State, Charter settle tax dispute [The Montana Standard, Butte :: ]
(Montana Standard (Butte) Via Acquire Media NewsEdge) June 20--HELENA -- 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." Charter is the major contributor to the coalition promoting the ballot measure. Signatures for the initiative are to be submitted to county election officials Friday.
Here are the key elements of the deal, Kadas said.
n 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.
n Charter will be assessed $8.3 million more in property taxes in 2007-2009 that will be sent to local government treasurers.
n 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.
n 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.
n All pending lawsuits filed by Charter against the state are dropped.
n 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.
n 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, Kadas said.
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 6 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."
He said Montana has a a broad, balanced tax structure that plays a role in providing the services that are important to business and normal family life.
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.
I-72 off ballot; Charter pulls plug
HELENA -- If it qualified, Initiative 172 figured to be one of the most controversial measures on Montana' s general election ballot, but Charter Communications pulled the plug on it as part of a major tax settlement with the state announced Thursday.
The measure was intended to reverse a Montana Supreme Court ruling in December that went against the Bresnan Communications and upheld how the Montana Department of Revenue classified its properties for taxes. Charter now owns Bresnan.
Signatures for the initiative have to be submitted by state election officials Friday. As a result of the agreement reached late Wednesday night, Charter is dropping the initiative effort through a political group it largely funds, the Big Sky Broadband Coalition for Lower Taxation.
MEA-MFT President Eric Feaver, whose group unsuccessfully asked the Supreme Court not to allow I-172 to be circulated for signatures, was pleased the proposal is now off the table.
"The best thing is we're not going forward with a ballot issue of unprecedented proportions, when a single entity can go to the people and ask what its taxes are," Feaver said. "I think that's really dangerous. The potential was there for others to follow suit."
Charter spokesman Brian Anderson 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."
Chuck Denowh, spokesman for the Big Sky Broadband Coalition, declined comment on the deal that ended the I-172 efforts, deferring comment to Anderson. He also declined to whether it had sufficient signatures to qualify for the ballot. Last week, Denowh had said he believed the coalition would obtain the necessary signatures to qualify the measure for the ballot.
To qualify for the November ballot, the group needed to turn in by Friday the signatures of 24,175 registered Montana voters, including 5 percent of the voters in 34 of the 100 state House districts.
This spring, Charter filed a proposed ballot initiative to reverse the Supreme Court decision and reclassify its property as a cable company in Montana.
A Revenue Department audit in 2008 concluded that Bresnan's division of its properties -- used to provided television, Internet access and telephone services -- didn't properly reflect the company's actual uses of the property.
Instead, the department classified all of Bresnan's property as a "telecommunications services company" and said all of its property would be centrally assessed, not just the 10 percent that the company had reported as two-way communications.
The reclassification put all of Bresnan's property in a class that was taxed at a 6 percent rate. Bresnan previously had put its cable TV systems in a class with a tax rate of 3 percent and telecommunications in a class with a 6 percent rate.
Charter argued that under the Supreme Court ruling upholding the Revenue Department's classification of Bresnan's property, its annual property tax bill would go up by 329 percent, from $1.7 million a year to $7.3 million.
However, the fiscal note for the initiative prepared by Gov. Steve Bullock's budget office and the Revenue Department, saw the impact differently.
The fiscal note said if I-172 passed, it would have cost the state general fund $1.1 million a year and the Montana university system $720,000 a year. It would require the state to pay Charter $10 million retroactively from the general fund, while the university system would owe $645,000.
In addition, local governments would lose $55 million in Charter property taxes retroactively, and $6 million prospectively, which the fiscal note said would shift the tax burden from Charter to other residential, commercial and other taxpayers.
Under the larger tax settlement between the state and Charter announced Thursday, Revenue Director Mike Kadas said Charter property would continue to be centrally assessed, with the vast majority of its property taxed at a 6 percent rate.
In a couple of counties, Charter's property would be taxed at 3 percent because it has old one-way video property.
Charter bought the cable company in February 2013 from Cablevision Systems Corp., which in turn bought it from Bresnan in 2010.
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