At issue is Senate Bill 514, by Sen. Joe Balyeat, R-Bozeman, which Schweitzer vetoed last week and Balyeat is urging lawmakers to override.
Schweitzer said his chief reason for vetoing the bill was its cost. It was estimated to cost the general fund more than $5 million in fiscal years 2008 and 2009 and $8 million the following two years.
Although intended to conform Montana's “late filing income-tax penalties to federal law, SB514 ‘cherry-picks' the provisions of federal law it mirrors to the disadvantage of the state treasury and taxpayers who pay their taxes on time,” he said.
Schweitzer said the “late filing of income taxes” costs the state and therefore other taxpayers through higher administrative actions to ensure proper collections.
“While SB514 would require the state to impose a lower monthly penalty rate on late tax filers, equivalent to the federal rate, it fails to recognize and adopt other penalties imposed by the federal government against late income tax filers, which prevents a net loss to the federal treasury,” Schweitzer wrote. “Therefore, SB514 does not mirror late filing provisions of federal tax law in their entirety, a feature that would be subsidized by those who pay their state income taxes on time.”
However, Balyeat, a certified public accountant for 30 years, said Schweitzer based the veto on “grossly erroneous advice.”
Five times in the veto letter, Schweitzer refers to late filers and late filing penalties, Balyeat said, but SB514 has nothing to do with late filing penalties. It applies only to late payment penalties assessed against Montanans, even if they filed a proper extension and their return, with full payment, by the Oct. 15 extension date.
“SB514 merely sets the late pay penalty at the exact same rate the IRS charges,” Balyeat said. “It's wrong to gouge Montana's own citizens at penalty rates 3.05 times what the IRS charges. It's wrong to charge Montanans a whole month of interest for one day. We've outlawed such practices in the private sector.”
The Bozeman legislator said the bill also corrects the Montana Department of Revenue's “mishandling” of federal and state refunds, which unnecessarily costs Montanans more federal tax and lowers Montana tax receipts.
“This feature of SB514 isn't even covered in the fiscal note and would actually result in a net gain for the Montana treasury, not to mention a net gain to Montana taxpayers because they would no longer be overcharged by the feds,” Balyeat wrote.
Balyeat disputed Schweitzer's citing the $8 million cost as a reason to veto the bill.
“But, in truth, the high ‘cost' of SB514 is a compelling reason to pass this law, and the higher the ‘cost,' the more urgent it is to pass the bill,” Balyeat said. “It is atrocious that the Montana Department of Revenue is gouging our own Montana taxpayer to the tune of $8 million per biennium.”
He urged lawmakers to speak to their own local CPAs about it.
Spokesmen for Schweitzer and the Revenue Department declined to respond to Balyeat's comments.
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