Montana Viewpoint©
Why Iím suing the Montana Department of Revenue

October 25, 2004

Montana citizens should be able to know how much Montana income tax large national and international firms pay. That’s not just an opinion, it’s our Constitutional right. 

Since 1999 when the scams and outright thefts of some of the world’s largest companies were coming to light (including our own beloved Montana Power Company, or Touch America) it was clear that investors were being told that the company was making lots of money, but the Internal revenue Service was being told the opposite. This allowed the big corps to have the best of both worlds; shareholder optimism and no taxes. 

Recently, while I was researching Montana’s Corporate Income Tax, I came across some interesting information, so interesting that a call to the Director of the Department of Revenue from the Montana Taxpayers’ Association has prevented me—or you—from getting it again.

In looking at the top 500 companies with over $5 million in sales in Montana, I discovered that in 2002 forty percent of them (196 companies) paid less than $500 in income tax. Did they have an off year? Were they legitimate deductions, or were they scams on the Montana taxpayer? I have no idea, because once I got that data, I was forbidden from seeing the same information from previous years. 

I was able to discover, though, that 49 of them had paid less than $500 in tax for 5 consecutive years. You decide for yourself what that means, I have my own opinion. We need to know whether or not these are legitimate tax avoidance methods, or what the federal government calls “abusive tax shelters.” And we can know.

There are two “competing” clauses in the Montana Constitution; the “Right to Know” and the Right of Individual Privacy. Essentially, our right to know gives Montana the most open system of government in  America. Every governmental proceeding, vote, and contract is open to public scrutiny, except when the right to Individual Privacy trumps the Right to Know.

For years Montana’s corporate income tax records were assumed to come under the Right to Individual Privacy, but a recent Montana Supreme Court decision changed that, and affirmed what the citizen-authors of our Constitution had meant all along. When the Right to Individual Privacy clause was being debated, it was made crystal clear that a corporation was not entitled to that right

There are three reasons why the Montana public should know this information; it affects their investment decisions, it affects their taxes, and it affects the level of service they get from government. To the extent corporations use schemes to avoid taxes an increased burden is placed on the citizen, homeowner, and small private business owner, either in higher taxes or reduced essential services.

Small, private Montana businesses are put at even greater competitive disadvantage because they cannot afford to hire a bevy of tax lawyers to avoid taxes.

There are two reasons a legislator should know; first to develop fair tax policy, and second in deciding how to vote on individual tax measures.

Last session I voted to give a certain company a tax reduction on the metal ore it produced. I knew at that time that they had previously gotten a $2.3 million reduction in their property taxes. I did not find out until recently that they paid only $50 in income tax in 2002. This knowledge would have changed the way I voted.

There is nothing sacred about keeping corporate income tax records private. In 1909, when the federal Corporate Excise Tax was created, the tax records were public. In fact, Republican President William Howard Taft was adamant that it be public information. In fact, each time illegal corporate practices have come to light—the 1890s and 1930s—the response from government was to make the tax records public documents. Following the 1999 Enron scandals, Republican Senator Charles Grassley proposed making them public again./p>

Corporate property tax records have been public in Montana for years.

Being able to see corporate tax records will let us know who the good corporate citizens of Montana are, just as it will reveal the bad ones. I believe in our constitutional Right to Know, and if the only way I can see that it is upheld for Montana citizens is to sue, then sue I must.

For that reason I have filed a lawsuit against the Montana Department of Revenue to require them to release limited corporate income tax information on publicly traded corporations with over $1,000,000 in annual Montana sales.

I want to know, and you need to know.

To the extent corporations use schemes to avoid taxes an increased burden is placed on the citizen, homeowner, and small business owner, either in higher taxes or reduced services. Small  Montana businesses cannot afford to hire a bevy of tax lawyers to reduce their own taxes, and that gives big business another competitive advantage over small business.


Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620