The Montana Department of Revenue and Charter Communications reached a multi-million-dollar tax settlement late Wednesday night, with the company agreeing to drop its controversial proposed ballot initiative to cut its property taxes as part of the deal.
“They saw an opportunity to settle,” state Revenue Director Mike Kadas told Lee Newspapers State Bureau on Thursday. “We appreciate that they were willing to settle. I felt comfortable we’re getting a reasonable valuation of their property.”
Kadas said the agreement frees up $25 million in property taxes protested by Charter, collects $8.3 million in back taxes and eliminates the expense and uncertainty of litigation.
Settling tax disputes is not out of the ordinary for the department, he said.
“While the initiative played a part, the reason for doing it was not the initiative,” Kadas said. “The benefits I talked about are what motivated us to settle.”
With Charter agreeing to drop the initiative, “I think we’re able to protect Montana taxpayers from seeing a tax increase as a potential consequence of that initiative,” Kadas said.
Charter spokesman Brian Anderson of Fort Worth, Texas, confirmed the agreement.
“It’s correct that Charter and the Department of Revenue reached a settlement on retroactive and current tax assessments, and Charter appreciates Director Kadas for his leadership in resolving these outstanding tax issues in a way that will bring revenue to the state, and will help position Charter for greater investment, more innovation and job creation in Montana,” Anderson said.
The Charter official said Big Sky Broadband Coalition has agreed to suspend its effort to qualify Initiative 172 for the ballot because “the issues in the initiative have been resolved.”
Here are the key elements of the deal, Kadas said.
- It frees up $25 million of Charter’s $34 million in protested property taxes from 2010-2013. The money will be released to local governments, school districts and the state, while Charter will be refunded the remaining $9 million.
- Charter will be assessed $8.3 million more in property taxes in 2007-2009 that will be sent to local government treasurers.
- More than 20 counties and Charter are to work out agreements on the penalties and interest that the company owed to local governments for its protested taxes from 2007-2009.
- The Revenue Department agreed to a number that would raise Charter’s property taxes in 2014 by 12 percent or 13 percent over the 2013 level.
- All pending lawsuits filed by Charter against the state are dropped.
- Charter agreed to drop efforts to file a writ of certiorari asking the U.S. Supreme Court to accept its case appealing a December decision by Montana Supreme Court won by the Revenue Department against Charter. One of Charter’s predecessor companies, Bresnan Communications, had challenged how the state agency was assessing and taxing its Montana property.
- Charter will drop its proposed ballot initiative to reverse the Montana Supreme Court ruling and lower its property taxes.
Kadas said there were several moving parts from the department’s perspective, including two key Montana Supreme Court decisions.
First was the court’s Gold Creek decision in September 2013, which, he said, “essentially told us that we were not valuing intangible property correctly.” As a result, he said, the department has had to revise how it values intangible property, which recognizes a company’s “good will” as reflected on its books.
“That in itself had a significant effect on what we can assess,” Kadas said. “What the settlement does is acknowledge the value we lost in the Gold Creek decision.”
The Supreme Court’s Bresnan decision in December upheld the department’s ability to classify the property of Bresnan, now Charter, as a telecommunications property with a unit valuation methodology and a tax rate of six percent.
“We had one decision that went against us and one that went for us,” Kadas said. “From both sides, ours and Charter’s, they recognized the realm of what we can fight over has been narrowed considerably.”
Kadas said the last round of negotiations began at the staff level and were a continuing of higher level discussions that took place in February between the state and Charter.
“The process has kind of an ongoing dialogue, which I think is positive,” Kadas said. “We want to be open to taxpayers and their concerns. If we can resolve them, I think that’s part of our responsibility.”
He said Montana’s general business tax structure has been recognized nationally as sixth or seventh best among the states.
“This has helped us across the state,” he said. “We have fairly vibrant Main Streets. It’s not all because of taxes, but it plays a role.”
If Charter’s initiative had passed, it would have caused everyone’s property taxes to go up, Kadas said.
“I’m happy that we’re able to resolve that tissue and not have to monkey around with it for the next five or six months,” he said. “If it passed, there would be several years’ worth of litigation,” he said.