Hertz seeks to exempt Montana‑based and employee‑owned contractors from 1% contractor gross‑receipts withholding

Senator Greg Hertz opened the hearing on Senate Bill 536, explaining the contractor gross‑receipts (CGR) tax was designed to capture taxes from contractors who might otherwise do work in Montana and leave without filing returns. Hertz said he favors eliminating the CGR tax entirely but proposed a narrower change: exempting Montana‑based contractors in good standing and providing a credit for employee‑stock‑ownership plan (ESOP) companies so the withholding does not inflate public project costs.

The Montana Contractors Association registered opposition to the bill as presented, urging caution and asking the committee for data about out‑of‑state contractor noncompliance and noting prior changes to the CGR threshold have reduced reporting. DOR representatives (Russ Christianson and Omar Cortez) explained the unit administers the CGR tax and described the compliance workload. Christianson said department assumptions suggested roughly 4% of entities across taxes are noncompliant and that the bill as written would likely create additional compliance work because exemptions at the general‑contractor level could reduce paper trails to subcontractors. He said the department had requested three FTEs in the fiscal note to handle compliance and that the amendment the sponsor planned would narrow the change to a credit for ESOP companies, which likely reduces administrative burden.

Hertz said he would accept an amendment to provide a credit or administrative clarification that limits the change to bona fide Montana‑based or employee‑owned firms. Committee members and agency staff discussed whether contract startup procedures and documentation could be used to preserve reporting lines if some general contractors are exempt. The committee did not record final action on SB 536 in the provided transcript.