The House Taxation Committee conducted its lengthy hearing on House Bill 5 Friday morning and early afternoon. But the panel didn't meet again later Friday or all of Saturday to vote on the bill and possibly amend it.
It is common in special sessions for committees to work late into the night, if necessary, to pass bills to the floor for debate. The House Appropriations Committee, in contrast to the Taxation Committee, met until about 9 p.m. Friday night to amend and pass out the major budget bill.
HB5 is one of the major bills of the special session. Besides Schweitzer's rebate, it includes a renter's tax credit of up to $120 a year and an exemption from property taxes of the first $65,000 worth of equipment owned by a business.
It also contains a series of measures that Revenue Department officials say are necessary to close tax loopholes, step up enforcement and crack down on those out-of-state businesses and individuals they believe are cheating Montana out of taxes owed.
Most elements of HB5 were included in the comprehensive agreement reached a week ago by a dozen or so moderate House Republicans and top Schweitzer administration officials.
Lake, who wasn't part of the group that consummated the deal, said earlier he doesn't feel bound by it.
“As tax chairman, I am not going to be held hostage by an agreement that is bad tax policy,” Lake told reporters.
It was the reporting and enforcement issues that bothered Lake, who believes the Revenue Department already has sufficient authority to crack down on tax cheaters.
Lake met for nearly two hours Saturday afternoon with Revenue Director Dan Bucks, deputy Revenue Director Dave Hunter and Gov. Brian Schweitzer's chief policy adviser, Hal Harper. Some other lawmakers from both parties also were there.
“I feel a strong obligation to the people of Montana to have good tax policy,” Lake said. “This bill in its current form has some fatal flaws in tax policy.
Lake read from a five-page sheet that he later acknowledged under questioning by Rep. Jill Cohenour, D-East Helena, was prepared by the Montana Taxpayers Association and groups representing the real estate and title insurance industries. The same groups have led the opposition to a series of Revenue Department bills in 2005 and 2007. Lake also offered amendments from the five-page sheet.
In particular, Lake objected to provisions of the 61-page bill that would have forced real estate agents or title company officials to collect capital gains taxes owed to the state when an out-of-stater sells land in Montana.
Lake, who is a real estate agent, suggested the Revenue Department use another reporting form after real estate deals to make sure proper taxes are collected. Bucks, however, said this method would require 20 more Revenue Department employees instead of the two needed for the withholding system.
The Taxation Committee chairman also opposed provisions to empower the Revenue Department to go after those out-of-state businesses and residents that Bucks alleges are cheating Montana out of taxes they owe or those Montanans using fraudulent tax shelters.
At one point, Bucks expressed his frustration. He said he was well familiar with the information provided to Lake and outlined by the legislator because the same groups have used it repeatedly during the session to oppose the bills.
“No one has asked whether those organizations have members or their boards that have engaged in abusive tax shelters, listed and reported,” Bucks said.
The Revenue director said four companies in Montana paid $11 million in fees to an accounting firm to buy illegal tax shelters to avoid paying state taxes and shift more of a burden on honest taxpayers. Confidentiality requirements prevented him from disclosing the names, he said.
“What has happened regarding the defrauding of Montana citizens is reprehensible,” Bucks said.
Few major agreements were reached at the meeting.
The Revenue Department agreed to drop a provision that would change how cellular telephone property is assessed and taxed. Lake agreed to a few minor changes.
The Schweitzer administration officials agreed to consider Lake's alternative method to have out-of-state real estate sales reported rather than have taxes withheld by real estate agents or title company officials. No commitment was made, however.
Afterward, Democratic Rep. Cohenour said, “I do think that there's a stall tactic involved on this.”
She said Lake's issues should have been raised at the committee meeting.
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