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SB 138 would repeal a temporary tax exemption for tribal properties

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MONTANA — Tribal leaders and advocates pushed back Tuesday, Feb. 2, against a Republican lawmaker’s bill that would eliminate a property tax exemption for tribal lands. 

The Senate Taxation Committee held the first hearing for Senate Bill 138 on Tuesday. Bill sponsor Sen. Greg Hertz, R-Polson, said the legislation would repeal a five-year temporary property tax exemption for tribally owned property. The exemption applies to lands that tribal governments are seeking to place in federal trust for the tribes. Hertz said local governments have lost out on important tax revenue when those trust applications drag on beyond the exemption period, and that there’s no mechanism in place to recoup those taxes when an exemption expires or a trust application is denied. 

Tribal leaders said Tuesday that few trust applications are denied due to improper actions by tribal governments, and that trust applications sometimes outlast the tax exemption period only because of a slow application process — a process some counties have slowed by objecting to the trust applications themselves. 

Opponents who spoke against the proposal included tribal advocacy organizations and leaders of the two tribal governments that have claimed the exemption. They said SB 138 would unfairly interfere with tribes and their sovereignty as they try to reclaim lands stolen from them, with some calling the bill “anti-Indian” or saying governments should not be taxing other governments. Several added that federal trust applications often drag on beyond the five-year exemption period because of red tape at the federal level. 

One of those speaking in opposition was Shelly Fyant, chairwoman of the Confederated Salish and Kootenai Tribes of the Flathead Reservation. “Senate Bill 138 is yet another attempt to repeal this good law. 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,” she testified. 

“I don’t think I need to go into the irony here of the tribes having to pay state taxes on land that was reserved by 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.” 

When tribal land is put into trust status, it is exempt from any taxes. 

Hertz said the bill stemmed from complaints Lake County commissioners have presented to him about the state Department of Revenue not taxing tribal property after an exemption expires, even if the trust application is still pending at the federal level. Additionally, Hertz, who represents an area within the boundaries of the Flathead Reservation, said there are no accountability measures in place to ensure that tribes aren’t improperly applying to put land in trust in order to get the tax break, or misleading the state by saying an application is pending with the federal government. 

Hertz and Lake County Commissioner Gale Decker said the county is missing out on significant tax revenue from properties continuing through the trust process after the five-year exemption has expired because the state Department of Revenue hasn’t been enforcing the rule and has no authority to retroactively collect taxes. 

“The process has broken down. I’m not exactly sure how to fix it, other than repealing, although I’m open to other suggestions,” Hertz said. “But currently, right now, it’s not working for local governments. It’s working very well for the tribes and tribal entities.”

It’s not the first attempt to repeal the exemption, which was passed by the Legislature in 2011. A similar repeal bill failed in 2019. Lake County also sued the state Department of Revenue in 2018, Decker said, to end the exemption. He said the county settled last week with the state, which agreed to grant no more exemptions until June 30, 2021. 

“This is not an anti-tribe piece of legislation,” Decker said. “It’s more of a tax equity situation.”

A state Department of Revenue representative said he wasn’t aware of a single land trust application being denied within the five-year exemption period — a circumstance that would subject the land to state property taxes. Jordan Thompson, a CSKT attorney, said only about a dozen properties have been denied trust status in recent years, noting that the reasons could have been procedural or clerical errors.

Others pointed out that the problem Hertz and Decker are highlighting is between the state and counties, and that rescinding the exemption from the tribes would be unfair. 

“This seems to be an issue with the Department of Revenue. And that’s where I’m having a problem with this bill,” said Senate Minority Leader Jill Cohenour, D-East Helena. “We’re not getting to the process within the Department of Revenue. We’re hurting our government-to-government relations with our tribes.”

Further delaying the process in some cases, Fyant said, are counties objecting to the tribes’ attempts to put such land in trust. She said one of the counties within the borders of CSKT’s reservation — she didn’t name which one — has objected to all or most trust applications the tribes have submitted to the federal government.

The conflict exists because of an 1887 policy, the Dawes Act, also known as the General Allotment Act of 1887, parceled tribal reservation land – to be allotted to individual tribal members for purposes such as farming, but much of that land ended up in the hands of non-Indians or opened up to homesteading by non-Indians. The policy was eventually repealed in 1934, and tribes have been trying to reclaim such lands to be held in trust ever since. 

“The state of Montana recognized the injustices of lost tribal homelands through the allotment process and the difficulty of the trust application process when it adopted [the 2011 legislation],” Fort Peck Tribal Chairman Floyd Azure testified. “Initially, Indian reservations were never intended to be part of the state’s property tax base. Now proponents of Senate Bill 138 claim loss of revenue for the state and counties as justification for this deal.”

The committee took no action on the bill Tuesday.

Chris covers Native American issues as a Report for America Corps member based in Billings. He also monitors the Montana Supreme Court, federal courts and criminal justice issues. Before joining MTFP in 2020, Chris most recently covered tribal affairs and Wyoming’s Wind River Reservation for the Casper Star-Tribune, and has also reported for the Wisconsin State Journal. 

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