EAST MILLINOCKET – Great Northern Paper Inc.’s tax dispute case against this Penobscot County town could be put on hold if the company fails to keep its tax payments current.

Lee Bragg, the attorney for East Millinocket, said a new provision in state tax law will require the company to have its taxes – whether due for the year under appeal or a subsequent year – paid up before the State Board of Property Tax Review can reconvene hearings in the case.

Bragg said the new law could affect a similar pending case involving the town of Millinocket, where Great Northern is disputing its 1998 and 1999 tax bills. That case has been tabled by the state board pending continuing negotiations between Millinocket and the paper company.

The new law, titled “An Act Related to the Suspension of Property Tax Abatement Appeals When the Taxpayer is Delinquent in Paying Taxes,” will become effective on Sept. 21. The state board is scheduled to reconvene Great Northern’s case against East Millinocket in October.

“Presumably, we won’t be back in hearings in October unless they pay their taxes,” Bragg said this week. “It will be necessary for the mill to be current in its taxes in order to continue the hearing and that will include getting paid up on the unpaid portion of their taxes as well as any taxes that become due later this year.”

Great Northern is disputing its 1999 tax bill in East Millinocket. Although the company has paid all of its 1999 taxes, it has not paid all of its taxes for 2000.

Great Northern owes East Millinocket $1,708,268 plus $45,734 in interest costs for the 2000 tax year. The company’s total tax bill was $3,574,210. The second half of the bill was due Feb. 1, with interest of 10.75 percent per annum being charged after that date.

Brian Stetson, Great Northern spokesman, declined to comment on the pending tax case, saying it would be inappropriate to do so during the proceedings before the state board.

“The statute will not have any bearing on the ongoing proceedings,” Stetson said when asked about the effect the new law may have on the company’s pending case. He would not say whether the company would pay its taxes before October.

Michelle Roberts, an assistant attorney general assigned to represent the state board, said the issue has not been formally presented to the board by the town’s attorney or the taxpayer at this point.

Bragg said the new provision simply clarifies the existing law, which was enacted in 1993 during the Bath Iron Works tax case. He said BIW, which had disputed its tax bill, was withholding tax payments to the city of Bath. He said lawmakers had enacted the special section to prevent towns from being held hostage by large taxpayers, which might choose not to pay their taxes.

Citing the 8-year-old law, Bragg in January asked the state board to suspend Great Northern’s tax abatement case against the town for 1999 because the company was delinquent in paying its 2000 tax bill.

But members of the state board did not agree with Bragg’s interpretation of the law. They interpreted it to mean a case could be suspended only if taxes had not been paid in full for the year under appeal. “The board determined the 1999 taxes have been paid,” said Roberts during an earlier interview.

Later, Bragg, on behalf of the town of East Millinocket, asked the Legislature’s Taxation Committee to clarify the existing law, which was approved by lawmakers. The bill was signed into law by the governor on June 20.

Millinocket Town Manager Gene Conlogue said the new law would have no immediate effect on the company’s pending case against the town.

Conlogue said Great Northern has paid all but about $1.4 million of its $3.1 million tax bill. The second half of the 2000 tax bills was due on April 15, with interest of 10.75 percent per year being charged after that date. Conlogue estimated the company owed $40,000 in interest charges.

The Millinocket manager said the town and company are negotiating a Tax Increment Financing package. One condition of the deal, which is not yet final, is that the company would withdraw its two tax cases against Millinocket.

In the meantime, hearings in the tax case between Great Northern Paper Co. and East Millinocket were held on Monday and Tuesday. Members of the state board toured Great Northern’s East Millinocket paper mill on Wednesday.

Mary Morris, East Millinocket’s administrative assistant, said the town was forced to seek a tax anticipation loan of $1.465 million earlier this month in order to continue operations. About 82 percent of the town’s total tax revenues are paid by Great Northern.