Proposed corporate property tax cut could lead to $80 million tax hike

A group of corporations are protesting the way their property taxes are assessed in Montana. More than 80 corporations from Verizon Wireless to Conoco Philips say they are being taxed too much for what are known as their centrally-assessed properties.

The group is asking a committee of state lawmakers to lower those rates.

But, the State Department of Revenue warns this would result in a large tax shift for small businesses and homeowners.

“Now, if you accept the industry recommendations made to you in July, you will tear up 8 decades of precedent and practice,” Department of Revenue Director Dan Bucks told the Revenue and Transportation Interim Committee on Friday.

Bucks says centrally-assessed property owners are looking for huge and unjustified tax breaks. He says it ends up being more than $80 million in taxes a year shifting away from corporations, “to homeowners, small businesses, farmers and ranchers.”

That is, a tax shift like that would need to happen or $80 million in state services would be cut.

So what is a centrally assessed property?

Well, think about it like a system or a network. Like a railroad, a gas utility or an oil pipeline, a telecommunications company—even a ditch can be considered a centrally assessed property. The state does not just tax a piece of centrally assessed property on its own but as a part of the value of the network.

Let’s use AT&T as an example. AT&T’s property taxes don’t just tax the land and material value of a cell tower, but incorporates in what that cell tower means to the wider AT&T network, based on measures like cost, stock price and income.

Attorney Mike Green is representing the Montana Taxpayers Association, which is bringing the protest from the Centrally Assessed property owners. He calls this taxing method completely ludicrous.

“There is absolutely nothing in case law, the statutes or the state of Montana, appraisal theory or in any other regard which suggests my home should be compared to a power line,” Green said.

Kalispell Republican Senator Bruce Tutvedt sits on the Revenue and Transportation Committee. He says these networks like AT&T are the only ones taxed for their income in both their income taxes and property taxes. He says that is not fair, even if it means the burden shifts to other parts of the tax base.

“What we want is equitability,” Tutvedt said, “what we want is a fair tax system, we want each class of property to pay its fair amount.”

The 2011 Legislature ordered a study on centrally assessed property taxes be brought before the Revenue and Transportation committee. The study found Montana does tax these types of properties more than surrounding states.

Senator Tutvedt says he has heard complaints from these companies that the taxes are affecting their investment in the state.

“We are starting to see real impacts from these companies from being taxed at significantly different rates than other states,” Tutvedt said.

Representatives from the centrally assessed property owners say they are looking for a sponsor for a bill to address their tax rate during the 2013 Legislature.

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