Wonky Word Wednesdays: Protested Taxes

Jul 16, 2014

As you may remember, the Montana Budget and Policy Center was heavily involved in the push against I-172 – the Charter Communications ballot initiative. We even did one of our first wonky words on centrally assessed property taxes to help explain the issue. Last week, the Department of Revenue announced a settlement with Verizon (which we will explain in detail tomorrow), and this week the Montana Revenue and Transportation Interim Committee will talk about other pending litigation. These cases involve companies protesting taxes. So lets spend this week’s wonky word digging in to the issue of protested taxes.

Like many Wonky Words about taxation, this explanation begins with Montana’s Constitution passed in 1972.  The Constitution required the legislature to establish an “independent appeal procedure for taxpayer grievances about appraisals, assessments, equalization, and taxes." Basically, Montana is required to have a system where people or companies can argue they have been taxed incorrectly and seek some sort of solution. So the state created the State Tax Appeal Board, along with County Tax Appeal Boards.  

Now there are formal ways to protest your taxes if you or your company believes your taxes have been assessed incorrectly. Missoula County even has step by step instructions to use. It is important to note that in Montana, when it comes to disputing property taxes, state law requires the taxpayer to pay the taxes, but under written protest. 

Property taxes comprise 12 percent of the revenue collected in Montana. That seems small, but not when you consider that 81 percent of property tax revenue is invested in local governments, including supporting local schools, public safety, and maintaining infrastructure. Property taxes are a critical piece of local government budgets.

When a company like Charter Communications protests its property taxes, the company pays the taxes, but those funds are held in an escrow account by the state. Generally speaking, those funds are unusable until the situation is resolved. This means that those local governments and schools are left with holes in their budgets - sometimes for years – until a settlement is reached.

In the US, individuals and businesses should have a system to dispute when an error has been made regarding taxes or other issues. People and government make mistakes, and there must be systems in place to correct those mistakes. However, it is important to realize the impact of large companies protesting significant portions of its taxes and what that means for our roads, schools, and local governments.

Tomorrow on the blog we will dig into the Verizon settlement and the issues surrounding protesting taxes.

Next week’s word will be back on the state budget. Thanks for being a part of wonky word Wednesdays.

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.