Prior to 1975, Montana's coal severance tax was assessed on a cents-per-ton basis. In 1975 the Legislature enacted the highest severance tax in the nation, based on the percentage of the mine-mouth price of the coal. The percentage was tied to the heating quality of the coal -- 30% for subbituminous and 20% for lignite. However, the 1987 Legislature enacted a law to gradually reduce the taxes on coal in 5% increments over the next few years if a target tonnage of 32.2 million tons was produced in Fiscal Year 1988. That target was met; and the tax dropped to 25% on July 1, 1988; to 20% on July 1, 1990; and to 15% on July 1, 1991. $60,028,000 was paid in 2019.
GROSS PROCEED TAXES
These are additional taxes paid on the value of the coal to support county government in the counties where the mines are located. $570,918,970 has been collected by Big Horn, Richland, Musselshell, and Rosebud Counties through FY 2018. The figure for FY 2019 is $20,265,434 bringing the total to date to $591,184,404.
Montana Dept. of Revenue
RESOURCE INDEMNITY TRUST TAX
As of 1973, all nonrenewable resource producers have been required to pay this tax which on coal is now 0.4 percent of gross value. The total collections from FY 1974 through FY 2018 were $54,740,111. The FY 2019 figure was $2,486,569 making the total taxes paid $57,226,680.
Source: Montana Dept. of Revenue
Property taxes paid in 2019 by the coal mines to the counties where the mines are located. Does not include gross proceeds taxes listed.
Decker Coal Co. $551,598
Spring Creek Coal $1,296,479
Westmoreland Absaloka $272,650
Westmoreland Savage $79,034
Westmoreland Rosebud $780,634
Signal Peak Energy $1,303,780
In addition to state taxes, Montana surface mining operations pay a tax for abandoned mine reclamation, mostly abandoned hard rock mines, consisting of 8 cents per ton for lignite or 28 cents per ton for all other types of coal. Effective January 1, 2019, the black lung tax is assessed at 50 cents per ton for underground mines and 25 cents per ton for surface mines. The tax is limited to 2% per ton and does not apply to lignite
PERSONAL INCOME TAXES
While it is difficult to determine the amount of personal income tax paid to the state by mine employees, we have made a general estimate based on the average gross income of $86,955 per year with two exemptions. Under that formula, the state of Montana would receive more than $5.6 million annually and the actual amount is most likely higher. It may be of interest to note that a large amount of the mine employees who work in Montana and pay its state income tax live in Sheridan County, Wyoming because it is the closest urban center.
Unlike a tax paid to the government on the production of coal or its realized profits, royalties are a monetary payment to the owner of the coal as agreed upon in the terms of pre-mining leases. State and Federal government still are major beneficiaries of these payments, however, because a large percentage of the mineral right ownership in Montana has been retained by the federal government, with payment from the coal-producing school sections going to the state. In addition, the 1976 federal leasing law mandates that 50 percent of the royalties collected from the development of federal leases be returned to the state. Other coal lessors include Indian tribes and private (of fee) owners.