Last week Weekly Industry News explored a controversy brewing in Montana about the loss of revenue the state believes it will suffer because of the now-called Trump tax reforms.
Before the update some background. In our story we pointed out that Montana is what is called a rolling conformity state. In other words, when changes are made to the federal tax laws, they automatically become law in Montana. State Revenue Director Mike Kadas said the federal cuts will put the state — which is already struggling to balance its budget — in a $29 million hole.
He blamed the loss of tax funds on the 20% deduction given to pass through businesses. These businesses — of which many independent insurance agents are — consist of sole proprietorships, limited liability companies, partnerships and small corporations taxed as partnerships. They do not pay a corporate tax but instead report business income as personal income.
In Montana, there are 381,170 tax returns posted as pass-through businesses. Income ranges from almost nothing to thousands of dollars. Federal tax law now says 20% of that income is exempt from taxing.
The income loss from that 20% — Kodas said — will amount to $29 million and he called for a special session of the Legislature to set up a fix.
Montana Senate Majority Leader — insurance professional and former PIA Montana and PIA National President — Fred Thomas said the special session is not necessary. He produced a report saying Kodas’ figures are in error.
It appears now that State Budget Director Dan Villa says Kodas’ figures are wrong and the reforms will hit the budget for a $12 million loss this year and $15.9 million in 2019.
That’s not enough to force a special session.
Thomas and the legislative staff say the tax loss is unavoidable. However, it won’t come into serious play and really affect the Montana budget until April of 2019 when the Legislature is already in session. He said at that point the Legislature can come up with a fix.
Source link: Billings Gazette