Montana Senate Passes Bill to Tax Nonprofits That Sue the State Under Environmental Laws

The Daily Montanan reports that the Montana legislature is seriously considering Senate Bill 524, which would impose the Montana business tax of 6.75% on spending by nonprofits incurred to sue the state under specific natural resources and environmental laws by treating those expenditures as unrelated business taxable income. (Yes, an expenditure would be treated as income.) Since the news report, the Senate passed a third reading of the bill (31 to 19) and transmitted the bill to the House for consideration, where it has been referred to the Committee on Taxation with a hearing scheduled for April 13th.

The sponsor of the bill accuses the targeted nonprofits, which are apparently tax-exempt section 501(c)(3) organizations, as “disrupting our lifestyles and economy.” He also said “[i]f the IRS would be doing its job like it should be doing, we have a number of nonprofits and 501(c)(3)s that are operating outside of their scope and mission.” 

During a Senate committee hearing, almost a dozen opponents spoke in opposition to the bill, citing constitutional and policy concerns. The opponents included the executive director of the Montana Nonprofit Association (MNA), who is also the board chairwoman of the National Council of Nonprofits. Here is the brief summary of the bill on MNA’s website:

SB524 – Revise UBIT to Include Legal Fees

This bill proposes to charge tax on any income certain nonprofits use to “challenge or support certain government actions” under the presumption that this would be unrelated to the mission of the organization and therefore subject to Unrelated Business Income Tax. The bill is somewhat narrow in scope (see p. 2 lines 2-5) but it’s important to read and understand the impact on litigation, lobbying, or simply meeting with a legislator or member of administration. The hearing date is not set. MNA will oppose.

Lloyd Mayer