Associated Press

BILLINGS, Mont. (AP) -- Yellowstone Club founder Tim Blixseth is settling his unpaid income tax claims from California and Idaho, but still faces a $57 million bill from Montana.

The former billionaire disclosed the settlement Wednesday. He declined to reveal how much he will pay, but has previously acknowledged owing the two states about $1.3 million.

Idaho and California tax authorities alleged he owed more than $2 million. They joined forces with Montana authorities earlier this month on a federal court petition that could force Blixseth into involuntary bankruptcy.

"While Idaho and California were disputed claims, we've reached a mutual settlement for them to withdraw," Blixseth said.

Payment on the back taxes was expected Wednesday. Idaho withdrew from the bankruptcy petition late in the day, and less than an hour later Blixseth's attorneys filed a motion seeking to dismiss the case altogether.

But Montana was not included in the settlement and its tax claims still stand, said C.A. Daw, chief counsel at the Montana Department of Revenue.

If the bankruptcy petition succeeds, Blixseth's assets could be liquidated to pay his debts. It was filed in Nevada, where Blixseth three years ago transferred most of his assets into a family trust.

Wednesday's partial settlement was confirmed by Lynn Butler, a Texas bankruptcy attorney representing Montana and California tax agencies.

Butler said Montana would continue to pursue the $57 million allegedly owed by the 59-year-old real estate baron, best known as the founder of Montana's Yellowstone Club, an enclave for the ultra-rich.

Authorities and creditors say he drained hundreds of millions of dollars from the resort prior to its 2008 bankruptcy.

Most of that money came through a $375 million loan to the club from Credit Suisse that largely was diverted to Blixseth's personal use. Montana authorities say that money should rightfully be counted as income on which Blixseth owes taxes.

Blixseth denies the allegations.

He says the Internal Revenue Service ruled years ago that the money was a legitimate loan. And he contends Montana's tax claims against him were engineered by state authorities working in collusion with creditor Credit Suisse and the club's new owners, CrossHarbor Capital Partners of Boston.

Montana officials say Blixseth has unpaid taxes from a period spanning 2002-2006, according to documents obtained by The Associated Press. That includes more than $36 million in taxes and almost $21 million in penalties and interest.

Blixseth's attorneys said those claims were not valid. They point to an April 13 court filing in which a Department of Revenue attorney wrote that Blixseth's tax liability "was not fully adjudicated prior to the commencement of the bankruptcy proceedings."

That means how much Blixseth owes in the state remains in dispute, his attorneys said.

The forced bankruptcy petition filed in Nevada was based in part on $219,000 in allegedly undisputed liabilities in Montana.

The case could not have been filed over disputed liabilities.

Butler, the state's attorney in the forced bankruptcy case, said Blixseth already has admitted to the liability in separate court proceedings, although he said the precise amount might need to be adjusted based on further examination of Blixseth's income.

"In essence, he has agreed to a tax liability," Butler said.

Just before the resort's 2008 bankruptcy, Blixseth passed control to ex-wife Edra Blixseth as part of their divorce settlement.

Within days of giving up the club he started transferring his assets to a Nevada trust, Desert Ranch LLLP. He has said the trust was set up to benefit members of his family.

Creditors say he tricked his former spouse into a dubious deal that let him make off with $286 million.

Forbes once pegged Tim Blixseth's value at $1.3 billion. Court documents recently put the figure at roughly $230 million.

A hearing is set for Friday on whether the forced bankruptcy petition belongs in Nevada. U.S. Bankruptcy Judge Mike Nakagawa has asked both sides whether the case should be heard in another state, such as Montana.

In a Wednesday court filing, Blixseth's attorneys sought to seal documents in the case "to prevent the unfair disclosure of the alleged debtor's personal financial information" while the change of venue is under consideration.

Copyright 2011 The Associated Press.

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