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Lake County Courthouse

POLSON — The Montana Department of Revenue has denied most of the key claims raised in a lawsuit by Lake County challenging the state's handling of property tax exemptions for tribal land.

In November, Lake County sued the department in local District Court, seeking an injunction to keep it from placing more properties under the temporary tribal property tax exemption.

Created by the Montana Legislature in 2011, this exemption applies to tribal-owned properties that are being considered for federal trust status, a process that, when complete, removes properties from tax rolls.

Data provided by the Montana Department of Revenue show that as of November, Lake County had about $120,000 worth of taxable value covered by the exemption. The Confederated Salish and Kootenai Tribes of the Flathead Reservation maintain that this policy prevents inefficient fund transfers from their government to other local taxing jurisdictions during the years-long trust application process.

But in the eyes of the Lake County Commissioners and Attorney’s Office, it’s a poorly run drain on county coffers. The core of its 62-page complaint against the Department of Revenue, filed in November, accused the department of flouting Montana’s laws, administrative rules and good transparency practices in exempting properties.

In its six-page reply, filed Jan. 15, the Montana Department of Revenue denied these claims, including contentions that:

• The county lacked information necessary for it to track exempted properties;

• The Department failed to adequately train its staff in the exemption process, notify the county when properties were exempted, or provide requested copies of trust applications;

• Filed applications were either incomplete or covered multiple geocodes;

• The Department of Revenue accepted applications not filed on the official forms;

• The annual documentation that the tribes must file for affected properties was insufficient to track them.

“The Department correctly applied the statutes of Montana, Department Rules, and established case law regarding temporary tribal property taxes,” wrote Special Assistant Attorneys General Dan Whyte and Nicholas Gochis.

As for Lake County’s claims of injury from the practice — that it had cost the county about $130,000 in lost property taxes, along with possible future liabilities from taxes on properties that should have been exempt, all at a cost to local residents — it said that it lacked sufficient knowledge or information to admit or deny them, and therefore denied them.

It requested that Lake County’s claims for relief be denied in their entirety.

Lake County Attorney Wally Congdon said the lawsuit will next proceed to discovery, and expects the county to file a request for production of documents by the end of the week.

As this lawsuit continues, Montana House Speaker Greg Hertz, R-Polson, is sponsoring a bill in the Legislature, sought by the county commissioners, that would repeal the policy altogether. Properties currently covered by the 5-year exemption would remain covered, and the department would have to process any applications pending on the date the bill was passed. It was listed as being in the drafting process Friday morning.

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