Many of state’s top corporations pay under $1,000 in income taxes

Almost half of the 50 largest corporations doing business in Montana are paying a pittance in state income taxes — and state Sen. Jim Elliott wants to know who they are.

Elliott, D-Trout Creek, said he’d like to determine whether the company that booked $500 million in gross sales last year yet paid just $250 in income taxes is paying its share of the tax burden in Montana.

By MIKE DENNISON
Tribune Capitol Bureau

http://www.greatfallstribune.com/news/stories/20040405/localnews/172777.html

He’d also like to ask the same question about scores of other big corporations logging minimal state income despite multimillion-dollar sales in Montana.

But the state won’t tell Elliott or anyone else the names of these businesses.

The state Supreme Court ruled in December that corporations have no right to individual privacy in Montana. But state law still forbids the release of corporate tax information by the company.

"There is still a law on the books that says corporate tax information is confidential," said Don Hoffman, interim director of the Department of Revenue. "The law itself hasn’t been stricken down."

Mary Whittinghill, president the Montana Taxpayers Association, which represents many corporate taxpayers, defended the confidentiality of corporate tax records, saying they might contain information that could help a competitor or be used for political purposes.

Further, Whittinghill said, if people are going to evaluate corporate taxes in Montana, they need to look at more than one year of statistics and more than one tax.

"If you just look at the corporate income tax, you’re not getting the whole picture," she said.

Corporations pay more property taxes than they do income taxes in Montana, she said, and studies have shown that business taxes in Montana still are relatively high when compared with other states.

Businesses pay 55 percent of all state and local taxes in Montana, Whittinghill said.

Last year may have been a down year for many corporations because of the economy, she said, and corporations also may declare a loss for one year, but not for other years.

Citing Montana law, the Department of Revenue last week refused a Tribune request to release the names and basic tax records for corporations with the top sales in Montana in 2003.

However, the department will release the information without naming the companies.

This information is what piqued Elliott’s interest and prompted him to raise questions about whether these companies — whoever they may be — are paying their overall fair share of Montana taxes.

The Revenue Department compiled a list of the gross sales, income and income taxes for companies with the top 500-highest sales in Montana.

The list revealed:

ã Of the top 50 companies — those with $80 million or more in gross annual sales — 21 paid less than $1,000 in corporate income taxes last year. Six of them paid the minimum of $50.

ã The company with the highest amount of sales — $795 million — paid about $2.6 million in corporate taxes, or about 0.3 percent of total sales. The third-highest firm had $535 million in sales but was able to declare an annual loss in net revenue, so it paid only $250 in corporate income taxes.

ã Almost one-third of these companies declared net losses in 2003, so their corporate income taxes were less than $1,000 and were often $50. All companies had at least $5 million in gross sales.

Montana taxes corporate income at 6.75 percent, but relies on a corporation’s federally reported income. For national or international companies, Montana taxes a percentage of their income, based on the amount of sales, payroll and property the company has in Montana.

If the company declares a loss on its national earnings, that loss is "apportioned" to Montana according to the company holdings in Montana — and the state levies taxes on that amount. Each corporate taxable entity that has a loss pays the minimum $50.

Elliott said that’s all well and good, but he’d like to know who the companies are, so he could decide whether state tax policy treats them fairly overall.

"You might look at it and say, ‘That makes sense,’" he said. "But we don’t know. The reason we don’t know is because we’re not allowed to know. …

"It’s not a crime to take maximum advantage of the tax code. At the same time, there is an obligation that companies have, just as citizens have, to pay their share of the cost of (government) services provided."

He pointed to the effort last year by some Montana lawmakers to pass a tax on the gross receipts of "big box stores," like Wal-Mart or Home Depot. The bill failed in the Legislature.

Elliott said if he knew these specific businesses are paying almost no corporate income taxes, despite huge Montana sales, there’d be a good argument for taxing their gross receipts. If not, then maybe not, he added.

"Some of these corporations are making lots of money off Montana and not paying for their share of services," he said. "And that share of the services is being paid by the average citizen and small-business person."

Elliott said he’s not asking for every little detail about corporate taxes, or privately held small businesses. He just wants the basic facts on the large, publicly held companies, to see if they’re paying their share of state taxes.

"I think it’s appropriate to protect the smaller corporations from unnecessary exposure," he said. "But I have no tolerance with the world’s largest corporations doing business in Montana and not paying taxes…. They should be paying their share of the tax burden."

Dennison can be reached by e-mail at [email protected], or by phone at (406) 442-9493.