Intangible Personal Property Exemption: Shifting Taxes to Homeowners

Jan 09, 2019

One of MBPC’s favorite documents was just released, the Department of Revenue’s Biennial Report. The Biennial Report gives an overview of the state’s taxes, where they go, and even has a chapter on tax expenditures. Tax expenditures are tax breaks that result in less state revenue and, as a result, fewer funds to invest in things like education, infrastructure, and health care. One interesting addition to the Biennial Report this year is the intangible personal property exemption for centrally assessed property. This particular provision in state code results in some of the biggest corporations in the state receiving a tax break to the tune of $15 million annually, and shifting $80 million of their property tax responsibility onto other property taxpayers (primarily residential homeowners). Those same $15 million could have funded an entire year of the school for the deaf and blind.
Centrally assessed properties operate as single entities and are connected across county or state borders. These entities’ values for the purposes of property taxes are centrally assessed by the state. The types of centrally assessed property in Montana includes railroads, telephone lines, power lines, natural gas transmission or oil transmission lines, pipelines, airlines, coal mines, and more. A cell phone company is one example of a centrally assessed company. The company’s towers work together to form a connection and communicate with each other. This connection is what gives the company its value. Thus, it is centrally assessed in Montana by the Department of Revenue on a statewide basis rather than having each county determine how much it should pay in taxes.
So what exactly is “intangible personal property”? Intangible personal property is property that cannot be touched. This can include things like contracts, agreements, copyrights, software, and even the good reputation of a company that gives customers the confidence to invest. Montanans around the state are feeling the pressure of increasing property taxes. One way to address this concern of many of our citizens is to require that centrally assessed corporations pay property taxes on the full value their property, and not just their physical property. The intangible personal property exemption allows these big companies to exclude intangible property from the property included in their tax bill. For example, a cell phone company could exclude the value of the computer software used in the transmitters as intangible property. The physical equipment used in the transmitter would be tangible property. Everyone knows that not all value is tangible, and that the new tech economy would not be as valuable as it is without intangible value. What would a company be without their copyrights, agreements, and everything else that can’t be held in a hand? When big businesses get out of paying their fair share, guess who picks up the tab? Schools do not cost less to educate our kids, roads do not cost less to fix, and public safety does not cost less to respond to emergencies. Instead, local homeowners and small business owners pay more. It is time for the Montana Legislature to repeal the intangible personal property exemption for centrally assessed companies.
Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.