MATT GOURAS Associated Press Writer
HELENA If Montanans end up getting tax relief, such as a $400 per-homeowner rebate, they may have Plum Creek Timber to thank for footing a big part of the bill. Buried in the tax reduction and tax collection “enhancement” bill that cleared the Senate this week is a provision aimed at unique corporate structures called real estate investment trusts like Plum Creek Timber. It could be worth as much as $20 million to the state, most of it paid by Plum Creek. Democrats say the new money is needed to pay for the tax cuts that could come out of negotiations between Senate Democrats and House Republicans. And so far, Republican leadership isn’t pushing back too hard on the idea of taxing Plum Creek. The REIT tax is in a so-called “tax cheats” package that includes money for more auditors at the Department of Revenue and other enforcement measures aimed at collecting money from nonresidents and corporations. Critics have said the measures don’t close loopholes, and instead are an “outrageous attempt to carve out a fiefdom at the Department of Revenue.” And some of the package, like the REIT measure, is a carefully disguised tax increase, they say. “It’s a new tax. It’s a change in tax philosophy resulting in a new tax,” said Mary Whittinghill with the Montana Taxpayers Association. Sen. Jim Elliott, D-Trout Creek, said that’s not true. He said the tax closes a loophole that has existed for decades that allows REITs to escape corporate taxation. He said Plum Creek needs to pay those taxes because it uses government services, such as fire protection for the roughly 1.3 million acres it owns in the state. Elliott said the new tax collection measures will collectively generate an extra $70 million every two years. “They are what pay for the tax reductions. That is responsible fiscal management,” he said. Plum Creek Timber, based in Seattle, said its Montana operations would surely become less profitable. A spokeswoman said Plum Creek converted to a REIT in order to raise more money for growth. Corporations organized as REITs argue that the structure requires them to return 90 percent of their income to shareholders, who then individually pay taxes on the income. But Elliott points out that most of the shareholders are not in Montana where Plum Creek owns more land than in any other state it does business and so Montana is getting little from those personal income taxes. The fate of the tax legislation is still up in the air. House Majority Leader Michael Lange, R-Billings, said permanent property tax relief remains the biggest issue for Republicans, and they stand ready to negotiate on the other pieces. Senate President Mike Cooney, Dhelena, said he thinks both sides are close to a compromise. Lange said he won’t advance the main spending bills for the state until he reaches an agreement with Democrats on the tax relief package and gets Gov. Brian Schweitzer’s signature. The governor has said he will need to see the budget and tax bills together. Tax relief talks could go on through the end of the session next week _ but Lange said the REIT tax and other new powers for the Department of Revenue are not necessarily a sticking point. “Those aren’t the biggest issues to me,” Lange said. “We need to work on the tax cut pieces.” Tax bills still alive include House Bills 678 and 833 and Senate Bill 220.