HELENA — Business groups on Tuesday launched a withering assault on a bill to empower the state Revenue Department to crack down on out-of-state tax cheaters and use the money to fund property-tax breaks for businesses.

One after another, they attacked Senate Bill 220 for giving the state tax agency unbridled powers they said it doesn’t need. They contended the Revenue Department already has sufficient authority to go after tax evaders, a claim adamantly disputed by the department’s director.

The Senate Taxation Committee heard comments but took no immediate vote on the bill, sponsored by its chairman, Sen. Jim Elliott, D-Trout Creek.

The measure is the centerpiece of the Gov. Brian Schweitzer’s administration package of bills seeking to crack down on tax evasion by some out-of-state individuals and companies doing some business here.

Out-of-staters selling land in Montana also would have to withhold capital gains taxes when they sell the land so the state could collect these taxes just as it does when Montana residents sell land at a profit in the state.

State Revenue Director Dan Bucks said Montana’s existing tax laws are simply inadequate to pursue highly sophisticated tax-evasion schemes devised by large national accounting firms, investment banks and law firms.

SB220 “is about bringing justice and fairness to honest taxpayers in Montana and bringing integrity to the system,” Bucks said.

The administration’s tax-cheat crackdown has quickly emerged as one of the major legislative issues so far after the Republican-controlled House Taxation Committee tabled three bills in the package late last month.

Schweitzer and Democrats have questioned why House Republicans want to kill bills targeting out-of-state tax cheats. In response, House Taxation Chairman Bob Lake, R-Hamilton, said in a letter to newspapers Monday that the department already has sufficient powers to chase tax cheaters and these bills would create “a bloated Department of Revenue.”

Elliott’s bill would raise an estimated $10 million a year collected from tax cheaters. The money would be used to remove a number of Montana businesses from the business equipment property-tax rolls.

Under the bill, any business that has equipment with a market value of $150,000 or less would be exempt from paying the business equipment tax. The current exemption, set in 2005, is $20,000. Supporters said passage of SB220 would drop 14,500 more businesses off the business equipment tax rolls besides the 12,500 removed in 2005. It would leave only Montana’s 3,200 largest businesses subject to the tax.

On Tuesday, lobbyists speaking for dozens of business trade groups, ranging from certified public accountants to bankers and real estate agents to contractors, opposed Elliott’s bill. They told the committee they were extremely wary about giving the Revenue Department additional powers that they didn’t believe the agency needs.

All of the business lobbyists prefaced their remarks by vouching that they in no way condone tax evasion, but they believe the bill amounts to an overreaching grab for more authority by the Revenue Department. These lobbyists said they favor exempting more businesses from paying the business equipment tax if another way can be found to pay for it.

“This bill isn’t anti-tax cheater, it’s anti-taxpayer, and that means all of us in this room,” said Dan Vuckovich of Great Falls, president of the Montana Society of Certified Public Accountants. “The proposals made in SB220 may be aimed at out-of-state tax cheats, but they hurt honest, hard-working Montanans in the process.”

Bruce Spencer of the Montana Automobile Dealers Association attacked the bill as “test-tube tax policy.”

Elliott disagreed, saying 13 other states have passed similar laws.

Under questioning, attorney Mike Green of Helena, representing the Montana Taxpayers Association, which opposed the bill, said he suspected some in-state and out-of state residents, in fact, do cheat on their taxes. He also criticized the bill.

“The intent of this bill is good, but the devil’s in the details,” Green said. “The problems outweigh the benefits.”

Elliott, who sponsored a similar bill that was killed in the House in 2005, wondered why none of these critics had offered the Revenue Department any suggestions for improvements in the legislation over the past two years.

An owner of a Helena microbrewery, Brian Smith, praised SB220 as helpful to small businesses. Dropping some businesses from the tax rolls might allow them expand, buy health insurance for workers or pay for rising energy costs since electricity and natural gas were deregulated by the Legislature a decade ago, he said.

Evan Barrett, the governor’s chief business development officer, said SB220 is “good for small business, and it’s good for tax compliance.”

“When we don’t collect taxes properly from out-of-state filers, particularly businesses, we put our Montana businesses at a competitive disadvantage,” Barrett said.

For the remaining 3,000 businesses that would still pay the business equipment property tax, Barrett said the 3 percent tax rate is now about one-fourth of what the rate was in 1989. The effective tax rate is now 1.8 percent, which he said is competitive regionally.

How it works

Here’s how Senate Bill 220 would work:

- Businesses that have equipment with a market value of $150,000 or less no longer would owe any property taxes on these items. The current exemption is $20,000.

- It would require taxpayers to file additional reports of potentially abusive tax-avoidance transactions, and it would impose penalties.

- The bill would require corporations to provide information about their tax returns filed in other states.

- It would create a one-time amnesty program later this year to allow those who have evaded taxes through “abusive tax avoidance” schemes to pay back taxes from past years with no criminal or civil penalties.

- The bill would require out-of-state sellers of Montana land worth at least $100,000 either to withhold for taxes either 2.5 percent of sales price or the amount of the capital gains times the highest tax rate.