Montana Cable Company Property Tax Initiative (2014)

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The Montana Cable Company Property Tax, Initiative 172 was not on the November 4, 2014 ballot in Montana as an initiated state statute. The measure would have reclassified cable television companies’ property for taxation purposes. Specifically, proponents desired to reclassify cable television property to avoid a tax increase of more than 300 percent.[1][2]

Charter Communications proposed the initiative.[2] The company dropped the initiative after striking a settlement deal with the Montana Department of Revenue on June 19, 2014. The deal allowed Charter Communications to keep $9 million of $34 million in disputed taxes from 2010-2013. Montana Department of Revenue Director Mike Kadas said, "I think there's probably a temptation to say it was the initiative that motivated the settlement. I just want to say very clearly this is a very good settlement, and I would have done it whether there was an initiative or not. The fact that there was an initiative, I think, helped create a deadline."[3]

Text of measure

The proposed ballot question would have read as:[4]

I-172 changes the property rates for the video portion of cable television property for companies that provide physically bundled services of cable television, phone and high speed internet. In 2009, the Department of Revenue determined that a company that upgraded its cable television services to include bundled telecommunication services should be assessed a higher rate, and sought retroactive property tax payments going back to 2006. This determination increased the property taxes owed by the company. I- 172 would reverse this increase by moving “cable television systems” from a higher property tax classification (Class 13) into a lower property tax classification (Class 8). I- 172 applies retroactively to tax year 2006.

I-172 will result in the reduction of state general fund revenue and state special revenue due to the retroactive application of the law to tax year 2006 and reductions in incoming revenue from 2015 and each year thereafter. Local governments would also see a reduction in taxable valuations.

[ ] YES on Constitutional Initiative CI-172.
[ ] NO on Constitutional Initiative CI-172.[5]

Background

In December 2013, the Montana Supreme Court upheld how the Montana Revenue Department classified the property of Bresnan Communications. The revenue department combined all of the company’s services into a single tax, namely, “telecommunication services” with a six percent rate. Previously, Bresnan’s property was classified differently, with some as “telecommunications services” and some as “cable television” with a three percent tax rate. The company, therefore, was paying the six percent tax rate on only ten percent of their property. The Montana Revenue Department’s reclassification caused Bresnan’s property tax to increase 329%, from $1.7 to $7.3 million.

Charter Communications bought Bresnan in February 2013 and crafted the initiative to reclassify their property taxes as what they were previously.[2]

Support

Big Sky Broadband Coalition for Lower Taxes led the campaign in support of the initiative.[6]

Arguments

  • Brian Anderson, a spokesperson for Charter Communications, said, "Charter is working to protect our customers from a more than 300 percent tax increase. We hope to find a fair solution that’s in the best interests of Charter customers and the state of Montana."[2]
  • Chuck Denowh, spokesperson for Big Sky Broadband Coalition for Lower Taxes, argued, "Affordable broadband is a key ingredient of the vibrant technology community that a lot of Montanans would like to see grow in our state. Second, many Montanans are concerned about Montana’s reputation as a good place to do business. And finally, a lot of consumers will feel the impact of this tax in their pocketbook."[6]

Opposition

Opponents

  • Montana Education Association-Montana Federation of Teachers (MEA-MFT)

Arguments

The Helen Independent Record Editorial Board warned voters to not be "fooled" by the initiative. They wrote:

Undoubtedly, if Charter finds itself needing millions of extra dollars to pay taxes, it will not dig deeper into its own pockets. That means Charter will likely pass along the tax increase to its subscribers.

Yet customers then will have some recourse. Charter customers can choose whether to subscribe to broadband, phone or cable TV through the company. If the cost is too pricey, customers will still have control and can reject the pass-along tax increase by simply canceling service.

However, if the ballot measure is successful and Charter is able to overturn the Supreme Court’s decision, then that lost tax money, which is needed to fund classrooms and essential government services, will likely be passed along to every Montanan in the form of higher taxes, regardless of which residents subscribe to Charter. [5]

—Helen Independent Record Editorial Board, [7]

Other arguments against the initiative include:

  • Sarah Cobler Leow, Executive Director of the Montana Budget and Policy Center, argued, “If the initiative passes, our schools and other essential services would be threatened by Charter’s refusal to pay its fair share toward our state’s economic growth.”[2]

Media editorial positions

Oppose

  • Helen Independent Record said, "However, if the ballot measure is successful and Charter is able to overturn the Supreme Court’s decision, then that lost tax money, which is needed to fund classrooms and essential government services, will likely be passed along to every Montanan in the form of higher taxes, regardless of which residents subscribe to Charter."[7]

Related lawsuits

See also: List of ballot measure lawsuits in 2014

MEA-MFT v. Fox

The MEA-MFT, a union representing educators and government employees, filed a lawsuit with the Montana Supreme Court asking the court to invalidate the ballot summary for the Cable Company Property Tax Initiative. The MEA-MFT argues that Attorney General Tim Fox (R) should not have approved the initiative for petition circulation. The union deemed the ballot summary as "systematically untrue and argumentative." MEA-MFT President Eric Feaver said, "Bottom line, we will do what we can to prevent Charter from assaulting Montana’s tax code for its exclusive self-interest."

Big Sky Broadband Coalition for Lower Taxes, who supports the amendment, called the lawsuit a "standard political tactic."[8] Attorney General Fox responded, "Since petitioner (MEA-MFT) has failed to show untruth, partiality, argumentation or prejudice in the ballot statement, the court should reject their arguments, regarding the statement of purpose and implication."[9]

In a 5 to 0 decision, the Montana Supreme Court dismissed the case. The court stated, "We have made clear in several recent opinions that the attorney general’s legal sufficiency review does not authorize him to withhold a proposed ballot measure from the ballot for an alleged substantive constitutional infirmity. We conclude these principles clearly apply here. Therefore, we decline to disturb the attorney general’s legal sufficiency determination on the grounds that the initiative is unconstitutional."[10]

Path to the ballot

See also: Laws governing the initiative process in Montana

Supporters were required to collect valid signatures from ten percent of the total number of votes cast in the last gubernatorial general election, including ten percent of the voters in each of the forty legislative house districts. In total, supporters needed to collect 24,174 valid signatures. Those signatures needed to be submitted by the petition drive deadline on June 20, 2014.

See also

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References