HELENA – The House Taxation Committee endorsed a bill Monday to extend to all new future electrical generating facilities – including coal and natural gas – the current tax breaks offered only to alternative energy facilities such as wind.
On a straight party-line vote, the committee approved Senate Bill 138 by Sen. Art Wittich, R-Bozeman, and sent it to the House floor for debate. All Republicans on the committee voted for the bill, while all Democrats opposed it.
If the bill becomes law, here’s how it would work:
Starting after June 30 this year, all future electrical generating facilities, fuels and gas production facilities that meet certain requirements would be deemed as Class 14 property. That’s the current classification for renewable energy production and transmission property, and it has a 3 percent tax rate.
The bill would potentially reduce the tax rate on new properties’ facilities that under current law would be classified as:
• Class 7, non-centrally assessed utilities such as electrical cooperatives, which now pay at an 8 percent rate.
• Class 9, pipelines and non-electric generating property of electric utilities, which now pay at a 12 percent rate.
• Class 13, telecommunications utilities and electric generating property of electric utilities, which now pay at a 6 percent rate.
Rep. Kathleen Williams, D-Bozeman, called the bill “poor tax policy.”
“There’s reasons we had preferential tax treatment for the alternative energy generation,” Williams said, “and I don’t think there’s any reason to lower everyone to the same rate.”
Rep. Brian Hoven, R-Great Falls, said he strongly favors the bill for two reasons. It ultimately would lower taxes for Montanans and reduce the protests over what tax classification are appropriate for these businesses.
Rep. Douglas Coffin, D-Missoula, said he was concerned about the potential loss of taxable value for local governments. Citing a projection in the fiscal note, he estimated the potential revenue loss at $1.6 million in fiscal 2015 and $1.7 million the second year.
“We’re blowing a hole in their budget and there’s no backfill,” he said. “We’re doing this to our localities.”
Rep. Austin Knudsen, R-Culbertson, defended the bill, saying it doesn’t create any loss of revenue because the new tax rates would apply only for new generating generation, not current facilities.
“By having these different property tax classifications on generation facilities, we’re picking winners and losers,” Knudsen said. “We’re stating that you renewables, you’re a winner, and you over here, you dirty coal and you dirty natural gas, or whatever the case may be, you’re a loser, and we’re going to tax you higher.”
Knudsen said he doesn’t care about what fuel the generating plants use.
“They’re generating power for the state of Montana,” he said. They should be taxed the same.”
Rep. Tom Jacobson, D-Great Falls, asked what how the proposed changes would work for a new power plant that shipped electricity out of state.
However, Rep. Mary McNally, D-Billings, pointed out that Montana already is a net exporter of energy.
In other business, the committee tabled, 17-3, HB569,by Rep. Scott Reichner, R-Bigfork, to freeze property taxes for qualified residential property whose owner is at least 65 years.
There was little discussion on the bill, which would have reduced property taxes statewide by $2.5 million in fiscal 2015, $4.9 million in 2016 and $7.2 million in 2017. As for the general fund, it would have cut it by about $418,000 in fiscal 2015, $820,000 in 2016 and $1.2 million in 2017.
“I recognize that when you’re trying to pass legislation of this magnitude, that sometimes it takes time to bring all sides and all groups together,” Reichner said later. “I’m looking forward to working on it during the interim and bringing together the entities so they can support this kind of legislation in the future.”