Bill would shield volunteer nonprofit board members from personal liability for brief payroll tax lapses, advocates say

Representative Bill Mercer and the Montana Nonprofit Association offered proponent testimony on House Bill 665, which would exempt certain volunteer officers of small nonprofit organizations from personal liability for unpaid employment (trust) taxes in narrowly defined cases.

Lorraine Burhop, policy director for the Montana Nonprofit Association, told the committee Montana has more than 8,000 charitable nonprofits and that a large share are small organizations using volunteers; about 2,800 nonprofits pay wages and roughly 2,000 pay 10 employees or fewer. She said current exposure to personal liability for unpaid employment taxes deters volunteer board service and that HB 665 would "balance the need for accountability with the need to encourage volunteer leadership by providing a sensible exemption from individual liability for volunteer board members."

Department of Revenue staff explained the agency’s existing collection authority for withholding and trust taxes and noted the department can and does send notices to both the entity and responsible individuals; the department said current statute treats trust taxes differently from ordinary corporate liabilities.

Sponsor and proponents emphasized exceptions in the bill: the exemption would not apply where there is fraud, embezzlement, or a director who received compensation in the form of wages; the exemption is time‑limited to prevent prolonged noncompliance. Committee members asked for statutory citations and clarifications; the sponsor said the bill is intended as a targeted protection for volunteer directors who serve small, community‑based nonprofits.

Ending: The committee closed the hearing after asking Department of Revenue staff to provide any related collection statutes and to confirm administrative practice for small nonprofits.