Mountain Water suing Department of Revenue for $5.2M tax refund, again
Mountain Water Co. is asking District Court to order the Montana Department of Revenue to refund more than $5.2 million in property taxes paid by the company after 2014, and to cover all attorney fees incurred in its lawsuit with the state.
In documents filed this month in Missoula District Court, the former owner of Missoula's drinking water system said the state has refused to refund taxes assessed on Mountain Water after the April date, which now amount to roughly $5.28 million.
The court's decision could carry implications for a number of taxing jurisdictions, though a Helena District Court judge has already panned Mountain Water's argument as “crafty,” saying it ignores a number of issues and was initially filed in the wrong court – an effort the judge suspects was an attempt at a favorable ruling.
“Mountain Water is entitled to a refund of all property taxes it paid under protest after April 2, 2014, and the (Department of Revenue) must take all steps necessary to ensure that refund is issued,” the company argued this month in its suit. “Mountain Water is (also) entitled to recover its attorney's fees and costs in pursuing this action against the (state).”
Mountain Water owned and operated the water system until June of last year when the city of Missoula took official possession of the utility. But the city initiated eminent domain back in 2014 when it filed its original complaint seeking condemnation.
After receiving that original court summons four years ago, Mountain Water sent a letter to the Department of Revenue asking it to stop assessing taxes on the company's property and instead assign them to the city as the system's condemnor.
“The condemnor must be assessed the condemnor's pro rata share of the taxes for the land being taken as of the date of possession or summons, whichever occurs first,” Mountain Water argued in its suit, citing state law.
The company said it has paid $5.28 million in taxes under protest since 2014 and has attempted to recover the funding. It filed its first complaint in 2015 in Helena District Court and eventually won a favorable ruling, though the Montana Supreme Court overturned that decision.
Mountain Water filed a subsequent motion late last year, again in Helena District Court and again asking for a refund of all taxes paid since 2014. That effort, however, prompted a harshly worded response from the judge, who ordered a change of venue back to Missoula District Court.
“This court will not permit Mountain Water to play fast and loose with the settlement agreement,” wrote Helena District Judge Michael McMahon. “(Missoula) District Court has tremendous historical knowledge, experience and familiarity with the underlying condemnation proceedings and the settlement agreement. (Missoula) District Court is the only proper venue for this proceeding.”
Tasha Jones, an attorney with Boone Karlberg who has represented the city in the Mountain Water case for several years, said the city will fight the company's latest request in Missoula District Court alongside the Department of Revenue.
“We are aligned with DOR that Mountain Water is not owed any refund of taxes, both as a matter of facts and law, and because this issue was settled in the settlement agreement reached with Liberty,” Jones said Monday.
Liberty was Mountain Water's parent owner.
Last fall, Deputy County Attorney Matt Jennings updated Missoula County commissioners on the case, saying the outcome could have implications for a number of local taxing jurisdictions, including the county and local schools.
Jones said the city included the potential of paying Mountain Water's assessed taxes in the event it lost the case. However, she remained optimistic in the outcome.
“The possibility of a refund has already been reserved and accounted for in the bonds that were issued and the short-term financing,” she said.