Tribal leaders and civil-rights advocates say a bill in the Montana Senate that would repeal a temporary property-tax exemption amounts to an infringement of treaty rights and an attack on tribal sovereignty.
Senate Bill 138, sponsored by Sen. Greg Hertz, R-Polson, would eliminate a tax exemption that takes some of the financial burden off tribes as they apply to the federal government to hold land in trust – part of the costly process of recouping reservation lands once taken by the federal government for non-Indian settlement.
Two bills that would have repealed the tax exemption, including one sponsored by Hertz, failed during the last legislative session in 2019. And after the proposal was met with vigorous opposition during a committee hearing Tuesday, Hertz said he doesn’t expect it to advance to the Senate floor. But he still sees problems in how the exemption is administered, and he’s working on a new bill to address them.
The legislation stems from a long-running dispute in Hertz’s district between Lake County and the Montana Department of Revenue.
Lake County sued the department in November 2018, alleging a “lack of internal oversight” led state officials to erroneously apply the tax exemption to lands owned by the Confederated Salish and Kootenai Tribes, diminishing tax revenue for schools and the county government. The department also exempted the tribes from fees for public services such as waste disposal, according to the county. The parties agreed to a settlement last month that pauses the issuing of new exemptions within the county until June 30.
The tax exemption, which the Legislature created through a bipartisan effort in 2011, can last up to five years while tribes petition the U.S. Department of the Interior to transfer land from fee status to trust status, making it permanently exempt from state taxes. The process requires tribes to conduct environmental reviews and secure title insurance, among other expenses.
Majel Russell, an attorney for the Fort Peck Assiniboine and Sioux Tribes, testified Tuesday that federal policy through the early 1900s left “checkerboard” patterns of land ownership within reservation boundaries, eroding tribes’ governing authority.
“Since 1934, tribes have been reacquiring the lands within their reservations, as they can afford to do so,” Russell said. “However, tribal acquisition is not complete until the tribe is able to return that land to trust status and has full governmental authority over such lands.”
CSKT CHAIRWOMAN Shelly Fyant also testified in opposition to the bill.
“This exemption recognizes that one government should not tax another government while the wheels of the federal government slowly turn,” Fyant told the committee. “It is frustrating that we need to keep discussing what has already been decided is good for Montana and its tribal nations time and time again.”
Fyant pointed to the Hellgate Treaty of 1855, in which the Salish and Kootenai tribes ceded millions of acres of their ancestral lands, only to have parts of the Flathead Reservation later opened up to white settlers.
“I don’t think I need to go into the irony here,” Fyant said, “of the tribes having to pay state taxes on land that was reserved for the tribes in perpetuity, for our exclusive use and benefit, by the Hellgate Treaty, only to be given away in violation of that treaty by the federal government, which we are now buying back from willing sellers.”
The federal government’s taking of reservation lands and the tribes’ ongoing efforts to buy them back, she said, “fully prepaid any taxes that anyone thinks the tribes may owe.”
TRIBAL LEADERS, along with representatives of the Montana Human Rights Network, the American Civil Liberties Union of Montana and other groups, said the state should not only preserve the tax exemption but extend it.
“This approach is consistent with one that other states take,” said Preston Parish, of the left-leaning Montana Budget and Policy Center. “Oregon, for example, exempts reservation fee land from property taxes when the trust application is pending. Idaho fully exempts from property taxation all property on a reservation belonging to a tribal nation, in an effort to treat all governmental properties the same whether federal, state, county or tribal.”
Fort Peck Chairman Floyd Azure said the bill would reinstate an “anti-Indian” policy that diminishes funding tribes use to provide their own essential services.
“Initially, Indian reservation lands were never intended to be part of the state’s property tax base,” Azure said. “While Montana may not ever support a total tax exemption for tribally owned fee lands, as some surrounding states have, maintaining the temporary tax exemption demonstrates goodwill for tribal governments.”
UNDER THEIR settlement agreement, Lake County was given 30 days to submit a list of properties where it disputes the validity of tax exemptions granted to the CSKT; the county and the Department of Revenue are expected to work together to resolve the tax status of those properties. The Salish and Kootenai tribes were not party to the county’s lawsuit.
Lake County Commissioner Gale Decker testified Tuesday that 149 CSKT properties in the county have received the exemption since 2012, but only 32 of those properties have been placed in trust. If the tax exemption isn’t eliminated entirely, he argued, the county should be allowed to collect back taxes when the tribes’ trust applications are unsuccessful. And he said the county is disputing the validity of more than 100 of those exemptions, alleging various paperwork errors by the tribes and the Department of Revenue.
Jordan Thompson, an attorney for the CSKT, said there might be a reason many of the tribes’ trust applications have been unsuccessful or dragged on for years: Lake County has opposed every one of those applications as part of the Interior Department’s administrative process.
Decker confirmed that in a phone call Thursday. Several years ago, the county also successfully appealed the federal government’s decision to grant trust status for the Big Arm Marina.
Thompson also questioned the county’s assertion that it has lost tens of thousands of dollars per year due to tribal tax breaks. He said the county and the tribes track pieces of land using different systems, making it difficult to “compare and fact-check” the county’s numbers.
“Since 2011, we estimate the total exempt value on the reservation at about $243,000. That’s over 10 years,” Thompson said. “And for the most part, we’re purchasing timberlands, wetlands, maybe some farms – generally not the high-value properties with houses on them that would produce a lot of taxable value.”
Thompson also noted some CSKT members have moved land out of trust and into fee status in order to sell it, putting it back on the county’s tax rolls.
“Since 2012, the CSKT lands department noted 64 properties totaling 635 acres had been taken out of trust and into fee,” he said. “These are generally much higher-value properties with homes on them.”
HERTZ, THE bill sponsor, said the situation in Lake County is unique, and he would be open to solutions that more narrowly address the administrative problems the county has alleged.
In an email to the Daily Inter Lake on Friday, Hertz said he doesn’t expect his bill to advance, and he’s working on a new bill that would put new requirements on the Department of Revenue.
The bill, he said, would require the department to notify counties when it learns of new trust applications, provide annual certifications of the status of those applications and, most significantly, allow counties to collect back taxes if the federal government denies an application during the five-year exemption period.