If there is ever a time when you should really fear the tax man in Montana, it’s now. Especially if you do business here but live elsewhere, are a pharmaceutical company, online booking agency, oil lease trader or your last name is Blixseth.
The rate at which the Montana Department of Revenue is raking in money, and the eagerness at which it is pursuing still more, tells me two things: previous revenue departments were lax and the state, specifically Gov. Brian Schweitzer, is looking under every mattress to keep the state in the black.
Except these mattresses are absurdly large.
In August, the revenue department reported that it had collected a record $80 million in audit collections. That’s in addition to the $77.5 million the agency collected the previous fiscal year – compared to $44.5 million in 2005. In fact, Schweitzer said in a recent visit to Kalispell that for every $1 spent on audits the agency has brought in $8.
He has called Revenue Director Dan Bucks a “pit bull” and has cautioned legislators against coming to Helena “to cut funding for the revenue (auditors).” And the governor continues to expand the list of those he believes owe the state money.
There’s the pharmaceutical companies, which he has compared to a “drug cartel” that cozies up to Congress to find tax loopholes. He argues that they make 70 percent of their worldwide profits in the U.S. but pay just 6 percent of their taxes here. He and Bucks are drafting legislation that would change that. He estimated the state could collect “millions” more a year from the companies
He’s targeted out-of-state oil lease traders, which he suspects fail to report income tax profits on many of their transactions. He and Bucks are hoping to come up with a way to track the deals.
Then there’s his dispute with online travel booking agencies, which may be the most public of his tax pursuits. The governor criticized Travelocity leaders at an economic summit in Butte and contends that the industry owes Montana bed tax money, which he says could net the state millions more.
“You can’t just unilaterally decide you’re not going to pay taxes that are owed in Montana,” Schweitzer said in a recent interview. Travelocity maintains that it doesn’t owe anything.
Perhaps the best example of the state shaking down anyone and anything it expects might owe it money is its recent pursuit of alleged back taxes owed by Yellowstone Club developers Tim and Edra Blixseth. The couple is now divorced and has been in and out of court since the billionaire’s club in Big Sky was taken over by creditors.
A federal bankruptcy judge ruled that a $375-million loan Tim Blixseth arranged for the club was used almost entirely to maintain the couple’s lavish personal lifestyle. Not long after the ruling, the Montana Department of Revenue filed court documents contending the money is taxable and the Blixseths thus owe the state a staggering $57 million.
Who knows if the state will ever see any of that money. Tim Blixseth calls the claim “bogus” and Montana will have to compete with creditors already seeking millions from the couple.
Of course, the Schweitzer administration’s mission to squeeze as much tax revenue from as many avenues as possible comes before a legislative session in which economists predict a tight budget. A few million dollars in Montana means a lot more than it would in almost any other state budget. For example, $57 million would cover one-sixth of a budget shortfall projected to be as high as $300 million, although Schweitzer dismisses those predictions.
Either way, expect the shakedowns to continue.