Calumet Montana Refining was back before the Cascade County Tax Appeal Board on April 29.

In this appeal, the company asked the board to reject a reappraisal issued by the Department of Revenue last fall for the company’s 2022 taxes after discovering that $79 million of assets had been missed in the initial appraisal.

The board voted 2-1 to accept the DOR’s revised valuation.

Kim Beatty, a lawyer for Calumet, told the board that Calumet had paid their 2022 taxes without protest though the company didn’t fully agree with the assessment, but said it had been in range with the 2021 agreed upon value.

Phil Murphy for Calumet said that the company agreed to a $355 million valuation in May 2021 for the entire Great Falls facility.

In November 2021, the company spun off some assets to create Montana Renewables, which is a separate company and taxpaying entity.

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Murphy said the hyrdocracker, which was installed in 2016, was transferred to Montana Renewables.

He said that from 2021, the company added about $6 million of assets, but had retired about $4 million, so only added about $2 million in value.

Murphy said the company didn’t appeal their August 2022 assessment, though they didn’t fully agree with it, to “pay our fair share” and be “good corporate citizens.”

Jennifer Sadler, sales and property tax manager for Calumet, said the company reported their property values to DOR in March 2022.

The company received and paid its assessments that summer.

DOR had initially valued Calumet at $165 million and Montana Renewables at $195 million, Sadler said.

Calumet didn’t agree with those valuations, she said, but didn’t appeal since they were consistent with the 2021 valuation.

Sadler said the company received a revised assessment in the fall of 2022 for $236 million though the company hadn’t made improvements or added assets.

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Beatty asked the board to reject the reappraisal and stick with the initial assessment that the company already paid.

She said that if the board did opt for a reappraisal to consider a $115 valuation from a third party appraiser the company had hired

The board went into closed session for about 45 minutes to hear testimony from the third-party appraiser at the company’s request due to proprietary information.

Mike Barber, an industrial appraiser for DOR, handles the Calumet valuations, as well as General Mills and Pasts Montana in Great Falls.

He said the 2022 appraisal had omitted $79 million worth of assets from Calumet due to a glitch in the department’s software, the company spinning off Montana Renewables and asking him to manually move assets from Calumet to the new company.

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Barber said the assets were properly reported by Calumet, but the software didn’t communicate correctly with another system used by the department, making them appear as duplicates that were then removed erroneously.

He said the error was discovered during the 2023 valuation process and those assets were added back to the company’s assessment.

DOR uses the same process for Calumet as other refineries in Montana to determine valuations, he said, and they don’t compare values year to year.

The reappraisal was done for one of Calumet’s properties, which is the main refining operation, and didn’t include other parcels such as the former Westgate Mall.

Barber said for 2022, in the revised assessment, Calumet’s land was valued at $274,000.

The company had $28 million of taxable improvements and $31 million in pollution control, which are nontaxable assets, he said.

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There was also a total of $204 million in personal property, which included taxable property and some nontaxable property that is still included in the valuation.

The total valuation for 2022 in the reappraisal was $235.5 million, Barber said.

Barber said that during the informal review of Calumet’s valuation, the company didn’t raise real issues with the department’s methodology.

Initially, Barber said Calumet had been valued at $300 million for 2022 but the company disagreed so through an informal review, DOR considered the company’s concerns and the valuation was adjusted to $158 million.

In that case, some assets were listed on both the Calumet and Montana Renewables valuations, which Barber said, “we agreed that shouldn’t be happening.”

Some assets had been retired from service so were removed and DOR applied a five-year economic life to catalysts, he said.

Barber said that typically when a new company is created, the taxpayer moves their assets themselves in the reporting system to the new company.

He said that Calumet had reported all their assets on the Calumet side for 2022, then emailed Barber a list of assets that needed to be moved to Montana Renewables.

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Barber said it was his first year assessing Calumet and since he was trying to be helpful, manually created the new company and moved those assets for Calumet.

But the software glitch caused some of the assets to be overwritten and then omitted entirely from the total valuations.

“It’s just a thing that happened and it’s been fixed as a result of this,” Barber said.

Murphy, for Calumet, said that their valuation went from $355 million in 2021 to $383 million for 2022 for the total Great Falls facility, that includes Calumet and Montana Renewables, without any significant improvements.

Barber said the company split into two refineries so there was a change in valuation.

Jill Gallagher of DOR said that tax settlements have more factors than a simple valuation.

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She said that the department had previously taken the cost of litigation into consideration and higher ups made decisions outside of the appraisal process. Gallagher said that the mentality within the department had changed and now the department won’t settle for anything less than what market value is.

Beatty asked Gallagher if the 2021 agreement was fair market value.

Gallagher said she wasn’t part of those discussions.

Beatty asked who could testify to those discussions and whether the settlement was fair market value.

Pressed, Gallagher said one of the department officials who was involved had since retired, or Beatty’s husband, who was appointed as the DOR director on January 2021 and currently serves in that position.

Tony Zammit, DOR’s deputy chief legal counsel, said Calumet also had a copy of the settlement agreement which had been signed by the current deputy director.

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Zammit said that the DOR director had recused himself from tax protests regarding Calumet and delegated authority on that matter to his deputy.

Beatty said the revised valuation was an increase of about $79 million and asked the board to reject it, saying the law didn’t require a reassessment if assets were missed, but instead said “may” conduct a reassessment.

Zammit said it was “an unfortunate confluence” of issues and that the DOR had an obligation to correct the valuation and tax rolls to ensure everyone was paying their fair share.

Jean Clary, tax appeal board member, said “I think it’s a necessity to make a correction when there’s obviously a mistake made. I think making a correction is important.”

Russell Hunnewell, board member, said he agreed that errors should be corrected but was concerned that it seemed as if only Calumet had this particular issue.

Chuck Pankratz, board member, said that DOR has an obligation to correct the error and that it only affected Calumet since they were the only refinery to spin off another company during the 2022 tax year.

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All three board members said they were struggling to make a determination and Clary said she understood both sides.

There was some discussion amongst the board of not making a decision and referring the matter to the Montana Tax Appeal Board.

Hunnewell said the local board has a responsibility to make a decision but moved to leave Calumet’s valuation and the August 2022 number and DOR could appeal to the state if they wished.

That motion failed 1-2.

Pankratz said the DOR had also made reductions to Calumet’s valuation during the informal review process and moved to accept the revised tax valuation.

That motion passed 2-1 with Hunnewell opposed.

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Calumet also has a pending tax appeal before the Montana Tax Appeal Board, asking them to override the county tax appeal board’s denial and lower their taxable value for 2023 by about $189 million.

DOR valued Calumet’s land at $118,944; and the buildings, equipment and improvements at $299,428,094 for a total of $299,547,035.

During a November hearing, Calumet asked the Cascade County Tax Appeal Board to lower their valuation for the buildings, equipment and improvements to $109,881,000 for a total of $109,999,944.

That’s a reduction of $189.5 million.

The county board denied the request.

In mid-December, Calumet appealed the decision to the Montana Tax Appeal Board as they did in 2018.

Dave McAlpin, chair of the state board, told The Electric on April 29 that the board had granted both parties more time to work toward narrowing issues, consolidating years in appeal or settling.

He said the board will received an update on those discussions on or before May 10.

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According to the appeal filed with the state board in December, Calumet is asking for their total valuation to be lowered to $110,000,000.

In their appeal, Calumet states that the county board and the DOR used the incorrect methodology to determine their valuation and that they’d be prepared for a hearing by Sept. 30, 2024.

During their November hearing, Philip Murphy for Calumet, said that their taxes have quadrupled since the company purchased the refinery in 2012.

He said that in 2012, their taxes were $1.4 million. In 2021, Calumet paid $5.5 million and in 2022, $6.2 million in taxes.

Calumet protested their taxes in 2019, which was a continuation of the 2017-2018 protest case that was settled in 2020.

The Montana Department of Revenue set Calumet’s value at $538 million for 2017. In February 2018, the three-person county tax appeal board lowered the value to $312.5 million. Calumet had requested their value be lowered to $190.7 million.

Both Calumet and the DOR appealed that decision to the Montana Tax Appeal Board in 2018.

In 2020, the parties settled and according to DoR, of the roughly $17 million paid by Calumet under protest for tax years 2017-2019, about $9.5 million was released to the local jurisdictions and $1.5 million to the state.

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Once the protest was settled, the county issued a refund of $4.7 million to Calumet and milled a special levy to recoup $1.2 million of funds the school district had to pay back to Calumet since they accessed their portion of protested taxes.