Bill to cut number of businesses paying equipment tax gets first hearing

Feb 10, 2021

By Tara Jensen

Billings Gazette Montana lawmakers Tuesday got their first look at pieces of Republican Gov. Greg Gianforte's plan to reduce taxes on some Montana businesses and provide credits to companies sending their employees to skills trainings. The first bill the House Taxation Committee heard was the Business Investment Grows (BIG) Jobs Act, or House Bill 303. The bill, carried by Rep. Joshua Kassmier of Fort Benton, would raise the exemption for the state's business equipment tax from $100,000 to $200,000. The change means about 4,000 fewer businesses would would pay the tax, a savings of about $3.9 million in total to those operations. Data from the state Department of Revenue shows just over 8,000 businesses pay the tax now. The loss in property tax revenue to the state would be replaced with money from the state's general fund, Kassmier told the committee Tuesday. A fiscal note attached to the bill and signed by Kassmier shows the lost revenue from raising the exemption will equate to about $1.37 million less in local school revenue, $1.264 million in county revenue, $342,000 for tax increment financing districts statewide, $272,000 for cities and $41,000 to the state's university system, in addition to a $658,000 hit to the general fund. Those losses will be offset by backfilling with general fund dollars. Brendan Beatty, the recently appointed director of the state Department of Revenue, spoke in support of the bill, both as the head of the state agency and as an owner of a ranch outside Winnett. "There's a lot of positives with this bill and obviously very few negatives," Beatty said. "The effect of this bill, this will actually remove approximately 4,000 taxpayers from the personal property tax rolls. And if you're one of those 4,000 taxpayers, you won't even have to file a form with the Montana Department of Revenue." He estimated about 1,500 of the businesses would be agriculture operations, 300 would be natural resource industries, 200 would be in construction and trades, 200 in restaurants, hotels and hospitality and and more than 500 leasing and rental companies. Representatives from several industry associations across the state spoke in support of the bill. Nicole Rolf, with the Montana Farm Bureau Federation, said farming and ranching were capital-intensive businesses. "They often say we're asset rich and cash poor, because there's just a lot of tools that a farmer or rancher needs in order to run the business and grow the food and fiber that we need to run this country and feed our population," Rolf said. Dan Brooks, with the Billings Chamber of Commerce, supported the bill because he said it would reduce the cost of doing business in Montana while making local governments whole. "We also applaud the backfilling of local revenue to make sure that local governments aren't burdened with the choice of either raising taxes or cutting services because of changes that happen up in Helena," Brooks said. The three opponents to the bill said the business equipment tax had already been reduced significantly over the last few decades and that tapping the state's general fund to offset the revenue losses could leave the state in a bind if revenues drop unexpectedly. Rose Bender, with the Montana Budget and Policy Center, said past changes have resulted in the number of businesses that pay the tax dropping precipitously, from 36,000 in 2000 to about 8,000 now. Bender said the business equipment tax has decreased as the share of total property taxes paid from 15% in 1995 to 5% in 2020. During the same time, Bender said the share of property taxes paid by residential homeowners increased from 38% to 50%. "The reality is that over the last 25 years, homeowners in Montana have seen their property tax obligation grow in relation to the owners of business equipment. This change has occurred despite the fact that the total market value of business equipment in Montana has increased dramatically, by 133%, over the same time period," Bender said. The committee also heard House Bill 252, carried by Rep. Llew Jones, R-Conrad, that aims to create about 1,000 partial scholarships for employers to send their workers for training in the trades. The tax credit will pay up to 50% of tuition for an employee, up to $2,000 a year per worker, and $25,000 for an employer annually. The bill has a $1 million cap, though Jones said an amendment is coming to remove that. It's also paid for with general fund dollars. "We know there's a skilled worker shortage in Montana," Jones said. Just shy of 30 representatives from industries around the state spoke in support of the bill, saying it would help create more trained workers. The sole opponent again raised concerns about tapping general fund money and what lifting the $1 million cap could mean. The committee chair said Tuesday she expected to take action on the bills as soon as this week.