A bitter battle between a business tax lobby and the director of the Montana Revenue Department is raging on, as the group's president is questioning why the state has signed a multi-state "compliance initiative" without informing lawmakers.

Mary Whittinghill, president of the Montana Taxpayers Association, has written in the group's newsletter that Revenue Director Dan Bucks should have made the information public in April, when he signed the agreement.

The agreement with the Multistate Tax Commission says Montana will participate in a program where users of illegal tax shelters can escape penalties by foregoing their right to appeal.

Bucks defends the move as simply another effort by his agency to collect legally owed taxes.

"Why (is the Taxpayers Association) attacking the department and director when all we're trying to do is ask those out-of-staters who engaged in tax fraud and other abusive shelters to pay the taxes they owe?" Bucks asked. "We are trying to protect the honest Montana taxpayers -- the hundreds of thousands of Montana taxpayers who year in, year out pay their property taxes and income taxes they owe."

The battle between Bucks, an appointee of Gov. Brian Schweitzer, and the business tax group has been on-going since 2005.

With help from other business groups, Whittinghill has spearheaded the effort to kill major initiatives proposed by Bucks to crack down on suspected out-of-state tax scofflaws.

The Montana Taxpayers Association's membership includes most of the state's largest businesses, as well as some smaller ones.

In recent weeks, Whittinghill, through her group's newsletter, has questioned Bucks' decision to sign a "voluntary compliance initiative" on April 2 with the Multistate Tax Commission (MTC).

The commission is a national group representing nearly all state revenue departments, and Bucks served as its executive director for 17 years.

"Our association takes no position on whether taxpayers should participate or not in the VCI (voluntary compliance initiative) program," Whittinghill wrote. "We do believe the department should have made this information public knowledge in April. At a minimum, the department should adequately inform the taxpayers of Montana about the program."

She said Bucks had numerous chances during the Legislature this spring to mention the agreement he signed April 2, but he never did.

The Legislature considered and passed some laws to help the Revenue Department crack down on suspected tax-evaders. But the Republican-controlled House killed the major initiatives proposed by Bucks and the Revenue Department.

Montana Taxpayers Association and business groups argued that the state has sufficient powers already to pursue suspected tax cheats, decrying the effort as a power grab by Bucks.

However, Gov. Schweitzer, a Democrat, and Bucks argued that the department needed more tools to track down suspected out-of-state tax evaders. Democrats generally supported the Schweitzer initiatives.

Twenty-four states including Montana are participating in the Multistate Tax Commission's voluntary tax compliance initiative.

Under the initiative, Montana taxpayers who participate in illegal tax schemes could get a waiver on penalties and half the interest owed, if they waive their right to appeal. This voluntary program runs for five months, starting May 1 this year and ending Oct. 1.

Bucks in a recent interview questioned why Whittinghill and a Montana conservative blog, www.thehardliner.com, has taken up this issue.

He also blasted Whittinghill's group for not even encouraging out-of-state companies or individuals that have engaged in abusive tax shelters to voluntarily comply.

"Why aren't they even on the side of voluntary compliance?" Bucks asked. "This is difficult to believe. Somebody is spending a lot of money to oppose our efforts to bring those who are failing to pay the taxes they owe into compliance."

Replied Whittinghill: In any kind of amnesty or compliance initiative, it depends on whether you believe the transactions are illegal.

"Some could be challenged or questioned by the court system. We're not giving tax advice. We were informing our members that there's a program out there."

Whittinghill said the Revenue Department didn't even put a notice on its Web site about the MTC agreement until agency officials saw her newsletter. She said she "stumbled across" news of Montana signing the agreement when she was looking at the Multistate Tax Commission's Web site.

Bucks said state law gives him authority to sign a settlement agreement with the Multistate Tax Commission to participate in the voluntary compliance program. He signed the agreement on April 2 and then on June 11 after the special legislative session.

Asked why he didn't inform the Senate and House taxation committees he had signed the April 2 agreement, Bucks said it would have been presumptuous of him to make the announcement on behalf of 24 states.

"I don't judge it having been a material fact that bears on the legislation," Bucks said.

Bucks said news of the MTC agreement wasn't posted initially on the Revenue Department's Web site because it's mainly of concern to "national companies where tax managers are headquarters outside Montana."

The Revenue Department has identified 350-400 corporations that do business in Montana that engaged in some kind of abusive tax shelter, but only one is headquartered in Montana, he said.

Bucks said state law prevents him from identifying these companies.

Tax policy fight splits panel

By IR State Bureau - 08/10/07

The controversy over state policy on tax scofflaws has even stopped a legislative tax committee from choosing its next chairman.

The Legislature's Revenue and Transportation Committee deadlocked on a 6-6 partisan vote over its chairman June 17.

The panel is an "interim committee," which meets between regular legislative sessions to study issues. Such panels usually rotate the chairmanships every two years between members of the House and Senate.

Sen. Jim Elliott, D-Trout Creek, headed the interim panel the previous two years, so the rotation system would have made the next chairman a House Republican.

Republicans nominated Rep. Bob Lake, R-Hamilton.

Democrats, however, unanimously opposed Lake's nomination as chairman because of an editorial column he sent to newspapers this spring.

As chairman of the House Taxation Committee during the Legislature, Lake also had blocked efforts by the Revenue Department to pass laws helping it crack down on tax-evaders.

In his editorial-page column, Lake was highly critical of the department and its director, Dan Bucks, for its largely failed attempts to gain greater powers to crack down on what Bucks believes are out-of-state business and individual tax-evaders.

"These policies would have created a Department of Revenue that only an IRS auditor could love," Lake wrote, adding: "They would have introduced radically intrusive requirements that would make tax compliance more difficult and would have elevated the position of revenue director to 'grand inquisitor' in the most powerful state revenue agency in the country."

At the Revenue and Transportation Committee meeting in June, Rep. Mike Jopek, D-Whitefish, said he was tired of legislative fighting. But after reading Lake's commentary, Jopek questioned whether Lake could run the committee in a nonpartisan manner.

Sen. Bob Story, R-Park City, said he was confident in Lake's ability to be fair. Interim committees, which are evenly divided and undertake studies, are much different than committees divided along partisan lines during legislative sessions

Lake said he would be fair, noting that the Legislature for the most part has set the study committee's agenda.

Elliott opposed Lake's nomination, saying Lake's editorial page columns "have been accusatory of the Department Revenue." Elliott said he's concerned whether impartial interests of the people of Montana concerning the Revenue Department can be served with Lake as chairman.

Democrats nominated Sen. Kim Gillan, D-Billings.

Lake and Gillan tied with six votes each, with all Republicans backing Lake and all Democrats favoring Gillan.

The committee next meets Sept. 19.