and corroborated by an affidavit from a PWII co-owner. MDOR appealed to the Montana Tax Appeal Board (MTAB), which reversed CTAB in February 2025, concluding that MDOR’s own model lacked a sufficient pool of comparable commercial-condominium data and that the taxpayers’ submission therefore did not meet the statutory threshold. The Eleventh Judicial District Court affirmed MTAB in July 2025, and the taxpayers appealed to the Montana Supreme Court.
Justice Katherine M. Bidegaray authored the opinion. The central statutory question was narrow: whether, at the time of MDOR’s informal review, “sufficient, relevant information on income was made available to the department” under § 15-8-111(5), MCA. An affirmative answer would obligate MDOR to use the income approach; a negative answer would permit the cost approach.
The Court’s Holding
The Montana Supreme Court partially affirmed and partially reversed the District Court. The Court affirmed that MTAB was entitled to examine the validity and reliability of the taxpayers’ appraisal on appeal and that MTAB correctly denied the taxpayers’ motion for summary judgment, because a genuine factual dispute existed over whether the income information met the statutory standard. On the merits, however, the Court reversed both the District Court and MTAB’s February 2025 decisions and reinstated CTAB’s April 2024 decisions for PWI Units 130, 132, and 136.
The Court held that MDOR’s inability to build its own mass-appraisal income model for commercial condominiums does not negate a taxpayer’s separate statutory right to trigger the income approach by supplying sufficient, relevant income information directly to MDOR. MTAB erred by equating MDOR’s lack of internal model data with a statutory absence of “sufficient, relevant information on income” — the two are distinct inquiries. Because CTAB’s finding that the taxpayers had provided adequate income information was supported by substantial record evidence (actual rents from PWI and the materially identical PWII, corroborated by a co-owner affidavit), MTAB’s reversal of CTAB was not justified.
The Court declined to decide the broader question of whether MDOR may generally rely on mass-appraisal models when valuing commercial property. It held only that MDOR may not treat the absence of its own comparable model data as dispositive when taxpayers have made income information directly bearing on the subject property and comparable rentals available during informal review.
Key Takeaways
- Under § 15-8-111(5)(b), MCA, the income approach is mandatory for commercial condominiums whenever a taxpayer makes “sufficient, relevant information on income” available to MDOR during informal review — MDOR’s lack of its own mass-appraisal model data for that property type does not override the taxpayer’s right to compel the income approach.
- Actual rent data from the subject property and a materially identical neighboring building, corroborated by owner affidavit testimony, can constitute sufficient, relevant income information even without formal written leases or tax returns, at least where MDOR has failed to supply the comparable-rent data it was required to provide on request.
- MTAB has authority to review the validity and reliability of a taxpayer’s appraisal methodology on appeal from CTAB and may deny summary judgment where underlying factual disputes remain — but MTAB’s merits findings must be supported by substantial evidence and consistent, rational, cogently explained decision-making.
- MDOR’s administrative rule (Admin. R. M. 2.51.307(4)) allowing each valuation cycle to stand on its own did not permit MDOR to separately value the non-separately-rentable PWI basements in a way that effectively circumvented an unappealed prior CTAB decision, at least where CTAB’s reinstated income-approach valuation already captured the basements’ value in the overall per-square-foot rent.
Why It Matters
This decision clarifies the interplay between MDOR’s mass-appraisal prerogatives and a commercial property owner’s statutory right to force income-approach valuation by proactively supplying income data. Assessors across Montana cannot sidestep the income-approach mandate simply by pointing to thin internal databases for niche property types — once taxpayers provide credible, property-specific rental data, the agency must engage with that data on its merits rather than defaulting to the cost approach. The ruling gives commercial property owners a meaningful procedural lever: documenting and delivering actual income information during informal review can lock in the income approach even when the agency’s own model is underdeveloped.
For practitioners, the case also underscores the importance of the unappealed CTAB decision as a baseline constraint on subsequent cycles and illustrates the evidentiary floor a taxpayer must clear — corroborated rent comparables, explained methodology tracking MDOR’s own formula, and credible witnesses with direct knowledge of the property — to overcome an agency’s presumption of correctness. The Court’s narrow framing preserves room for future disputes over what “sufficient, relevant” income information means in other commercial property contexts.