Montana State Legislature

Legislative Council assigned the House Joint Resolution No. 35 study to the Revenue Interim Committee. The committee completed the study in September 2020, adopted a final report, and recommended the introduction of two bills to the 2021 Legislature:

• HJ35-02: Property tax circuit breaker; and
• HJ35-03: Increase minimum corporate income tax to $200.

The study focused on two main topics: consideration of the adequacy of revenue for the state of Montana and for local governments and whether the tax system relies on diverse and balanced sources of revenue. The committee focused its work on existing revenue sources including the property tax, the individual and corporate income taxes, and natural resources taxes, and considered other revenue sources such as a consumption tax.

The committee completed the study using a subcommittee composed of all 12 member of the Revenue Interim Committee and the following public members:

• Rose Bender, Senior Fiscal Policy Analyst, Montana Budget and Policy Center;
• Eric Bryson, Executive Director, Montana Association of Counties;
• Tim Burton, Executive Director, Montana League of Cities and Towns;
• Dwaine Iverson, CPA;
• Bob Story, Executive Director, Montana Taxpayers Association; and
• Doug Young, Professor Emeritus, Montana State University.

Materials provided for the study are provided below by meeting date.

Background Materials

Submitted Materials

HJ 35 Final Report

Meeting Materials

September 11, 2020

The HJ 35 Tax Study Committee concluded its work and recommended the following legislation to the Revenue Interim Committee, which will consider the recommended legislation at the September 11 meeting.

• HJ35-01 - Full inflation for mill levy limit
• HJ35-02 - Property tax circuit breaker
• HJ35-03 - Increase minimum corporate income tax to $200
• HJ35-04 - Revise calculation of capital gains tax credit
• HJ35-08 - Decouple from CARES Act net operating loss deduction provisions
• HJ 35 Study of State and Local Tax Policy Final Report (Draft)

August 25, 2020

• Agenda
• Information requests from July meeting
  • Carry Forward Authority for State Mill Levies -- Section 15-10-420, MCA -- Jaret Coles
  • Effect of circuit breaker credit on effective property tax rates -- Eric Dale, DOR
  • Impact of circuit breaker on effective property tax rates -- Sen. Dick Barrett
  • Treasure State Endowment Program Reports and Resources
  • Answers to Montana Legislators' Questions -- Marco Guzman, Institute on Taxation & Economic Policy
• HJ35-07 - Revise tax rates for second homes
• HJ35-08 - Decouple from CARES Act net operating loss provisions
• HJ35-06 - General sales tax
  • Sales Tax Bill Options -- Megan Moore
  • Revenue Impact of Statewide Sales Tax - Modeled After South Dakota -- Finn McMichael, DOR
  • Distributional Analysis of Sales Tax & Offset Option: slides,  spreadsheet -- Institute on Taxation & Economic Policy
  • Sales Tax Options Calculator
  • Mitigating Regressivity in Our Tax System (memo) -- Rose Bender, Montana Budget & Policy Center
• Public comment
  • Tim Abney, Hamilton
  • Lt. Gov. Mike Cooney
  • Brian Fausett
  • Carol Fowler, Stevensville
  • Jenny Jessop, Corvallis
  • Dane Kendall
  • Marne Newton
  • Ruth Nordin, Great Falls
  • Charlotte Schneider, Hamilton
  • Scott Smith
  • Rep. Brad Tschida, Missoula
  • Jackie Wahl, Belgrade

July 20, 2020

• Agenda
• Tab 1: Property Taxes
  • Rising Property Taxes: What You Should Know (Revised May 2020) -- Doug Young
  • Determination of Tax Revenue and Mill Levy Limitations  -- DOR
  • HJ35-01 - Full inflation for mill levy limit
  • HJ35-02 - Property tax circuit breaker
    • HJ35-02: Circuit Breaker Bill -- Megan Moore
    • Percent Reduction in Property Tax from Circuit Breaker -- Sen. Dick Barrett
• Tab 2: Individual Income Tax
  • CARES Act Changes to Net Operating Losses -- Megan Moore
  • Montana Tax Exempt Tip Income in Tax Year 2018 -- Aaron McNay, DOR
  • Memo: Calculation of Capital Gains Tax Credit (HJ35-04)
    • HJ35-04 - Calculation of capital gains tax credit
  • HJ35-05  - Direct income tax collections above inflation to public infrastructure
• Tab 3: Corporate Income Tax
  • Resisting the Allure of Gross Receipts Taxes: An Assessment of Their Costs and Consequences -- Tax Foundation
  • Broad Based Gross Receipts Taxes: A Worthwhile Alternative? -- Institute on Taxation and Economic Policy
  • Corporate Income Tax-Minimum Tax Increase -- Finn McMichael, DOR
    • HJ35-03  - Increase corporate minimum tax
• Tab 4: Sales Tax
  • Presentation to the Revenue Interim Committee on Sales Taxes (slides) -- Marco Guzman, Institute on Taxation & Economic Policy
  • Who Pays?: A Distributional Analysis of the Tax Systems in All 50 States -- Institute on Taxation and Economic Policy
    • Who Pays? (Montana) -- Institute on Taxation and Economic Policy
  • Options for a Less Regressive Sales Tax in 2019 -- Institute on Taxation and Economic Policy
  • Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform -- Institute on Taxation and   Economic Policy
  • How Sales and Excise Taxes Work -- Institute on Taxation and Economic Policy
  • Expanding Sales Taxation of Services: Options and Issues -- Center on Budget & Policy Priorities
  • Four Steps to Moving State Sales Taxes into the 21st Century -- Center on Budget & Policy Priorities
  • Memo: Revenue Impact of Statewide Sales Tax -- Finn McMichael, DOR
• Tab 5: Natural Resource Taxes
  • Montana's Natural Resources Fiscal Policies -- Mark Haggerty, Headwaters Economics

May 13, 2020

• Agenda
• Tab 1: Property Tax
  • "Montana property taxes keep rising. Here's where residents shoulder the heaviest loads."-- Montana Free Press (article using data presented in January)
    • State Property Tax Authority and Limits -- Megan Moore
    • Special Districts: Statutory Authority -- Toni Henneman, LSD
    • Hawaii Treatment of Residential Property Owned by Residents and Nonresidents -- Jaret Coles
    • Impact of Commodity Prices on Valuation -- Department of Revenue
    • Residential Property Taxes: overview, spreadsheets (corrected) -- Megan Moore
    • Public comment:  Montana Infrastructure Coalition,  John Payne
• Tab 2: Individual Income Tax
  • Individual Income Tax Overview -- Megan Moore
    • Individual Income Tax Form 2
  • Historical Analysis of Montana Revenues -- Legislative Fiscal Divisions (pages 4-6)
  • Montana's Changing Demographics -- Legislative Fiscal Division (pages 11-13)
  • Montana Taxes By County in 2018 -- Department of Revenue
  • Types of Capital Gains Income -- Aaron McNay, Department of Revenue
  • Capital Gains in Montana By Household -- Aaron McNay, Department of Revenue
  • Individual Income Tax Bills of Interest to Committee -- Megan Moore
  • Individual Income Tax Credit Analysis (2018) -- Stephanie Morrison, LFD
• Tab 3: Corporate Income Tax
  • Corporate Income Tax Overview -- Megan Moore
    • Tax Cuts and Jobs Act State Impacts: Corporate Income Tax (2018) -- Megan Moore
    • Corporate Income Tax Apportionment -- Megan Moore
    • Implications of Changing Montana's Corporation Apportionment Formula -- Sam Schaefer, Legislative Fiscal Division
  • Impact of TCJA and Market Based Sourcing on Corporate Income Tax -- Finn McMichael, Department of Revenue
  • Corporate Income Tax Bills of Interest to Committee -- Megan Moore

January 13, 2020

• Agenda
• Tab 1: Property Tax Basics
  • Rising Property Taxes: What You Should Know -- Doug Young, MSU
  • Property Tax Overview -- Megan Moore, LSD
  • Property Tax History -- Megan Moore
  • Property Assessment Timeline -- Megan Moore
    • Key Dates 2019 -- Department of Revenue
  • Property Assessment -- Department of Revenue
  • School Funding -- Pad McCracken, LSD
    • K-12 Funding Basics
  • Legal Issues Associated with the Property Tax -- Jaret Coles, LSD
• Tab 2: Evaluation the Property Tax (Committee Data Requests)
  • Mill Levy History: overview, graphs, spreadsheets
  • Voted levies information  -- Montana Infrastructure Coalition
    • Terry Johnson slides
  • Property Taxes Paid by Class -- Megan Moore
  • Percent Change in Montana Property, 2000-2014 -- Montana Taxpayers Association
  • Distribution of 10-Year Increase in Estimated Taxes for Residential Properties -- Department of Revenue
  • Relative Change in Taxable Values and Taxes for Residential Properties -- Department of Revenue
  • Change in Market Value, Taxable Value, Inflation, and Taxes Paid -- Department of Revenue
    • Phillips County example
  • Property Tax Abatements -- Megan Moore
• Tab 3: Considering Revisions to the Property Tax
  • Property Tax Limits -- Megan Moore
  • Residential Property Tax Relief programs -- Lincoln Institute of Land Policy
    • Database and 2018 summary tables
      • exemptions and credits
      • circuit breakers
      • deferrals
      • tax freezes
    • Tax Savings from Property Tax Exemptions and Credits in 2012
  • Circuit Breakers -- Megan Moore
    • Property Tax Circuit Breakers --  Lincoln Institute of Land Policy
  • Past Legislation of Interest to Committee -- Megan Moore
  • Proposal to Increase Property Tax with Corresponding Income Tax Credit, Additional Thoughts -- Dwaine Iverson
• Tab 4: Miscellaneous
  • Revised Committee Work Plan
  • Allocation of Property Taxes by Taxing Jurisdiction -- DOR Biennial Report
  • Estimated Reappraisal Impact on Property Tax Liability (SB 513 2009)
  • Senate Bill 513: Targeted Property Tax Relief -- Montana Budget & Policy Center
  • Taxes Paid Per $100,000 Value -- Montana Taxpayers Association

November 18, 2019

• HJ 35 Committee Agenda
• HJ 35 Tax Study Survey Results Overview
  • Complete Results
• Information requests from September meeting
  • Tribal revenue sharing: alcohol and tobacco taxes, fuel taxes
  • Average Property Taxes as a Percent of Household Income (Exhibit from SB 513 2009)
  • Senate Bill 513: Targeted Property Tax Relief -- Montana Budget & Policy Center
  • Percent Change in Montana Property, 2000-2014-- Montana Taxpayers Association
  • Property Assessment, Budgeting, and Appeals Timeline (draft) -- Megan Moore
• Public comment
  • Gwen Jones, Missoula City Council
  • Claudia Clifford

September 24-25, 2019

• HJ 35 Committee Agenda
• Tab 1: Overview of Montana Tax System
  • An Overview of Montana Taxes -- Doug Young
  • Montana Taxes Comparisons -- Montana Taxpayers Association
• Tab 2: Balanced Revenue Systems
  • Department of Revenue information
  • Understanding the Graphs -- Montana Taxpayers Association
• Tab 3: Reliability
• Tab 4: Equity
  • HJ 35: Equity and the Tax System -- Megan Moore
  • Department of Revenue information
  • Who Pays Taxes in Montana -- Montana Budget & Policy Center
• Tab 5: Economic Neutrality
  • HJ 35: Economic Neutrality -- Megan Moore
• Tab 6: Administration and Compliance
  • Administration and Compliance (slides) -- Department of Revenue
• Tab 7: Responsiveness to Competition
  • State comparisons for specific tax types available on tax overviews
  • Department of Revenue information
  • Where States Get Their Money -- Pew
  • How States Raise Their Tax Dollars -- Pew
  • Facts & Figures -- Tax Foundation
• Tab 8: Accountability
• Tab 9: Complementary State and Local Tax Systems
  • HJ 35: Complementary State & Local Tax Systems -- Megan Moore
  • Local Government Sources of Revenue (June 2016) -- Megan Moore
  • Memo: Local Governments Levying Maximum Authorized Mills (Nov. 2015) -- Megan Moore
  • Annual Budget in Brief, City of Great Falls, Fiscal Year 2020
  • Public comment:
    • Montana Infrastructure Coalition: Total Montana Tax Sources, City/County Revenues and Expenditures

June 27, 2019

• Draft Work Plan
• Draft Work Plan Decision Matrix
• Tax Policy Handbook for State Legislators -- NCSL
• Principles for Evaluating State Tax Sources -- Megan Moore, LSD
• Tax Glossary
• Public Comment
  • Letter from Montana Infrastructure Coalition
  • Making Montana's Tax System Work for All Montanans -- Montana Budget and Policy Center