HELENA – Business groups turned out Wednesday to support a Republican senator’s bill to further reduce the state’s property tax on business equipment.
No one showed up at the Senate Taxation Committee to oppose Senate Bill 96 by Sen. Bruce Tutvedt, R-Kalispell.
It would lower the property tax rate to 1.5 percent on equipment valued at between $3 million and up to $10 million. If a business had $15 million worth of equipment, it would be taxed at a rate of 1.5 percent for the first $10 million and 3 percent for the remaining $5 million.
The current law taxes equipment valued at up to $3 million at 1.5 percent. The rate is 3 percent for property valued at more than $3 million. Business equipment valued at $20,000 or less is not taxed.
SB96 would cost the state $7.2 million from the state general fund in fiscal 2015 to reimburse schools, local governments and the university system for lost property tax revenue. In future years, the cost would be about $5 million annually.
Democratic Gov. Steve Bullock favors a different approach, one that would eliminate this tax for businesses with equipment worth less than $100,000.
In presenting his bill, Tutvedt said, “This is a jobs bill. This is to incentivize small companies.”
It would help attract businesses using expensive equipment such as gun manufacturers, printing presses and lumber mills, he said.
Tutvedt said the proposed 1.5 percent tax rate for the first $10 million of value in his bill would make it as the same effective rate that is charged on homes.
In 2011, Tutvedt sponsored the law that lowered the tax to 1.5 percent from 3 percent for businesses with equipment valued $3 million or less.
The Legislature has steadily lowered Montana’s business equipment tax since 1989 when it dropped from 12 percent to 9 percent. Since then, it was reduced from 9 percent to 6 percent over time and then 6 percent to 3 percent. It was set to be eliminated if a certain economic trigger was hit, but the 2005 Legislature halted that and froze the tax at 3 percent.
Webb Brown of the Montana Chamber of Commerce supported the bill, saying the business equipment tax rate “is absolutely an important tax consideration” that businesses use in deciding whether to relocate or expand their existing operations.
Idaho is considering eliminating its business equipment tax, which would leave Montana standing alone among its neighboring states with such a tax, he said.
Riley Johnson of the Montana chapter of the National Federation of Independent Business said the bill wouldn’t directly help the very small businesses he represents. But he said small businesses need big businesses.
Cary Hegreberg of the Montana Contractors Association endorsed the bill, saying, “Our member companies have huge capital investment in equipment.”
Also backing the bill were representatives of the various agricultural groups.
“Any tax savings that farmers and ranchers see goes back into our local economies,” said Nichole Rolf of the Farm Bureau.
Sen. Sue Malek, D-Missoula, told Tutvedt she believes businesses want more than just lower tax rates to locate here. They also want good schools, good roads and other services, she said.
“When we continue to cut taxes – we’re still way down in average income – are we shooting ourselves in the foot by not building the kinds of communities our businesses need?” she asked.
Tutvedt said Montana has a good education system and one that will get better under a bill by Sen. Llew Jones, R-Conrad, and good communities.
The committee didn’t vote on Tutvedt’s bill.
Missoulian State Bureau reporter Charles S. Johnson can be reached at (406) 447-4066 or at email@example.com.