Montana House Taxation Committee hears SB 99 to treat nonprofit agricultural lease income as taxable UBTI

Sen. Becky Beard, sponsor of Senate Bill 99, told the House Taxation Committee the bill would classify rental income from leasing class 3 agricultural property as unrelated business taxable income (UBTI) for tax-exempt organizations beginning in tax year 2026, with collections likely in fiscal year 2027 and implementation work for the Department of Revenue (DOR). "The bill is focused on the income tax portion of it," Beard said, arguing the measure promotes fairness by taxing revenues not reinvested in an organization's mission.

Charles Denow of United Property Owners of Montana urged the committee to support SB 99 and cited a nonprofit tax return in which roughly $486,000 in gross rents from grazing leases was reported as related-to-exempt-function revenue with $0 reported as unrelated business income. "It seems incompatible that a group whose purpose is to create a nature preserve could claim those same…