(1) The Department of Revenue adopts and incorporates by reference the model procedural rules, as amended, promulgated by the Attorney General.

(2) The model procedural rules may be found in Title 1, chapter 3, of the Administrative Rules of Montana.

(1) A petition for declaratory ruling must be typewritten or printed.

(2) The petition must include:

(a) the name and address of petitioner;

(b) detailed statement of the facts upon which petitioner requests the department to base its declaratory ruling;

(c) sufficient facts to show that petitioner will be affected by the requested ruling;

(d) the statute, rule or order for which petitioner seeks a declaratory ruling;

(e) the questions presented;

(f) propositions of law asserted by petitioner;

(g) the specific relief requested; and

(h) the name and address of any person known by petitioner to be interested in the requested declaratory ruling.

(3) The following sample form should be used.

BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

In the matter of (summary) Example:                    ) PETITION FOR

the application of John Doe, a liquor                    ) DECLARATORY RULING

license owner, for a declaratory ruling                  )

on the applicability of 16-4-413 , MCA,                )

to his new location                                                   )

1. Petitioner's name and address is (provide name and address of petitioner) .

2. (Provide summary of facts) . (Example: Petitioner previously applied for the transfer of ownership and location of a Montana beer/wine license for on-premises consumption, pursuant to the floor plan submitted with the application. Petitioner's application to transfer was granted by the department's hearing examiner on July 17, 1997, but was denied by the Director of the department on December 19, 1997.

Petitioner intends to apply to the department for transfer of license to a new premises to be located in an addition to the same building.

The new license application will apply only to the proposed new premises defined by the submitted floor plan. The new premises would have its own entrance/exit door to the outside, and would also have its own restrooms. The connecting door to the old premises is able to be locked blocking it off from the new premises.

Petitioner contends that the proposed new premises constitutes a different premises than the old premises for which the previous license transfer application was denied. Section 16-4-413 , MCA. Before taking any further action, the Petitioner must know whether the department considers that the new premises constitutes a different premises than the premises previously denied.)

3. The statute, regulation, or order to which Petitioner requests a declaratory ruling is (list statute, regulation or order) which provides (list the pertinent provisions of the statute, regulation, or order identified above) .

4. The question presented for declaratory ruling by the department is (explain the questions being presented to the department) (Example: Petitioner seeks a declaration that the proposed new premises constitutes a different premises than that which was previously denied, thus negating the five-year moratorium of section 16-4-413 , MCA.)

5. Petitioner contends that (provide reasons) . (Example: The proposed new premises constitutes premises that are different from that which were previously applied for and denied, and thus the five-year moratorium under 16-4-413 , MCA, is inapplicable to such proposed new application and the department may consider such proposed new application and issue a license for the proposed new premises.)

6. Petitioner requests a declaratory ruling that (provide the ruling that is sought by the petitioner) . (Example: The proposed new premises constitutes a different premises from that which was denied a transfer application, and thus the five-year moratorium outlined in 16-4-413 , MCA, is inapplicable to such proposed new application and the department may consider such proposed new application and issue a license for the proposed new premises.)

7. (Option 1:) Petitioner knows of no other party similarly affected or otherwise interested.

(Option 2:) Petitioner knows of the following parties who are similarly affected or otherwise interested: (list the parties that are similarly affected) .

Dated this ____ day of ___________, ____.

                                                   ____________________________

                                                   (Name of Petitioner)

(4) The department reserves the right to ask additional questions if the petitioner's intent is not clearly stated.

(5) The petition should be mailed directly to the director of the Department of Revenue, P.O. Box 5805, Helena, Montana 59604-5805.

(2) If the petition is accepted, the department will notify the petitioner of the acceptance and how the department intends to proceed regarding the matter.

(3) If for good cause shown, the department determines an oral hearing is necessary, the petitioner will be provided notice of the date, time, and place for the hearing.

(4) If the department denies a petition for declaratory ruling, the department shall mail a copy of the order denying the petition to all persons named in the petition.

(5) An order denying a petition must include a statement of the grounds for the denial and the petitioner's right to appeal the denial for a declaratory ruling within 30 days to the district court.

(a) the petition;

(b) a statement of matters officially noticed;

(c) if for good cause shown the department has held hearings on the petition, a stenographic record of the proceedings when requested by a party; and

(d) the department ruling.

(2) The stenographic record of oral proceedings or any part thereof shall be transcribed on request of any party. Unless otherwise provided by statute, the cost of transcription shall be paid by the requesting party.

(3) Pursuant to 2-4-703 , MCA, the petitioner may appeal the declaratory ruling within 30 days to the district court.

This rule has been repealed.

This rule has been repealed.

(1) "Contact person" means the department representative designated to answer questions regarding the information contained in the administrative summons.

(2) "Interested person" means the taxpayer to whom the summons relates or any other person to whom the records or testimony pertains, including a third-party record keeper.

(3) "Records" means books, papers, and other data, whether in paper or electronic form.

(4) "Third-party record keeper" means, but is not limited to:

(a) an attorney;

(b) an accountant;

(c) a registered agent;

(d) a conservator;

(e) a bank or credit union;

(f) a broker-dealer or investment advisor; or

(g) any other person engaged in the making or keeping of records involving transactions of other individuals.

(1) Section 15-1-301 , MCA, authorizes the department to summon witnesses to appear and give evidence and produce documents and records. The statute also provides for taking the depositions of witnesses on notice to the interested party if necessary.

(2) The rules in this subchapter govern department investigatory actions that may or may not result in a tax assessment against a particular taxpayer and do not apply to a disputed matter that has been referred to the department's Office of Dispute Resolution as provided in ARM 42.2.615.

(2) Financial institutions may, at their discretion, designate a specific office where service of administrative summons may be accepted. If no such designation is made, the department shall serve the summons on the financial institution in the city where the department believes the requested information may be found.

(3) The summons may require the personal appearance and testimony of a person in addition to the production of records, or it may require only the production of records.

(4) If the personal appearance and testimony of a person is required, the summons will specify the date, time, and place where the appearance shall occur.

(5) If only the production of records is required, the items must be delivered to the department at the Sam W. Mitchell Building, 125 N. Roberts, Helena, Montana 59604, or to the location designated on the administrative summons on or before the date and time specified in the summons.

(6) The summons will:

(a) to the best of the department's knowledge, identify the taxpayer to whom the summons relates or the other person to whom the records pertain;

(b) will provide information to enable the person summoned to locate the records required under the summons;

(c) identify a contact person;

(d) be personally served as provided in Rule 45(b) of the Montana Rules of Civil Procedure;

(e) state the fees for appearing, which shall be the same amount witnesses are compensated in Montana district court; and

(f) include a state warrant (check) for one day's witness fee and mileage.

(7) A form for claiming additional witness fees will be provided when the person appears before the department.

(8) Questions about the identity of any person or the scope of a record request should be addressed to the contact person.

(9) If the summons requires the giving of testimony or relates to the production of any records with respect to any person, known to the department at the time of the issuance of the summons, other than the person who is identified in the summons (third-party recordkeeper) , the department shall, within three days, mail a copy of the summons by registered or certified mail, to that person. Additionally, the department will explain the person's right to bring a proceeding to quash the summons. In no event shall the department require the production of documents or the giving of testimony earlier than 30 days from the issuance to the third-party recordkeeper.

(10) On receipt of a summons to which this section applies for the production of records, the summoned party, including a third-party record keeper shall proceed to assemble the records requested, or such portion thereof as the department may prescribe, and shall be prepared to produce the records pursuant to the summons on the day on which the records are to be examined.

(11) In the event that a third-party recordkeeper incurs copying costs in excess of $50 for any one administrative summons issued by the department, the department shall reimburse the third-party recordkeeper for those copying costs in excess of $50. Reimbursement will be at reasonable commercial rates, such as a rate charged by a private copy service. Calculating the amount of copying costs incurred by a third-party recordkeeper will be determined by examining the actual costs expended (as shown on a receipt or invoice) or by applying a reasonable commercial rate per page copied and produced to the department, whichever amount is lower.

(a) Taxpayers will not be reimbursed for their own copying charges.

(b) Taxpayers or third-party recordkeepers will not be reimbursed for any other costs associated with the production of the requested information, except for the payment for mileage and witness fees stated in this rule.

(12) Nothing in this section may be construed to limit the department's ability to obtain information, other than by summons, through formal or informal procedures authorized by 15-1-301 , MCA.

(1) Interested persons served with notice of an administrative summons may begin a proceeding to quash the summons in either the district court in the county in which the person resides or in the district court of the first judicial district not later than the 20 days after the notice of summons is received by the interested person. Notice is deemed given as provided for in Rule 45, Montana Rules of Civil Procedure.

(2) If a person begins any such proceeding, such person shall mail, by registered or certified mail, a copy of the petition to the person summoned and to the department's contact person.

(3) In any proceeding to quash the summons, the department may seek compliance with the summons.

(4) If no proceeding to quash is brought within the period proscribed in (1) , the interested person may not interfere with the voluntary giving of testimony or disclosure of records sought in the department's summons. Failing to initiate such a proceeding to quash, however, does not prohibit an interested person from intervening in a subsequent action brought by the department to enforce the summons.

(2) Any person entitled to notice of a summons may begin a proceeding to intervene in either the district court in the county in which the person resides or in the district court of the First Judicial District not later than 20 days after the notice of administrative summons is received. Notice is deemed given as provided for in Rule 45, Montana Rules of Civil Procedure.

(3) If a person intervenes, the person shall mail, by registered or certified mail, a copy of the petition to the person summoned and to the department's contact person. In any proceeding to intervene, the department may seek to compel compliance with the summons.

(2) If another method of summons enforcement or compelling testimony is provided by statute, the department may use it as an alternative to the methods provided for in the rules of this subchapter.

(3) If the department initiates an action to enforce a summons, the department will, within three days after initiating the enforcement action, notify the summoned person and any person identified in the summons of the pending action.

(1) Citizens desiring information about anything mentioned in these rules or about anything concerning the department and public participation should contact the Department of Revenue, P.O. Box 5805, Helena, Montana 59604-5805, or visit the department's Internet web site at revenue.mt.gov.

(1) Any individual or group of individuals may make appointments to meet with the director, the deputy director, or division administrators regarding any matter of concern to those individuals and under the responsibility of the department. Such appointments may be made by contacting the Department of Revenue, P.O. Box 5805, Helena, Montana 59604-5805, telephone (406) 444-6900.

The terms used by the department are, in great part, defined in Titles 15, 16, 39, and 72, MCA. In addition to these statutory definitions, the following definitions apply to ARM Title 42, unless context of a particular chapter or rule provides otherwise:

(1) "Amended return" is a return that amends the original return defined in (36).

(2) "Ancestor" means a lineal ancestor and a collateral ancestor if related by blood. Sections 72-11-102, 72-11-103, and 72-11-104, MCA, describe how kinship and degrees of kinship are determined.

(3) "Annual accounting period" means the accounting period used for federal income tax purposes.

(4) "Association" means an organization of people having a common interest.

(5) "Business activity" refers to the transactions and activity occurring in the regular course of a particular trade or business of a taxpayer.

(6) "Calendar year" means a 12-month period beginning January 1 and ending December 31.

(7) "Compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services. Payments made to an independent contractor or any other person not properly classifiable as an employee are excluded. Only amounts paid directly to employees are included in the payroll factor. Amounts considered paid directly include the value of board, rent, housing, lodging, and other benefits or services furnished to employees by the taxpayer in return for personal services; provided, that such amounts constitute income to the recipient under the federal IRC. In the case of employees not subject to the federal IRC, e.g., those employed in foreign countries, the determination of whether such benefits or services would constitute income to the employees shall be made as though such employees were subject to the federal IRC.

(8) "Contiguous parcels of land" means separate land acreage in the same ownership that are adjacent.

(9) "Corporation" or "C corporation" means a corporation, limited liability company, or other entity treated as an association for federal income tax purposes. The term does not include an S corporation or a disregarded entity. The term includes a regulated investment company (RIC) as defined in IRC 851, a real estate investment trust (REIT) as defined in IRC 856, and a corporation that has elected to be treated as a real estate mortgage investment conduit (REMIC) as provided in IRC 860D.

(10) "Deficiency assessment" means an amount greater than the amount disclosed on a return or report filed with the department.

(11) "Department" means the Department of Revenue as defined in 2-15-1301, MCA.

(12) "Dependent" means any individual listed in 15-30-2115, MCA, as amended, over one-half of whose support for the calendar year in which the taxable year of the taxpayer begins was received from the taxpayer. In determining whether or not an individual received for a given calendar year over one-half of his support from the taxpayer, there shall be taken into account the amount of support received from the taxpayer as compared to the entire amount of support the individual received from all sources, including support which the individual himself supplied.

(13) "Descendant" means a lineal descendant and a collateral descendant related by blood. Sections 72-11-102, 72-11-103, and 72-11-104, MCA, describe how kinship and degrees of kinship are determined.

(14) "Discretion" means the power to do or to refrain from doing a certain thing.

(15) "Disregarded entity" means a business entity that is disregarded as an entity separate from its owner(s) for federal income tax purposes. The term includes a limited liability company with one owner, a qualified subchapter S subsidiary not treated as a separate corporation, and a partnership, syndicate, group, pool, joint venture, or other unincorporated organization electing under IRC 761 to be excluded from application of partnership tax rules. A corporation is not a disregarded entity by virtue of being included in a federal consolidated return.

(16) "Domiciled" means having a residence in the state of Montana as stated in 1-1-215, MCA.

(17) "Earned income" means:

(a) wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered; and

(b) the amount of the taxpayer's net earnings from a trade or business which is wholly or partially subject to the federal self-employment tax.

(18) "Economic hardship" means the financial inability of the taxpayer to pay a tax when the tax is due as determined by the department through a review of various financial documents and inquiries.

(19) "Employee" means:

(a) Any individual who performs services for another individual or organization having the right to control the employee as to the services to be performed and as to the manner of performance. The power to control, rather than the actual exercise of control, is the important factor. Designation of an individual as, or determination by an appropriate authority that an individual is an employee for purposes of industrial accident insurance (workers' compensation), unemployment compensation, federal Social Security, or federal withholding tax will establish that person as an employee.

(b) All classes or grades of employees are included within the relationship of employer and employee. Thus, superintendents, managers, other supervisory personnel, and corporate officers are employees.

(20) "Employer" means any person or organization for whom an individual performs any service as an employee. However, if the person or organization for whom an individual performs services does not have control of the compensation payments, the term employer means the person or organization having control of the payment of such compensation. State income tax withheld, or that should have been withheld, and will be collected from the person or organization having control of the payment of such compensation.

(a) An employer may be an individual, corporation, limited liability company, partnership, estate, trust, association, joint venture, or other unincorporated group or entity. The term employer also includes all religious, educational, charitable, and social organizations or societies and all governmental agencies at the federal, state, and local level, including school districts, towns, counties, and other political subdivisions.

(21) "Final order" means an order entered by the department or a court of review which either has not been appealed on a timely basis or to which no appeal is available.

(22) "Fiscal year" means any 12-month period ending on the last day of any month other than December.

(23) "Household" means a family living together.

(24) "Immediate family member" means any individual who is a lineal descendant of the taxpayer and also includes their spouse. Stepchildren are considered lineal descendents if that relationship was created before the child's eighteenth birthday.

(25) "Incorporated city or town" means any municipality or county area in which the government body has complied with all incorporation provisions outlined in Title 7, MCA.

(26) "Information return" means a pass-through entity information return described in ARM 42.9.301, 42.9.401, 42.9.501, 42.9.510, 42.9.520, 42.9.530, and 42.9.540.

(27) "Internal Revenue Code" (IRC) means the Internal Revenue Code of 1986, as amended.

(28) "Internal Revenue Service" (IRS), means the federal bureau of the Department of the Treasury of the United States of America with the duties set forth in 26 USCA 8022.

(29) "Limited liability company" has the same meaning given it in the Montana Limited Liability Company Act, Title 35, chapter 8, MCA, and includes limited liability companies formed under the laws of Montana and the laws of other states and foreign countries.

(30) "Lookback period," for purposes of the voluntary disclosure program, means the filing periods agreed upon for which returns must be filed and all taxes and statutory interest must be paid under a voluntary disclosure agreement.

(31) "Manufacturer" means any person who produces a product for the purpose of resale.

(32) "Montana source income" is defined in 15-30-2101, MCA, and the statute should be consulted to determine whether particular income is "Montana source income" obligating a nonresident to file a Montana individual income tax return, and a pass-through entity to file a Montana information return. In general, all income from work performed in the state, real or personal property located in the state, and business conducted in the state is Montana source income. Gain realized from transfer of real or personal property located in the state remains Montana source income notwithstanding that recognition of the gain is deferred and regardless of the deferral mechanism.

(a) Gain realized from an installment sale of Montana property retains its Montana source income character and must be reported as the payments are received.

(b) Gain realized on the transfer of Montana property in a like-kind exchange retains its Montana source income character and must be reported when the gain is recognized in a subsequent taxable transaction.

(33) "Noncontiguous parcels of land" means land acreage in the same ownership that meets one of the two following standards:

(a) acreages that do not touch, but are each an integral part of the operation of a bona fide agricultural operation; or

(b) acreages that would meet the definition of contiguous contained in (8) were the acreages not separated by one or more of the following features only:

(i) roads and highways;

(ii) navigable rivers and streams;

(iii) local taxing authority boundaries;

(iv) railroad lines; or

(v) federal or state land that is leased from the federal or state government by a taxpayer whose land ownership is contiguous to the federal or state land.

(34) "Neglect" means the failure to exercise ordinary business care and prudence.

(35) "Nonresident" means any individual, estate, trust, partnership, or other organization, excluding corporations, not a resident of Montana.

(36) "Notice of Assessment (NOA)" means the first notice provided to the taxpayer of an amount owed to the department or of a violation. It may include, but is not limited to, a notice of refund reduction, net operating loss adjustment, tax debt, fine, or notice of a violation of the laws administered by the department. It does not include notices pertaining to inheritance taxes, estate taxes, or liquor licensing matters.

(37) "Original return" means the return required to be filed on or before the due date.

(38) "Ownership interest" means the involvement in the business operated by someone who owns some or all of the assets of the business, shares in the financial risks, is entitled to any portion of the profits, or any portion of the liabilities and losses of the business. Ownership interest includes the right to control the location or ownership of a business. Examples of ownership interests include the authority to participate in such business decisions as sale of the business, relocation of the business, change or creation of any financial arrangements for loan repayment or funding sources, or any other responsibilities regarding the management of the business. This definition applies to an ownership interest for purposes of rules contained in the ARM Title 42, unless otherwise specified by law.

(39) "Paid" and "received" are construed in the context of an acceptable accounting method used to compute taxable income.

(40) "Partnership" means any partnership, including a general partnership, a limited partnership, a limited liability partnership, a professional partnership, or any other entity, treated as a partnership for federal income tax purposes. The term includes an unincorporated entity that has elected to be treated as a real estate mortgage investment conduit (REMIC) as provided in IRC 860D.

(41) "Pass-through entity" means a partnership, an S corporation, and a disregarded entity.

(42) "Pass-through entity information return" means the same as (26).

(43) "Payee" means a person to whom or to whose order a bill, note, check, or money order is made payable.

(44) "Person" means an individual, estate, trust, receiver, firm, partnership, corporation, cooperative association, limited liability company, joint venture, syndicate, or other business entity, however formed.

(a) A person may not include:

(i) federal government entities or their subdivisions; or

(ii) enrolled Native American entities, including tribal offices or businesses owned by the tribe and operating on the tribal reservation.

(45) "Qualified entity," for purposes of the voluntary disclosure program, is a corporation, trust, limited liability company, or partnership that meets the conditions in ARM 42.2.310.

(46) "Qualified individual," for purposes of the voluntary disclosure program, is an individual who meets the conditions in ARM 42.2.310, or is a beneficiary of a trust that meets the conditions in 42.2.310.

(47) "Qualified partner," for purposes of the voluntary disclosure program, is an individual or entity who is treated as a partner of a qualified entity for federal income tax purposes and who themselves meets the conditions of ARM 42.2.310.

(48) "Qualified shareholder," for purposes of the voluntary disclosure program, is a shareholder in an S corporation that is a qualified entity as defined in (44), and who themselves meets the conditions of ARM 42.2.310.

(49) "Quarter" means quarters that end:

(a) March 31;

(b) June 30;

(c) September 30; and

(d) December 31.

(50) "Reasonable cause" means the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return, pay the tax within the prescribed time, or object to a department action as provided for in ARM 42.2.510. Examples of what does or does not constitute reasonable cause may be found in ARM 42.2.512.

(51) "Reasonable time" means within five years or the normal statute of limitations, whichever is later.

(52) "Residence" means the same as (16).

(53) "Resident" means natural persons and includes, for the purpose of determining liability to the tax imposed by the state, any person domiciled in the state of Montana and any other person who maintains a permanent place of abode within the state even though temporarily absent from the state and who has not established a residence elsewhere.

(54) "Retail business" means individuals, firms, fiduciaries, partnerships, corporations, trusts, organizations, or associations engaged in the business of selling products to the consumer.

(55) "Return information" includes a taxpayer's identity, the nature, source, or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, over-assessments or tax payments, or any other data received by, recorded by, prepared by, furnished to, or collected by the department with respect to a return or with respect to the determination of the existence or possible existence of liability or the amount of liability of any person under Title 15, MCA, for any tax, penalty, interest, fine, forfeiture, or other imposition of any offense. The term does not include data in a form that cannot be associated with or otherwise identify, directly or indirectly, a particular taxpayer.

(56) "S corporation" means an incorporated entity for which a valid federal S corporation election is in effect. "S corporation" and "subchapter S corporation" are synonymous. The term "small business corporation" is also synonymous with "S corporation," except that certain S corporations are allowed to continue to file Montana corporation license tax returns as provided in 15-30-3301, MCA.

(57) "Settlement" means a compromise, agreement, or arrangement between parties which, in consideration of mutual concessions, terminates a dispute.

(58) "Situs" means location.

(59) "Statement of Account (SOA)" means a notice provided to the taxpayer summarizing amounts owed to the department. 

(60) "Support" includes food, shelter, clothing, medical and dental care, education, and the like. Generally, the amount of an item of support will be the amount of expense incurred by the one furnishing such item. However, if the item of support furnished is in the form of property or lodging, it will be necessary to measure the amount of such item in terms of its fair market value.

(61) "Taxable year," as stated in section 441(b) of the IRC, means:

(a) the taxpayer's annual accounting period, if it is a calendar year or a fiscal year;

(b) the calendar year if the taxpayer does not keep books or does not have an annual accounting period that qualifies as a fiscal year; or

(c) the period for which the return is made, if a return is made for a period of less than 12 months, the so-called "short period" defined under section 443 of the IRC. Generally, a taxable year cannot cover more than 12 calendar months.

(62) "Taxpayer" means any person (which may include any corporation, partnership, firm, association, or person acting as a business entity) or fiduciary, resident or nonresident, subject but not limited to, a tax, license fee, royalty, or permit imposed by the state of Montana or a liability for payment of a debt collected by the department.

(63) "Write-off of collection" means removal of an assessment from active department enforcement and monitoring procedures, and does not mean a tax assessment is forgiven.

(1) Unless otherwise provided by law, all taxpayers who are required to maintain records shall make such records available to the department during normal business hours. In this regard, the department, or its duly authorized agents, may enter any office or other area where the provider maintains business records to examine the records and other supporting data from which the tax returns were prepared. These audits may be conducted at the same time as audits are conducted for other state taxes.

(2) Records and other supporting data used to prepare the tax returns must be maintained for a period of five years from the due date of the return or five years from the date of payment, whichever is later.

This rule has been repealed.

(1) The taxpayer's method of accounting must be the method of accounting for federal income tax purposes. If the taxpayer's accounting method is changed for federal income tax purposes, the accounting method for Montana income tax purposes is automatically changed to reflect the same method.

(2) Acceptable accounting methods include the cash basis, accrual method, a hybrid of the cash and accrual methods, or any other method permitted under section 446 of the IRC.

(1) Gain realized on the transfer of Montana real or tangible personal property retains its Montana source income character and must be reported if and when the gain is recognized for federal income tax purposes.

(2) When the Montana property is relinquished in a section 1031 exchange for like-kind property, the gain realized as shown on the taxpayer's U.S. Treasury Form 8824 is generally the amount of Montana source income. If, however, the Montana property was itself acquired in a prior like-kind exchange as replacement property for property located outside the state, Montana source income does not include the gain attributable to the out-of-state property that has been deferred from the prior exchange as shown on the taxpayer's U.S. Treasury Form 8824 for that exchange. The following examples illustrate how the Montana source income may be calculated in different situations:

(a) Example 1 - A nonresident relinquishes unimproved Montana land with a fair market value of $100,000 and an adjusted tax basis of $10,000 in exchange for Wyoming property with a fair market value of $90,000 and $10,000 cash, and incurs exchange expenses of $2,000. The $88,000 realized gain reported on the taxpayer's Form 8824 is Montana source income, of which $8,000 is recognized and reportable in the year of sale and $80,000 is deferred and must be reported if and when the gain is recognized for federal income tax purposes:

(b) Example 2 - Same facts as in (2) (a) except the Montana property included improvements with a fair market value of $12,000 and $1,000 is reportable as ordinary income under the recapture rules because of depreciation deductions taken with respect to those improvements. The result is the same as the result in (2) (a) , except that $1,000 of the $8,000 Montana source income recognized and reportable in the year of sale is ordinary income.

(c) Example 3 - Same facts as in (2) (a) except the Montana property relinquished was replacement property exchanged for Oregon property in a prior like-kind exchange. In the prior like-kind exchange, the deferred gain or loss, as shown on the nonresident's Form 8824 was $50,000. The nonresident's Montana source income is $38,000, the $88,000 gain realized shown on the Form 8824 filed with respect to relinquishment of the Montana property, less the $50,000 deferred gain as reported on the Form 8824 filed with respect to relinquishment of the Oregon property. Of the $38,000 Montana source income realized, the $8,000 recognized for federal income tax purposes in the year of sale is currently reportable and $30,000 is deferred and must be reported if and when the gain is recognized for federal income tax purposes.

Form 8824 filed with respect to Oregon property relinquished

24

Deferred gain (or loss). Subtract line 23 from line 19

50,000

Form 8824 filed with respect to Montana property relinquished

15	Cash received, FMV of other property received, plus net liabilities assumed by other party, reduced (but not below zero) by any exchange expenses	8,000
16	FMV of like-kind property you received	90,000
17	Add lines 15 and 16	98,000
18	Adjusted basis of like-kind property you gave up, net amounts paid to other party, plus any exchange expenses not used on line 15	10,000
19	Realized gain (or loss). Subtract line 18 from line 17	88,000
20	Enter the smaller of line 15 or line 19, but not less than zero	8,000
21	Ordinary income under recapture rules	0
22	Subtract line 21 from line 20. If zero or less, enter -0-. If more than zero, enter here and on Schedule D or Form 4797, unless the installment method applies	8,000
23	Recognized gain. Add lines 21 and 22	8,000
24	Deferred gain (or loss). Subtract line 23 from line 19	80,000
25	Basis of like-kind property received. Subtract line 15 from the sum of lines 18 and 23	10,000

(3) The nonresident must report the deferred Montana source income realized on the relinquishment of the Montana property if and when the gain is recognized for federal income tax purposes. The amount of Montana source income recognized will never exceed the gain recognized for federal income tax purposes. The following examples illustrate how the Montana source income may be calculated in different situations:

(a) Example 1 - Same facts as in (2)(a). In a later tax year, the Wyoming replacement property is sold for $150,000, the taxpayer reporting taxable gain of $140,000 on their federal income tax return. The nonresident's $80,000 of Montana source income realized on the Montana property exchange that was deferred has been recognized for federal income tax purposes and must be reported as Montana source income when the nonresident files the Montana individual income tax return required in 15-30-2104, MCA.

(b) Example 2 - Same facts as in (3)(a), except the Wyoming replacement property is sold for $60,000 and $50,000 of taxable gain is reported on the taxpayer's federal income tax return. While $80,000 of Montana source income was realized but deferred on relinquishment of the Montana property, only $50,000 was recognized for federal income tax purposes. The nonresident must report the $50,000 of Montana source income recognized when the nonresident files the Montana individual income tax return required in 15-30-2104, MCA.

(c) Example 3 - Same facts as in (3)(a), except improvements with a cost of $75,000 are erected on the Wyoming property and depreciation deductions of $15,000 are claimed with respect to those improvements before the improved Wyoming property is sold for $150,000. On the date of sale the fair market value of the improvements, which have an adjusted basis of $60,000, is $70,000, and the fair market value of the Wyoming property acquired in the exchange, which has an adjusted basis of $10,000, is $80,000. Of the $80,000 of deferred Montana source income realized on relinquishment of the Montana property, $70,000 has been recognized for federal income tax purposes and must be reported when the nonresident files the Montana individual income tax required in 15-30-2104, MCA.

(d) Example 4 - Same facts as in (2)(c). The Wyoming replacement property is sold for $150,000. The $30,000 deferred Montana source income realized on relinquishment of the Montana property has been recognized for federal income tax purposes and must be reported when the nonresident files the Montana individual income tax return required in 15-30-2104, MCA.

This rule has been repealed.

(1) The voluntary disclosure program allows qualified entities and individuals, and qualified shareholders, and partners of qualified pass-through entities to disclose their tax liabilities voluntarily and settle their tax obligations in a voluntary disclosure agreement. Affected taxpayers may contact the department directly as provided for in (3) or use the services of the Multistate Tax Commission's National Nexus Program. The department encourages those qualified entities, qualified shareholders, and qualified partners with a need to come into compliance with multiple states or other jurisdictions to use the services of the National Nexus Program to resolve their compliance issues. The National Nexus Program provides a single point of contact and substantially uniform procedures. Information regarding the National Nexus Program can be found at www.mtc.gov.

(a) If a taxpayer contacts the department directly, the department will not enter into a voluntary disclosure agreement on terms more favorable than the terms the taxpayer would have entered into through the services of the National Nexus Program.

(2) To qualify for a voluntary disclosure agreement with the department, a qualified entity, qualified shareholder, qualified partner, or qualified individual must meet all of the following criteria:

(a) have not filed a return for the tax type covered by the agreement within the last five years;

(b) have had no previous contact by the department or its agencies, including the Multistate Tax Commission, regarding a tax covered by the agreement, including but not limited to, notification of audit, review, assessment, request for information, letter from the department following a foreign company's registration with the Montana Secretary of State, or a letter from the department following a domestic company's formation by filing documents with the Montana Secretary of State;

(c) voluntarily come forward and make an application for a voluntary disclosure agreement that contains the information required by (3);

(d) agree to file returns specified in the agreement and pay all the taxes and statutory interest for the entire lookback period within the time period and manner specified in the agreement without further action by the department;

(e) agree to register with the Secretary of State (if a business entity), file returns, and pay all taxes for periods after the lookback period without further action by the department; and

(f) have not been a party to any criminal investigation or pending civil or criminal litigation for nonpayment, delinquency, or fraud in relation to any tax due.

(3) To request a voluntary disclosure agreement, a qualified entity, qualified shareholder, qualified partner and/or representatives or qualified individual must submit a written request to the department including the following information:

(a) if an entity:

(i) a full and accurate statement of the entity's activities for five immediately preceding filing periods;

(ii) a full and accurate statement of the entity's activities in Montana for five immediately preceding filing periods; and

(iii) the number of years the entity has been doing business in Montana;

(b) if an individual:

(i) a full and accurate statement of the individual's activities in Montana for five immediately preceding filing periods;

(ii) the addresses at which the individual has resided for the five immediately preceding filing periods; and

(iii) the number of years the individual maintained a place of abode in Montana;

(c) the type of tax or taxes for which they are requesting voluntary disclosure;

(d) an explanation for the failure to register with the Secretary of State, if an entity;

(e) an explanation of the failure to file Montana returns and pay taxes;

(f) proposed voluntary disclosure agreement terms; and

(g) an estimate of the tax liability for the lookback period.

(4) A qualified entity or individual may preserve confidentiality by not revealing its name or any information that could readily identify the company or individual during the voluntary disclosure process until the agreement is finalized.

(5) The voluntary disclosure agreement is voidable by the department if the qualified entity, shareholder, partner, or individual:

(a) misrepresents material facts relevant to the agreement;

(b) fails to file returns or pay taxes and statutory interest for the lookback period within the time specified in the agreement;

(c) reneges on an installment payment arrangement; or

(d) fails to continue to comply with Montana tax law.

(1) Public participation is encouraged and assisted to the fullest extent practicable. Participation must be consistent with other requirements of state law and the rights and requirements of personal privacy. The major objectives of such participation include:

(a) greater responsiveness of governmental actions to public concerns and priorities; and

(b) improved public understanding of official programs and actions.

(2) Prior to the adoption, amendment, or repeal of a rule or policy or the granting or denying of certain licenses, the department shall, where the decision is of significant public interest, give adequate notice and opportunity to participate in the decision-making process.

(1) The following will be considered action of significant public interest to require notice and opportunity for public participation in the decision-making process:

(a) the adoption, amendment, or repeal of any regulation, standard, or statement of general applicability that implements, interprets, or prescribes law or policy, or practice requirements of the department; or

(b) the granting or denying of a license for which a hearing is required under provisions of Montana law.

(2) In all other cases, whether or not the decision is one of significant public interest will be determined by the person within the department who is proposing the decision according to the following considerations:

(a) whether the decision regards a matter which is controversial;

(b) the number of persons who will be affected by the decision;

(c) the fiscal impact the decision will have; or

(d) the department has witnessed a high level of citizen interest.

(1) If it is determined that significant public interest is involved, one or more of the following steps, as applicable, shall be taken to assist public participation in the decision-making process:

(a) a proceeding or hearing is held in compliance with the provisions of Montana Administrative Procedure Act, Title 2, chapter 4, MCA;

(b) a public hearing, after appropriate notice is given, is held pursuant to any other provision of state law or a local ordinance or regulation;

(c) a news release, legal advertisement, or other method of publication will be given to news media within the area to be affected which shall include the name of a person within the department most familiar with the proposed action, that person's address, and a telephone number where interested persons may submit their data, views, or arguments, orally or in written form, concerning the proposed action.

This rule has been repealed.

This rule has been repealed.

(1) The department shall develop procedures that outline the elements stated in ARM 42.2.322 through 42.2.325. The exact mechanism and extent of activity may vary in relation to available resources, public response, and the nature of issues involved.

(1) To assist the public in participating in the department's decision-making process, the department shall provide continuing policy, program, and technical information at the earliest practicable times and at places easily accessible to interested or affected persons and organizations. News releases and other publications may be used for this purpose as well as informational discussions and meetings with interested citizens' groups. Special effort shall be made to summarize complex technical materials for public and media use.

(1) The department shall develop procedures for providing technical and informational assistance to concerned groups and individuals.

(1) The department shall maintain lists of interested persons and organizations who request information such as the information listed in ARM 42.2.322. This shall be in addition to the lists required by the Montana Administrative Procedure Act.

(2) Additionally, the department shall notify interested persons of public hearings or other decision-making proceedings prior to the decision-making and, wherever possible, shall supplement this notification with informal notice to all interested persons or groups having requested advance notice.

(1) The department files, other than those files required by law to be closed, are open to public inspection in accordance with established department policy. These files are located at various department offices in Montana. Copies of specific documents are available in accordance with department policy entitled, "Agency Documents - Access and Photocopying," 2.1.4, dated January 3, 2013.

(2) All requests for confidential tax returns or tax return information submitted by someone other than the taxpayer or an authorized agent of the taxpayer must be made to the department in writing directed to:

Department of Revenue

Director's Security Office

P.O. Box 7701

Helena, MT 59604-7701.

(3) A taxpayer may authorize a representative to obtain the taxpayer's confidential tax information by completing and submitting the department's Power of Attorney form, Form POA. The downloadable form is located on the department's web site at revenue.mt.gov. The department will also accept a fully executed Federal Form 2848, Power of Attorney and Declaration of Representative.

(4) Except as provided in (5), when the department receives a written request for confidential tax return information from someone who is not statutorily authorized to receive it, the department's Security Office will respond in writing denying the request.

(5) The department complies with the State Tax Appeals Board's order to provide relevant confidential realty transfer certificate information to requesting taxpayers who are appealing the department's valuation of their property for comparable sales that the department used in valuing the taxpayer's property.

(6) When the department is served with an administrative summons, judicial summons, or subpoena demanding confidential tax return information on behalf of someone who is not statutorily authorized to receive it, the department will oppose the request by filing a motion to quash with the judicial body that issued it or under whose authority it was issued, and will appeal any adverse ruling that implicates the department's view of proper tax administration. The department will obey an order to provide the information according to a final judicial order.

This rule has been repealed.

This rule has been repealed.

(1) Information obtained and records prepared in the course of property tax administration in Montana are available to the public, including the property owner's name. An individual who is at risk of physical harm or to their personal safety may have a reasonable expectation of privacy. A qualified property owner, as defined in (2), may request that the department not display the name of the owner on the department's web applications upon demonstrating that the right of the individual's privacy clearly exceeds the public's right to access property records.

(2) A "qualified property owner," for the purposes of this rule, means an individual who:

(a) owns real property that is displayed on the department's online web applications; and

(b) can demonstrate that their name, if published with the property record, will create a risk of physical harm or a threat to the safety of the individual.

(3) A qualified property owner must apply for nondisclosure of their name on the department's web applications using an application form provided by the department. In addition to the application, the applicant shall submit:

(a) a statement explaining the reason(s) for the nondisclosure request; and

(b) documentation supporting the reason(s) that the individual's name should be withheld.

(4) After receipt of the application, the nondisclosure request statement, and the supporting documentation demonstrating individual safety concerns, the department will weigh the asserted privacy interest against the public's right to know to determine if the information should remain public or be maintained as confidential. The department will advise the individual and the local department office of its determination, in writing, within 30 days of receipt of the completed application materials.

(5) If approved for nondisclosure status, the individual's name will not be displayed on the department's online web applications. However, property record data, including the property owner's name, may remain available on other state or county web applications or web sites or any other media outside the department's control.

(6) The department may not withhold from public scrutiny any more information than is required to protect an individual privacy interest.

(7) Qualified property owners who have been approved for nondisclosure status will be required to submit a renewal application with supporting documentation by May 31 of every odd-numbered calendar year thereafter, for consideration and approval by the department. Examples of when a qualified property owner needs to reapply to maintain nondisclosure status are:

(a) Example 1: applicant is approved for nondisclosure status on July 1, in an odd-numbered calendar year. The nondisclosure status is in effect until May 31 of the next odd-numbered calendar year, or 23 months.

(b) Example 2: applicant is approved for nondisclosure status on July 1, in an even-numbered calendar year. The nondisclosure status is in effect until May 31 of the following year, which is an odd-numbered calendar year, or 11 months.

(8) If the renewal application required in (7) is not timely received or is not approved by the department, the individual's name will appear on the department's online web applications by June 1.

(9) The property owner's name will always remain on the department's Computer Assisted Mass Appraisal (CAMA) property tax system, used for property tax administration purposes. The information in the CAMA property tax system will remain available to local county and city governments for tax administration purposes, and to contractors and vendors who have entered into agreements with the department to access the system.

This rule has been transferred.

(1) The department may issue a tax certificate, referred to as a "Title 15 Certificate," to a domestic corporation or limited liability company (LLC) that has been involuntarily dissolved by the Montana Secretary of State (MSOS) if the business has filed all required tax returns and reports and has paid all taxes, including interest and penalties, owed by the entity. Effective May 6, 2011, an LLC that has only one member and has not elected to be taxed as a corporation is not required to provide a Title 15 certificate from the department to be reinstated under 35-8-912, MCA.

(2) The department may issue a tax certificate, referred to as a "Dissolution/Withdrawal Certificate" to a domestic C or S corporation that wishes to voluntarily dissolve, and to a foreign C or S corporation and LLC that wishes to voluntarily withdraw, if the business has filed all required tax returns and reports and has paid all taxes, including interest and penalties, up to the date of the request.

(3) The department may issue a tax certificate, referred to as a "Tax Clearance Certificate" to a domestic C or S corporation that has completed its dissolution or to a foreign C or S corporation that has completed its withdrawal, verifying that the corporation has filed all applicable returns, including a final return, and that all taxes owed by the corporation, including interest and penalties, have been paid through and including the corporation's final year of existence in Montana.

(4) The department will issue a tax certificate, referred to as a "Reviver Certificate" to a domestic C corporation whose corporate powers have been suspended or to a foreign C corporation whose right to do intrastate business in the state has been forfeited as provided in 15-31-523, MCA, for failure to file a corporation license tax return or to pay a corporation license tax and that is seeking to be relieved from the suspension or forfeiture as follows:

(a) if the application for relief from the suspension or forfeiture is made within one year or less after the date of the suspension or forfeiture and if the suspension was made because the corporation failed to file a required corporation license tax return, then the department will issue the certificate if the corporation has filed the required return and paid any associated tax, interest and penalties; or

(b) if the application for relief from the suspension or forfeiture is made within one year or less after the date of the suspension or forfeiture and if the suspension was made because the corporation failed to pay all or any part of its corporation license tax liability, then the department will issue the certificate if the corporation has paid the tax, interest and penalties.

(5) The department will also issue a tax certificate, referred to as a "Reviver Certificate" to a domestic C corporation whose corporate powers have been suspended or to a foreign C corporation whose right to do intrastate business in the state has been forfeited as provided in 15-31-523, MCA, for failure to file a corporation license tax return or to pay a corporation license tax and that is seeking to be relieved from the suspension or forfeiture as follows:

(a) if the application for relief from the suspension or forfeiture is made more than one year after the date of the suspension or forfeiture and if the suspension was made because the corporation failed to file a required return, then the department will issue the certificate if the corporation has filed the required return and paid twice the amount of any associated tax and penalties; or

(b) if the application for relief from the suspension or forfeiture is made more than one year after the date of the suspension or forfeiture and if the suspension was made because the corporation failed to pay all or any part of its corporation license tax liability, then the department will issue the certificate if the corporation has paid twice the amount of tax and penalties.

(6) The department may issue a tax certificate, referred to as a "Certificate of Good Standing," to any entity wishing to show that it filed required tax returns and paid all tax, interest, and penalties. The Certificate of Good Standing will be issued when the department has all the information it needs to determine that all required returns have been filed and all taxes, penalties, and interest have been paid.

(7) The department will not issue any tax certificate unless the application contains the name, mailing address, and federal employer identification number (FEIN) of the entity. If the entity is a single member LLC that has no employees and does not have an FEIN, the single member LLC shall use its owner's social security number (SSN) or FEIN. If the entity is a C corporation requesting a tax clearance certificate described in (3), the entity must provide additional information as provided in ARM 42.23.313.

(8) Except as provided in (9), the tax filing requirements of the single member LLC for purposes of obtaining a tax certificate, are separate from the tax filing requirements of its owner. Because an entity that is disregarded for tax purposes may, and usually does, have an obligation to file an information return (Form DER-1, Montana Disregarded Entity Information Return) with the department, a single member LLC cannot claim to be current on its tax filing requirements on the basis that its owner is current on the owner's tax filing requirements.

(9) For wage withholding purposes a single member LLC that has not elected to be taxed as a corporation and its owner are considered to be the same employer. The department will not issue a tax certificate for the single member LLC unless all withholding taxes have been paid by the single member LLC and the owner.

(1) Partial payments that are received by the department for payment of a tax liability and a collection service fee, if any, must be applied proportionately between the tax liability and the collection service fee. Payment of the tax liability is applied in the order of tax, penalty, and then interest.

(2) Partial payments for a customer's tax liability shall be applied as directed by the customer as to account type, period, or order to apply.

(3) If customer direction is not provided, the payment will be applied in full to the oldest period first in the following order:

(a) first to tax (dollar for dollar until satisfied);

(b) then to penalty (if due); and

(c) then to interest (if due).

(4) Payments not directed by the customer will be applied pro rata among the accounts being collected by the department. For example, if 30 percent of the total debt is coal severance tax, 40 percent is withholding, and 30 percent is income tax, and a partial payment is received, application of the payment will be applied pro rata according to the schedule shown in (1) until all debt is satisfied.

(1) If the department finds the assessment or collection of a deficiency will be jeopardized by delay and a deficiency notice has not been issued, the deficiency, penalty, and accrued interest become immediately due and payable on the date the department mails the taxpayer a written notice:

(a) of its finding that assessment or collection of the deficiency will be jeopardized by delay and its basis for making the finding;

(b) of the amount of deficiency, penalty, and accrued interest (the Notice of Assessment (NOA));

(c) that immediate payment of the deficiency, penalty and interest is demanded;

(d) that the department may immediately commence collection proceedings, including issuing a Warrant for Distraint;

(e) that if the taxpayer does not file a written objection to the amount of the NOA or a Request for Informal Review Form (APLS101F) with the department within 30 days of the date of the notice, the assessment becomes final and may not be appealed to the state tax appeal board; and

(f) that while filing the objection or request as provided in (1)(e) will not stop or delay collection proceedings, including issuing a Warrant for Distraint, if the taxpayer files the objection or request and it is subsequently determined in the department dispute resolution proceedings or on subsequent appeal that the amount of tax collected is in excess of the amount due, the amount of the overpayment will be credited against any income tax, penalty, or interest then due from the taxpayer and the balance of the excess refunded to the taxpayer as provided in 15-30-2609 and 15-31-531, MCA.

(2) If the department finds the collection of a deficiency, for which an NOA has been mailed, will be jeopardized by delay and the time for filing a written objection to the amount of the NOA or a Request for Informal Review form (APLS101F) with the department as provided in ARM 42.2.510 has not yet expired, the deficiency, penalty, and accrued interest become immediately due and payable on the date the department mails the taxpayer a written notice:

(a) of its finding that collection of the deficiency will be jeopardized by delay and its basis for making the finding;

(b) that immediate payment of the deficiency, penalty and interest is demanded;

(c) that the department may immediately commence collection proceedings, including issuing a Warrant for Distraint; and

(d) that if it is subsequently determined in the department dispute resolution proceedings or on subsequent appeal that the amount of tax collected is in excess of the amount due, the amount of the overpayment will be credited against any income tax, penalty, or interest then due from the taxpayer and the balance of the excess refunded to the taxpayer as provided in 15-30-2609 and 15-31-531, MCA.

(3) If the department finds the collection of a tax, including penalty and interest, will be jeopardized by delaying the issuance of a Warrant for Distraint until the notice provided in 15-1-702, MCA, has been given and 30 days have passed, the department will issue the Warrant for Distraint without giving the taxpayer prior notice. On the date a Warrant for Distraint is issued, the department will mail the taxpayer written notice that warrants have been issued.

(4) If the department has reason to believe that collection of the amount of any tax withheld is in jeopardy, the department will issue the Warrant for Distraint without giving the employer prior notice. On the date a Warrant for Distraint is issued, the department will mail the employer written notice that warrants have been issued.

(2) The penalty for purposely failing to file a return or to pay the tax by the due date is set forth in 15-1-216, MCA.

(3) A taxpayer who files, renders, or signs a false or fraudulent return or statement, or who supplies the department with false or fraudulent information, is subject to the additional penalties described in 15-1-216, MCA.

(4) A person who files a frivolous return or report under Title 15, MCA, is subject to the additional penalties described in 15-1-216, MCA. Frivolous positions, as defined in 26 U.S.C. 6702, that may apply to provisions of Title 15, MCA, can be found on the department's web site at mtrevenue.gov/gov/government/frivolous-tax-positions.

(2) The penalty for purposely failing to file a return or to pay the tax by the due date is set forth in 15-1-216, MCA.

(3) A taxpayer who files, renders, or signs a false or fraudulent return or statement, or who supplies the department with false or fraudulent information, is subject to the additional penalties described in 15-1-216, MCA.

(4) A person who files a frivolous return or report under Title 15, MCA, is subject to the additional penalties described in 15-1-216, MCA. Frivolous positions, as defined in 26 U.S.C. 6702, that may apply to provisions of Title 15, MCA, can be found on the department's web site at mtrevenue.gov/gov/government/frivolous-tax-positions.

(1) Unless otherwise provided by law, for all taxes, fees, and other assessments imposed under Titles 15 and 16, MCA, and administered by the department, interest attaches as outlined in 15-1-216, MCA.

(2) Exclusions to this rule are provided in 15-1-216, MCA.

(3) In the case where there is unpaid tax for a year that is reduced by the carryback of a subsequent year's net operating loss, interest on the unpaid tax accrues to the later of:

(a) the due date of the loss year return; or

(b) the date the loss year return is actually filed. This limited interest calculation applies only to the unpaid tax offset by the net operating loss carryback.

(4) Interest on all outstanding taxes shall accrue at the rate in effect, as provided in 15-1-216, MCA, during each calendar year, regardless of when the tax was originally due or when the tax was assessed. The rate does not affect any interest accrued prior to the current tax year.

(5) For purposes of determining interest on the underpayment of estimates provided in 15-30-2512, MCA, the rate in effect on the original due date of the tax return shall be used. For example, a return for the 2015 tax year is due April 15, 2016, so the rate that became effective January 1, 2016, shall be used to compute interest on the underpayment of estimates.

(1) Applicable late filing penalties are calculated at 5 percent of the net tax due for each month during which there is a failure to file the return or report. Late filing penalties shall:

(a) not exceed an amount up to 25 percent of the net tax due; and

(b) not be less than $50.

(2) Net tax due includes the amount of any credit against the tax that may be claimed on the return or report and any payments received by the due date of the return or report, including extensions.

(3) If the due date of the return or report is a date other than the last day of a calendar month, the late filing penalty is assessed each month or fraction thereof for which there is a failure to file a tax return or report. For example:

(a) A taxpayer files a tax return on June 20 that was due on April 15 of the same year. When filing the return, the taxpayer pays the tax due of $1,500. The late filing penalty assessed is $225 ($1,500 x 5 percent x 3 months).

(b) A taxpayer files a tax return on June 20 that was due on April 15 of the same year. When filing the return, the taxpayer pays the tax due of $300. The late filing penalty assessed is $50 because the calculated penalty does not exceed the $50 minimum ($300 x 5 percent x 3 months = $45).

(c) A taxpayer files a tax return due on June 20 that was due on April 15 of the same year. The taxpayer, however, paid the tax due of $1,500 on April 15. The late filing penalty assessed is the minimum $50.

(4) If the due date of the return or report, including extensions, is the last day of a calendar month, the late filing penalty is assessed each succeeding month or fraction thereof for which there is a failure to file a tax return or report. For example:

(a) A taxpayer files a tax return on April 10 that was due on March 31 of the same year. When filing the return, the taxpayer pays the tax due of $1,500. The late filing penalty assessed is $75 ($1,500 x 5 percent x 1 month).

(b) A taxpayer files a tax return on April 10 that was due on March 31 of the same year. The taxpayer, however, paid the tax due of $1,500 on March 31. The late filing penalty assessed is the minimum $50.

(1) A taxpayer who substantially understates tax due is subject to a substantial understatement of tax penalty in an amount equal to 20 percent of the understatement.

(2) For individuals, estates, and trusts, the penalty does not apply to understatements of tax that are less than or equal to $3,000. For understatements larger than $3,000, the penalty applies when the understatement exceeds the greater of:

(a) 10 percent of the tax the taxpayer is required to show on the return; or

(b) $3,000. 

(3) Examples of how the substantial underpayment penalty is calculated for individual, estate, and trust taxpayers are as follows:

(a) A taxpayer reports $2,000 of tax on their original return; however, the taxpayer was required to report $6,000. The taxpayer understated their tax by $4,000. To determine whether the taxpayer's understatement was substantial, the understatement has to exceed the greater of $3,000, or 10 percent of the tax required to be paid. Because the understated amount of $4,000 exceeds both $3,000 and 10 percent of the required tax to be paid ($6,000 x 10 percent is $600) the substantial understatement penalty applies. The taxpayer would be assessed a penalty of $800 (20 percent of $4,000).

(b) A taxpayer reports $3,500 of tax on their original return, however, the taxpayer was required to report $6,000 of tax. The taxpayer understated their tax by $2,500. The understatement does not exceed $3,000. As a result, the taxpayer is not subject to the penalty.

(4) For taxpayers, other than individuals, estates, and trusts, the penalty does not apply to understatements that are less than or equal to $10,000. For understatements greater than $10,000, the penalty applies when the understatement of tax exceeds the lesser of:

(a) 10 percent of the tax required to be shown on the return; or

(b) $500,000.

(5) Examples of how the substantial underpayment penalty is calculated for taxpayers other than individuals are as follows:

(a) A corporate taxpayer reports $5,500,000 of tax on their original return; however, the taxpayer was required to report $6,250,000 of tax. The taxpayer understated its tax by $750,000. Because $500,000 is less than 10 percent of the tax required to be shown on the return ($625,000), $500,000 is used to determine whether the taxpayer substantially understated its tax. Here, the taxpayer substantially understated its tax ($750,000 is greater than $500,000) and is assessed a $150,000 penalty ($750,000 x 20 percent).

(b) A corporate taxpayer reports $750,000 of tax on their original return; however, the taxpayer was required to report $1,000,000 of tax. The taxpayer understated its tax by $250,000. Because $100,000 (10 percent of the tax required to be shown on the return) is less than $500,000, $100,000 is used to determine whether the taxpayer substantially understated its tax. Here, the taxpayer substantially understated its tax ($250,000 is greater than $100,000) and is assessed a $50,000 penalty ($250,000 x 20 percent).

(c) A corporate taxpayer reports $901,000 of tax on their original return; however, the taxpayer was required to report $1,000,000 of tax. The taxpayer understated its tax by $99,000. Because $100,000 (10 percent of the tax required to be shown on the return) is less than $500,000, $100,000 is used to determine whether the taxpayer substantially understated its tax. The taxpayer did not substantially understate its tax because its understatement is less than $100,000. The taxpayer is not subject to the penalty.

(d) A corporate taxpayer reports $991,000 of tax on their original return; however, the taxpayer was required to report $1,000,000 of tax. The taxpayer understated its tax by $9,000. Since the understatement does not exceed $10,000, the taxpayer is not subject to the penalty.

(6) The burden of proof is on the taxpayer to establish the existence of substantial authority or a reasonable basis for the tax treatment of an item taken on the return.

(7) For the purposes of determining a reduced penalty, the penalty is first calculated based on the understatement as a whole. Reductions are separately calculated by item and then subtracted from the penalty. For example:

(8) For the purposes of this rule, the following definitions apply:

(a) "Adequate disclosure" means a clear and comprehensive disclosure through statements, footnotes and/or supplemental schedules, which provides a comprehensive and clear description of the taxpayer's position.

(b) "Reasonable basis" means a well-reasoned construction of applicable statutory provisions and/or rules that provide substantial authority applied in good faith to support the taxpayer's position.

(c) "Substantial authority" means an objective standard that is more stringent than the reasonable basis standard, where the weight of the authorities' supporting treatment is substantial in relation to the weight of the authorities' supporting contrary treatment.

(1) Late pay penalties will be adjusted based on the corrected amount of tax due that results from an amended return, adjustment from an audit, or correction to the original return.

(2) The department will adjust interest based on the corrected amount of tax due that results from an amended return, adjustment from an audit, or correction to the original return, unless a decrease in tax due arises from a net operating loss or a tax credit.

(3) When there is a change to the tax liability that results from an amended return, adjustment from an audit, or correction to the original return, no change will be made to the underpayment interest penalty as calculated on the original return.

(4) The taxpayer may appeal a penalty assessment under the provisions of ARM 42.2.510 and ARM 42.2.613 through 42.2.621.

(1) This rule applies to all department actions where a Notice of Assessment (NOA) or deficiency assessment, as those terms are defined in ARM 42.2.304, is issued. An NOA does not include centrally assessed appraisal reports and centrally assessed assessment notices which are covered by ARM 42.2.511.

(2) The department will provide notification by mailing the NOA to the taxpayer as prescribed in 15-1-211, MCA. Information provided on the NOA shall advise the taxpayer of the requirement to file a Request for Informal Review (Form APLS101F) or a written objection to the NOA with the department within 45 days from the date of the NOA; and that failure to file a written objection within the 45 days shall be deemed an admission that the debt stated in the NOA is due and owing.

(a) If the taxpayer agrees with the NOA, the matter is resolved upon compliance with, or acceptance of, the terms set forth in the NOA.

(b) If the taxpayer does not pay or respond to the NOA as required in (2), a letter will be sent to the taxpayer requesting payment within 45 days of the date of the letter or a Warrant for Distraint may be issued pursuant to 15-1-702, MCA.

(c) If payment is received, the matter is resolved.

(d) If payment is not received, the matter is forwarded to the department's Collections Bureau for handling.

(3) The taxpayer must submit to the department an objection to the NOA within 45 days of the date on the NOA. If the objection is sent by the U.S. Postal Service or by any other generally accepted delivery service, the objection must be postmarked within 45 days of the date of the NOA. If it is sent by e-mail, it must be sent within 45 days of the date of the NOA. Failure to respond within the 45 days shall be deemed an admission that the debt stated in the NOA is due and owing.

(a) Objections may be submitted using Form APLS101F or by a detailed letter stating the issues and amount of tax disputed.

(b) Electronic objections will be accepted. The e-mail address is provided in the appeal rights section of the NOA.

(4) An extension to deadlines in this rule may be granted if both parties agree.

(5) The department shall review the objection and determine whether the department agrees or disagrees with the taxpayer's objections. The department shall mail written notice to the taxpayer advising the taxpayer of the department's determination within 45 days after receipt of the objection.

(a) If the department concurs with the taxpayer, the matter is resolved by withdrawing or revising the NOA.

(b) If the department disagrees with the taxpayer, it shall explain the reasons for the disagreement in a Notice of Determination, notify the taxpayer of the dispute resolution procedures, and provide a copy of the Notice of Referral to the Office of Dispute Resolution (Form APLS102F). The department shall also notify the taxpayer that the taxpayer must submit Form APLS102F or any other written objection to the department within 45 days of the date on the Notice of Determination from the department, and that the taxpayer will forfeit the right to a hearing if the taxpayer fails to submit Form APLS102F or any other written objection within the 45-day period.

(c)  If the department does not issue a Notice of Determination within the 45-day period provided in this rule, and an extension has not been previously agreed to between the parties, the taxpayer's appeal for the period identified in the NOA is deemed granted.  An appeal that is deemed granted on this basis does not prohibit the department from making the same adjustment(s) identified in the underlying NOA in a different tax period.

(6) If the taxpayer disagrees with the department's determination, the taxpayer must submit Form APLS102F or any other written objection within 45  days of the date on the Notice of Determination to request a hearing before the Office of Dispute Resolution (ODR). Appeals should be mailed to the Department of Revenue, Office of Dispute Resolution, P.O. Box 5805, Helena, Montana 59604 or e-mailed to dordisputeresolution@mt.gov. If the objection is sent by the U.S. Postal Service or by any other generally accepted delivery service, the objection must be postmarked within 45 days of the date of the department's Notice of Determination. If it is sent by e-mail, it must be sent within 45 days of the date of the department's Notice of Determination.

(a) Failure by the taxpayer to file an appeal within 45 days of the date of the department's Notice of Determination shall be deemed an admission that the debt stated in the NOA is due and owing.

(b) If the taxpayer pays the bill, the matter is resolved.

(c) If the taxpayer does not pay the bill, the matter will be referred to the department's Collections Bureau.

(7) Once the matter is submitted to the ODR, ARM 42.2.613 through 42.2.621 apply. The department has 180 calendar days from the referral date to resolve the matter.

(8) The parties can agree to settle the dispute at any point during the process.

(1) This rule applies to all centrally assessed property tax appraisals issued by the department.

(2) Appraisal reports will be mailed to the taxpayer as provided in ARM 42.22.115. The appraisal report shall advise the taxpayer of the requirement to file a Request for Informal Review (Form CAB-8) or a written objection to the appraisal report within 15 days of the date of the appraisal report; and that failure to file a written objection within the 15 days shall be deemed an admission that the appraisal is correct and final. If the taxpayer agrees with the appraisal, no response is required and the department will advise the local department field office and the taxpayer by issuing an assessment notice on or before July 1 of the year of assessment that the appraisal is final.

(3) Objections to an appraisal report shall be sent to the department within 15 days of the date on the appraisal report. If the objection is sent by the U.S. Postal Service or by any other generally accepted delivery service, the objection must be postmarked within 15 days of the date of the appraisal report. If it is sent by e-mail, it must be sent within 15 days of the date of the appraisal report. Failure to respond within the 15 days shall be deemed an admission that the taxpayer concurs with the appraisal as stated in the appraisal report.

(a) Electronic objections will be accepted. The e-mail address is provided in the appeal rights section of the appraisal report.

(4) Extensions may be granted if both parties agree. The parties may extend the time periods in this rule after the initial objection has been filed by completing an extension form or by detailed letter.

(5) The department shall review the objection and determine whether the department agrees or disagrees with the taxpayer's objections. The department shall mail written notice to the taxpayer advising the taxpayer of the department's determination within 15 days after receipt of the objection.

(a) If the department concurs with the taxpayer, the matter is resolved by revising the appraisal report and issuing a final assessment notice.

(b) If the department disagrees with the taxpayer, it shall explain the reasons for the disagreement by issuing a Notice of Determination and revised appraisal report, if applicable, notifying the taxpayer of the dispute resolution procedures and providing a copy of the Notice of Referral to the Office of Dispute Resolution for Centrally Assessed Companies (Form CAB-9). The department shall also notify the taxpayer that the taxpayer must submit Form CAB-9 or any other written objection to the department within 15 days of the date on the Notice of Determination, and that the taxpayer will forfeit the right to a hearing if the taxpayer fails to submit Form CAB-9 or any other written objection within the 15-day period. Appeals should be mailed to the Department of Revenue, Office of Dispute Resolution, P.O. Box 5805, Helena, Montana 59604, or e-mailed to dordisputeresolution@mt.gov. If the objection is sent by the U.S. Postal Service or any other generally accepted delivery service, the objection must be postmarked within 15 days of the date of the department's Notice of Determination. If it is sent by e-mail, it must be sent within 15 days of the department's Notice of Determination. Failure to object within the 15 days shall be deemed an admission that the taxpayer concurs with the department's Notice of Determination.

(6) If the taxpayer decides to appeal the department's decision, the taxpayer shall:

(a) submit to the department Form CAB-9 or any other written objection within 15 days of the date on the Notice of Determination to request a hearing before the Office of Dispute Resolution (ODR); or

(b) upon mutual agreement of the parties, file an appeal with the state tax appeal board.

(7) If the matter is submitted to the ODR, ARM 42.2.613 through 42.2.621 apply. The department has 180 calendar days from the referral date to resolve the matter.

(8) The parties can agree to settle the dispute at any point during the process.

(9) If the department fails to comply with the deadlines in this rule, the taxpayer may immediately refer the matter to the ODR.

(1) "Reasonable cause" for waiver of penalty and interest is construed in favor of the collection of the penalty and interest.

(2) The exercise of ordinary business care and prudence must be determined by the facts of each case. The existence of "reasonable cause" will be determined on a case-by-case basis at the discretion of the department.

(3) Examples of reasonable cause for failure by a taxpayer to file a tax return or report, pay a tax on the date required by statute, or reply to a deficiency notice from the department include, but are not limited to:

(a) where it can be substantiated that the return or reply was mailed (whether or not the envelope bore sufficient postage) or electronically filed in time to reach the department in the normal course of business, within the legal period (if the due date is a Saturday, Sunday, or holiday, the following business day is within the legal period);

(b) where it can be substantiated that the delay or failure was due to erroneous information given the taxpayer by an employee of the department according to the provisions provided in the taxpayer bill of rights found in 15-1-222, MCA;

(c) where the delay was caused by death or extended serious illness of the taxpayer;

(d) where the delinquency or delay was due to destruction by fire or other casualty of the taxpayer's place of business or business records; or

(e) where a taxpayer is unable, for reasons beyond the taxpayer's control, to obtain the records necessary to determine the amount of tax due.

(4) The examples stated in (3) are illustrations only. Other reasonable causes may exist for failure to properly and timely file the tax statement or return, pay the tax, or reply to a deficiency notice. Each request for waiver will be considered on a case-by-case basis using the following criteria:

(a) the taxpayer's reasons address the penalty and interest that was assessed or the date a reply was due;

(b) the length of time between the event cited as a reason and the filing, payment, or reply date negate the event's effect;

(c) the event that caused the taxpayer's noncompliance or increased liability could have reasonably been anticipated;

(d) the taxpayer has provided sufficient detail (dates, relationships) to determine ordinary business care and prudence was exercised;

(e) the taxpayer documented all pertinent facts; and

(f) the taxpayer could have requested an extension or filed an amended return.

(5) The following are examples which do not constitute reasonable cause and do demonstrate neglect:

(a) forgetfulness or inadvertence on the part of a taxpayer, a taxpayer's employee, a taxpayer's agent, or the taxpayer's professional tax preparer;

(b) failure to file or reply because of advice by a professional tax preparer, attorney, or accountant;

(c) religious, political, or philosophical opposition to the tax;

(d) the advent of new tax laws, regulations, or administrative requirements that create complex problems and significantly delay the taxpayer in preparing returns;

(e) inability of a professional tax preparer to secure competent help in sufficient time to cope with the workload;

(f) a failure to secure the proper forms; or

(g) the taxpayer started to prepare the return or reply in sufficient time, but found that because of complicated issues the taxpayer was unable to finish the return or reply.

(6) The examples stated in (5) are for illustrations only. Other circumstances may exist which do not constitute reasonable cause.

(7) Ignorance of the law does not constitute "reasonable cause."

(8) Inability to pay a tax does not constitute reasonable cause for failure to file a tax return or statement on time.

(1) The taxpayer who requests waiver of penalty and interest on a tax, or submits an untimely reply to a deficiency notice, has the burden of proving to the department that reasonable cause exists for the failure to timely file the tax statement and report, timely pay the tax, or timely submit a reply to a deficiency notice. The taxpayer also must prove the taxpayer was not guilty of neglect when the taxpayer failed to timely file the tax statement and report, timely pay the tax, or timely submit a reply to a deficiency notice.

(2) Unless reasonable cause is apparent in the department's file or is public knowledge, all requests for waiver of penalty and interest must be in writing.

(3) The simple statement that "reasonable cause" existed for the failure to timely file the tax statement or return, to timely pay the tax, or timely submit a reply to a deficiency notice, is never sufficient to receive a waiver or other consideration. All requests for waiver of penalty and interest or untimely replies to a deficiency notice must include the facts the taxpayer believes demonstrate reasonable cause and lack of neglect.

(1) In order to collect delinquent taxes after the time for appeal has expired, the department may direct the offset of tax refunds or other funds due the taxpayer from the state except wages subject to the provisions of 25-13-614, MCA, and retirement benefits that are exempt from execution.

(2) Contract proceeds subject to offset may include wages due the taxpayer. Taxpayers may exclude wages from offset on contract proceeds by submitting a claim to the department within 30 days of notification of the offset. The claim must set forth the amount of wages and include documentation to support the claimed wage exclusion. Should the department dispute the claim, the claim and documentation shall be considered a request for hearing.

(3) Upon determination by the department of a tax refund or other funds owed by the state to a delinquent taxpayer, the department may direct the offset of such funds by serving notification of the offset to the taxpayer.

(a) The department shall provide notice of the right to request a hearing pursuant to the Montana Administrative Procedure Act on the matter of the offset action or the department's intent to file a claim on behalf of a taxpayer.

(b) All tax refunds or other funds subject to offset by the department shall be held pending either the expiration of the 30-day notification period, or the resolution of the taxpayer's hearing, if requested.

(c) The provisions of (3) and (3)(a) also apply to claims for tax refunds submitted on behalf of delinquent taxpayers by the department.

(4) The department may file a claim for state funds on behalf of the delinquent taxpayer if a claim is required before the funds are available for offset.

(5) Claims for tax refunds or other funds which are submitted by the department are based upon a subsequent intent to offset on those funds. Should a hearing be requested by the taxpayer, the issues of such hearing shall be based upon both the claim submitted by the department and the intended offset.

(6) The department may internally issue such offsets or claims upon tax refunds or other funds administered by the department in accordance with the above provisions.

(7) Tax refunds and other funds seized by levy based upon a filed Warrant for Distraint are not subject to the above provisions.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

The following definitions apply to rules found in this subchapter.

(1) "Administrative Law Judge" means, within the context of the department's ODR, the individual who:

(a) adjudicates or mediates a dispute between a person or other entity and the department after the dispute has been proceeded beyond informal review; and

(b) has general authority to regulate the course of appeals.

(2) "Bad debt matters" means disputes arising from a debt owed to an agency, other than the Department of Public Health and Human Services, that have been transferred to the department for collections pursuant to 17-4-104, MCA.

(3) "Collection matters" means disputes arising from the department's collection of outstanding state taxes and any associated penalties and interest.

(4) "Evidence" has the meaning given in 26-1-101, MCA.

(5) "Form APLS101F" is a document titled Request for Informal Review that is available at mtrevenue.gov for use by a person or other entity to file a written objection with the department for issues concerning the first notice of a tax adjustment.

(6) "Form APLS102F" is a document titled Notice of Referral to the Office of Dispute Resolution that is available at mtrevenue.gov for use by a person or other entity to appeal an informal review determination to the ODR.

(7) "Form CAB-8" is a document titled Request for Informal Review for Centrally Assessed Companies that is available at mtrevenue.gov for use by a centrally assessed company to appeal a first notice of tax assessment or classification.

(8) "Form CAB-9" is a document titled Notice of Referral to the Office of Dispute Resolution for Centrally Assessed Companies that is available at mtrevenue.gov for use by a centrally assessed company to appeal an informal review determination to the ODR.

(9) "Hearing" means a recorded, contested proceeding before an ALJ, acting as a finder of fact, during which the parties may offer testimony under oath with an opportunity to question the witnesses, offer exhibits, make arguments, and provide evidence.

(10) "Initial conference" means a conference conducted by ODR with the parties involved to consider the issues in dispute and determine:

(a) whether the proceedings will be informal or formal;

(b) the necessity for discovery; and

(c) a schedule that will address the context and needs of the dispute; or

(d) whether the taxpayer will elect to bypass ODR.

(11) "Liquor license protests" means challenges pursuant to 16-4-207, MCA, to the transfer of ownership or location of an all-beverages license.

(12) "Liquor matters" means disputes arising from the department's administration of the Montana Alcoholic Beverage Code (Title 16, chapters 1 through 4, and 6, MCA), other than liquor license protests. Liquor matters are contested cases conducted pursuant to the Montana Administrative Procedure Act set out in Title 2, chapter 4, part 6, MCA. Liquor matters are not subject to the dispute resolution procedures established by 15-1-211, MCA.

(13)  "Marijuana matters" means disputes arising from the department's administration of the Montana Marijuana Regulation and Taxation Act (Title 16, chapter 12, MCA, and ARM Title 42, chapter 39).  Marijuana matters are contested cases conducted pursuant to the Montana Administrative Procedure Act, Title 2, chapter 4, part 6, MCA.  Marijuana matters are not subject to the dispute resolution procedures established by 15-1-211, MCA.

(14) "Mediation" means a process by which a mediator assists opposing parties in attempting to arrive at a mutually acceptable resolution of a dispute.

(15) "Notice of referral to the ODR" means to file an appeal from an informal review determination with the ODR, by submitting:

(a) a completed Form APLS102F; or

(b) any other written objection.

(16) "ODR" means the department's Office of Dispute Resolution as established by 15-1-211, MCA.

(17) "Party" means either a person or other entity or the department.

(18) "Request for informal review" means a request by a person or other entity for review of a tax assessment, adjustment, or other department determination, by submitting:

(a) a completed Form APLS101F;

(b) a completed Form CAB-8; or

(c) any other written request for review.

(19) "Settlement" means a mutually agreed upon resolution of the disputed issues.

(20) "Tax matters" means disputes arising from the department's administration of state taxes.

(1) Section 15-1-211, MCA, requires a uniform dispute review procedure and the establishment of a dispute resolution office within the department.

(2) A primary objective of the dispute resolution procedure is to make resolving a dispute with the department as accessible as possible to parties appearing before the department.

(3) The department's dispute review procedure applies to all matters administered by the department except those exempted by 15-1-211, MCA, or other applicable law. Liquor matters and marijuana matters are handled pursuant to the Montana Administrative Procedure Act and are not subject to the department's dispute review procedure.

(4) A final agency decision must be issued within 180 days from the date the notice of referral to ODR is received as provided for in 15-1-211, MCA, unless extended by mutual consent of the parties.

(5) Section 69-8-414, MCA, requires the department to issue a final agency decision for uniform systems benefits matters within 60 days from the date the matter is submitted to ODR, rather than the 180 days provided for in 15-1-211, MCA.

(1) Notice of referral to the ODR shall be submitted in writing and shall indicate the issues in dispute.

(2)  Except for liquor matters and marijuana matters, as defined in ARM 42.2.613, a person or other entity who has filed an appeal with ODR may, within 30 days of filing the appeal, elect to bypass review by that office and file an appeal with the state tax appeal board. If the person or other entity elects to bypass review by ODR, the determination originally issued by the division will be deemed the final department decision.

(3) The ODR shall notify the appropriate division within the department that a referral has been received.

(1) The department recognizes that a wide array of parties appear before the department with disputes to resolve. These disputes range from large corporations employing professional tax counsel to individuals appearing on their own behalf. It is the intent of the department to accommodate all such disputes to the greatest extent possible in a manner that is deemed most appropriate for each situation.

(2) The ALJ, in consultation with the parties, will evaluate the circumstances and complexity of each dispute being presented and determine the most appropriate level of formality and procedure to follow.

(3) To the extent the department's rules do not provide for or specify procedures, or where necessary to supplement the rules, the Montana Administrative Procedure Act, Montana Rules of Civil Procedure, Montana Uniform District Court Rules, and Montana Rules of Evidence may be utilized to the extent that they clarify fair procedures, expedite determinations, and assist in the adjudication of rights, duties, or privileges of parties.

(4) When conducting discovery, the parties shall attempt to obtain discovery through informal consultation or communication. If reasonable informal efforts to obtain information are unsuccessful, then formal discovery procedures may be used.

(5) Liquor matters and marijuana matters are handled pursuant to the Montana Administrative Procedure Act and are not subject to this rule.

(1) Following the ODR's receipt of a notice of referral to the ODR, an initial conference will be scheduled as soon as possible.

(2) Parties may participate at the initial conference either on their own behalf or through representatives, employees, or agents as long as a requisite notice of appearance has been entered by an attorney or a power of attorney form designating representation has been submitted by the party of record.

(3) Written notice of the initial conference shall be given at least 10 days prior to the date of the initial conference unless the parties waive notice. The initial conference may be conducted by telephone, in person, or by other means agreeable to the parties.

(4) At the initial conference, the hearing examiner will discuss the options for proceeding with an appeal before the ODR. The options generally entail proceeding to a decision based on a hearing, proceeding to a decision based on the record, and/or participating in mediation. The hearing examiner shall set a time and date for the mediation or hearing that is as mutually satisfactory as possible to all concerned.

(5) Once a hearing or mediation has been scheduled, the hearing examiner will coordinate with the parties to schedule other deadlines as needed, such as:

(a) discovery and exhibit exchanges;

(b) motion deadlines; and

(c) other documentation or briefing submission deadlines.

(6) If the parties and the hearing examiner agree, mediation may occur during the initial conference as set forth in ARM 42.2.618.

(7) A party may request a continuance of a scheduled matter. The party seeking the continuance shall indicate whether the request is opposed. If the request for continuance is contested, the requesting party shall provide the basis for the request.

(8) Specific facts and substantive matters discussed during the initial conference are considered confidential. Procedural matters discussed are not considered confidential. Any matters raised do not constitute admissions against interest of any party participating in the conference.

(9) The hearing examiner assigned to the matter shall preside over any hearing and issue the written determination adjudicating the matter.

(10) Nothing in this rule may be construed as limiting a party's right to a hearing.

(1) The resolution of any matter in connection with a dispute may be pursued through mediation with the agreement of all parties.

(2) Mediation may be requested and scheduled at the initial conference or at any time during the proceeding at the agreement of both parties. Alternatively, if the parties and the hearing examiner agree, mediation may also occur during the initial conference with the understanding that if a resolution is not reached, the case shall be reassigned to a different hearing examiner.

(3) The mediator may either be a hearing examiner from the ODR or a mediator from outside the department and shall be selected with the consent of both parties.

(4) If an outside mediator is selected, the cost of the mediator shall be paid for by the party requesting the outside mediator, unless the parties have agreed to some other cost-sharing provision.

(5) The mediator does not have authority to enter any decision on the merits of the issues in dispute or to impose a settlement upon the parties. The parties control the identification of the issues submitted and the type of resolution to be agreed upon.

(6) At the mediation, each party shall have the appropriate representative or access to the appropriate representative who has full settlement authority.

(7) Mediation sessions are confidential settlement negotiations. All written and oral communications, negotiations, and statements made in the course of the mediation are made without compromising any party's legal position, are not discoverable, and shall be inadmissible for any purpose at any legal proceeding.

(8) If mediation resolves the dispute, a written agreement documenting the resolution shall be prepared by the parties with the assistance of the mediator, if necessary. A written agreement signed by all parties to the agreement is not confidential and may be admissible as evidence, as set forth in 26-1-813, MCA.

(9) If mediation does not resolve all issues in a dispute, the parties shall prepare a stipulation that identifies the issues resolved and those that still remain in dispute. For the issues remaining unresolved, the matter may proceed before a different hearing examiner unless the parties have agreed to move the remaining issues to the next level of appeal.

(1) Except as provided in this rule, hearings shall be conducted in Helena, Montana. Upon a showing of compelling circumstances by either party, the hearing examiner may order a hearing to be conducted at a location elsewhere in Montana.

(2) The location for hearings pertaining to liquor matters is determined according to ARM 42.11.305 and 42.12.108, and is not subject to (1).

(3) Upon agreement of the parties, hearings may be conducted by telephone or video conference. If the hearing examiner determines that telephonic or video conference participation may unfairly prejudice the rights of any party, the hearing will be conducted in person. If, however, telephonic or video conference participation is approved, the hearing examiner will place the call at the designated time to the numbers provided by the parties.

(4) Notice of the time and place for a hearing shall be given to the parties concerned, or their representatives if legal authorization is on file, not less than 14 days prior to the day fixed for such proceedings.

(5) A party may request a continuance of a scheduled matter. The party seeking the continuance shall indicate whether the request is opposed. If the request for continuance is contested, the requesting party shall provide the basis for the request.

(6) A party may be represented by legal counsel at the hearing at any stage of adjudication. Legal counsel must enter a notice of appearance with the department to represent a person or other entity before the hearing examiner.

(7) Failure to obtain legal representation may not be cited as grounds for complaint at a later stage in the adjudicative process or for relief on appeal from an adverse decision.

(8) If a person or other entity chooses to be represented by someone other than legal counsel at the hearing or adjudication stage, the person or other entity must first submit a signed power of attorney form to the department authorizing the representative to act on the party's behalf.

(9) If a party is represented by legal counsel or another representative, all documents and information pertaining to the dispute will be directed to the representative. The information may be transmitted by fax, e-mail, or other electronic means, provided such transmission meets the department's confidentiality requirements. Otherwise, documents will be mailed to the representative's address as shown in the original filing.

(10) Hearing proceedings shall be conducted at all times with due regard for the confidentiality requirements imposed by law.

(11) Testimony at hearings shall be given under oath.

(1) The hearing examiner shall have the discretion to adopt and apply rules of civil procedure and/or rules of evidence as deemed necessary.

(2) Every party at a hearing shall have the right to introduce evidence. The evidence may be oral or written, real or demonstrative, direct or circumstantial.

(3) At the discretion of the hearing examiner, or upon stipulation of the parties, the parties may be required to reduce their testimony to writing and to prefile the testimony.

(4) Prefiled testimony may be placed in the record without being read into the record at a hearing if the opposing parties have had reasonable access to the testimony before it is presented.

(5) If a party intends to question a witness on prefiled testimony, that party must file a notice of intent to do so within a time frame agreed upon by the parties with consideration for affording the opposing party an opportunity to cross-examine.

(6) The hearing examiner shall rule on matters concerning the evidentiary and procedural conduct of the hearing.

(7) Any party appearing at a hearing may submit a written statement addressing factual or legal issues, including citations of legal authority, if deemed necessary by the hearing examiner for a full and informed consideration of all matters.

(8) Liquor matters are conducted pursuant to the Montana Administrative Procedure Act and are not subject to this rule.

(1) The director retains the authority to issue a final agency decision (FAD) on all matters except those identified in (2).

(2) The director delegates to the ODR the authority to issue a FAD on liquor licensing protests, marijuana matters, bad debt matters, tax matters, and collection matters. The delegation to issue a FAD applies only to matters referred to the ODR.

(3) An FAD on liquor matters, marijuana matters, liquor licensing protests, and bad debt matters may be appealed to the district court by filing a petition for judicial review within 30 days after service of the FAD.

(4) An FAD on a tax matter or collection matter may be appealed to the Montana Tax Appeal Board as provided in 15-2-302, MCA, by filing an appeal within 30 days following receipt of the FAD.

(5) If no decision is rendered by the end of the 180-day period specified in 15-1-211, MCA, the department shall notify the parties that they are entitled to carry their appeal forward by filing a complaint with the appropriate reviewing authority within 30 days after service of the notice.

This rule has been repealed.

This rule has been transferred.

(1) These rules provide guidance to Department of Revenue employees concerning the ethical standards they are expected to meet or exceed. The rules also inform the public concerning ethics expected of department employees.

(2) In Wadsworth v. DOR , the Montana Supreme Court held that the department's policy prohibiting appraisal employees from also working as private appraisers or as real estate salesman was unconstitutional. The key to the decision was that the department could not show actual conflicts, only potential conflicts. In addition, the court held that such policies should be adopted as administrative rules. In light of this decision and the fact that employees need to have some guidance concerning ethical issues, these rules are adopted.

(3) The guiding principle behind these rules is that the department trusts its employees to respect their public office and act in an ethical manner. These rules provide guidance and examples to assist employees in recognizing potential conflicts of interest and ethical issues.

(4) The corollary principle is that employees must take responsibility for their conduct. An employee who betrays the state's trust will be disciplined, including the possibility of termination of employment.

(5) The key to compliance with ethical requirements is recognition of an ethical issue and complete, full and timely disclosure of possible problems. The purpose of requiring disclosure is to ensure that no harm comes to the employee, the state of Montana, the department or the public from a conflict of interest, appearance of a conflict of interest, or other ethical issue. Disclosure is necessary so steps can be taken by the employee and the department to prevent harm. Disclosure is also required by the Montana Code of Ethics, 2-2-131 , MCA. Preventing harm is, by its nature, something that can occur only if disclosure of conflicts of interest are made in a timely manner.

(6) The courts in Montana and other jurisdictions have stated that employees owe a duty to their employer in return for employment. This includes the duty to perform their responsibilities diligently and faithfully. It also includes the duty to be loyal to their employer as appropriate and within the bounds of the law and ethical standards. Although this duty is incapable of specific definition, these rules attempt to inform employees of what is expected concerning their responsibility to be loyal to the state of Montana.

(1) "Code of ethics" means any accepted professional standards of conduct, requirements or prohibitions applicable to state public employees that the Montana legislature has adopted. The code of ethics is currently codified in Title 2, chapter 2, MCA as well as other sections of law including 16-1-304 , MCA.

(2) "Conflict of interest" means any situation where an employee's private pecuniary or political interests as defined in (8) below conflict with the interests of the department.

(3) "Disclosure" means written documentation by an employee to the employee's supervisor or the ethics review panel and the secretary of state ( 2-2-131 , MCA) of any matters in which the employee knows or should reasonably know is a conflict of interest, will give the impression of a conflict of interest, or presents any other ethical issue. A written disclosure includes electronic mail as well as hard copy.

(4) "Employee" means all entities and individuals in the employ of or under contract to the department of revenue. The term specifically includes contractors, full-time and part-time employees and appointees.

(5) "Ethical issue" means a set of facts that raise or may reasonably raise questions about whether a violation of these rules or the code of ethics will occur.

(6) "Ethical misconduct" includes but is not limited to:

(a) failure to disclose a conflict of interest, appearance of conflict of interest or other ethical issue as required by these rules or the code of ethics;

(b) violation of these rules or the code of ethics; and

(c) violation of a professional code of ethics or conduct or similar provision by an employee engaged in the profession subject to the code or similar provision.

(7) "Ethics review panel" as used in these rules refers to the panel described in ARM 42.2.806 of these rules.

(8) "Political interests" as used in these rules mean those interests that go beyond the employee's private political beliefs. Private political beliefs are not of concern to the department. As used here, the term is restricted to those situations where an employee is publicly advocating a political position as part of an organized effort. This might include being an officer or other leader of a political or public interest organization which is advocating a particular political viewpoint when such public advocacy creates a conflict of interest or will give the impression of a conflict of interest or other ethical issue.

(2) Employees shall disclose any personal conflicts of interest, appearance of a personal conflict of interest or personal ethical issue as soon as it becomes known to them or should have become known to them.

(3) Employees shall seek to avoid employment outside of the department that creates an actual conflict of interest with their work for the department.

(4) Employees shall comply with all statutory provisions that the department administers including but not limited to filing requirements and payment of taxes.

(5) Employees shall conduct themselves with the highest sense of integrity and loyalty so as to serve the public interest, honor the public trust and demonstrate their commitment to professionalism.

(6) Pursuant to 16-1-304 , MCA, employees involved in any way in administering any of the state liquor laws for the department shall not directly or indirectly become involved in any business which sells alcoholic beverages. The prohibited involvement is interpreted broadly to include direct or indirect ownership, employment, or agency relationships of all types.

(a) A tax auditor employed by the department prepares federal and state income tax returns for a private client on his own time. The private client is later identified as an income tax audit candidate, and it is possible the auditor could be assigned to conduct the audit. As soon as the auditor becomes aware of these facts he must disclose the potential conflict of interest created by his involvement with the private client's taxes so that the department can take steps to avoid a conflict of interest (such as by assigning an auditor without the conflict) .

(b) The department hires an attorney whose sister is an attorney and partner in a local law firm. The attorney's sister brings an action on behalf of a client against the department. The department employee must disclose the ethical issue as soon as it is known so that a different attorney can be assigned to work on the case. Disclosure of the potential conflict as soon as the attorney is hired would be preferable but the disclosure needs to occur in time to prevent a clear conflict of interest.

(c) A department employee responsible for audits of oil companies owns stock in an oil company. The employee must disclose her ownership interest in the oil company. If the interest is small and the outcome of an audit will have little or no direct impact on the employee, the department may determine that no actual conflict of interest exists. However, disclosure is still required in order to allow the employee and the department to prevent a conflict of interest or appearance of conflict of interest from occurring.

(d) An employee is a real property appraiser for property tax purposes. The appraiser also has a private fee appraisal service. He conducts a private fee appraisal for a certain property owner. If the appraiser may be assigned to appraise the property owner's property as part of his duties with the department, the appraiser must disclose the ethical issue. The employee and the department must take steps to insure that the appraiser does not do both appraisals on the same property. Disclosure is also required if the employee is in a position of reviewing a department appraisal of the property. Disclosure may also be required if the employee has any other business relationship with a particular property, such as a sale by an employee who is a real estate agent.

(e) A department employee performs computer programming and analysis on her own time for a private corporation. If the employee is aware that the corporation is actively seeking a significant contract to provide consulting services to the state or is providing services to the state, the employee must disclose this outside employment. The outside employment may create a conflict of interest or appearance of conflict of interest. Upon disclosure the department and employee can determine whether a conflict or appearance of conflict exists and what steps can be taken to cure any potential problems.

(1) In consideration of their employment, employees have a duty to perform diligently and faithfully. This includes the requirement to be faithful to the employer's objectives and goals. An employee is expected to act in the best interests of the state of Montana as shaped and determined by the leaders of the department. This duty clearly does not include any acts that would violate the laws, rules or clear public policies of the state. It does include refraining from any acts that will be contrary or counter productive to the legitimate policies of the department leadership. This responsibility to act in the best interests of the state may become an ethical issue. Employees with questions concerning the applicability of this rule should disclose these issues to their supervisor or the ethics review panel.

(2) The department shall provide training regarding these rules, the code of ethics and the requirements for compliance. In addition, the department shall make information available to assist employees in complying with these rules.

(3) Upon disclosure of an ethical issue by an employee, the department shall take such action as appropriate to prevent an actual conflict of interest or ethical misconduct.

The following definitions apply to rules found in this subchapter.

(1) "All protested taxes" means all taxes in all funds, under protest, for the given tax year a school district is electing to waive protested taxes as stated in 15-1-409, MCA.

(2) "Election to Waive Protested Taxes form" means the form to be filed with the department by the school districts that choose to waive protested taxes authorized by 15-1-409, MCA. This form includes: school district legal entity number, board chair signature, a description of relevant policies, and mailing addresses for submission to the Department of Revenue and the Superintendent of Public Instruction.

(3) "Property identification" means geocode, county assessor code, or parcel identification code.

(4) "Protested School Tax Remittance form" means the form to be submitted with each remittance payment to the Department of Revenue by the county treasurer. This form tabulates total taxes assessed, protested, and attributable to the levy district by: school district, parcel owner, and property identification.

The following definitions apply to terms used in this subchapter:

(1) "Complaint" means a taxpayer's allegation of improper or abusive behavior by an employee of the department.

(2) "Office of Dispute Resolution (ODR)" means the department's dispute resolution office. This office handles disputes that cannot be resolved at a lower level within the department.

(3) "Office of Taxpayer Assistance (OTA)" means the department's independent office that assists taxpayers and advocates on behalf of their needs.

(4) "Problem" means a taxpayer's procedural issue or dispute with the service or inefficiency of the Department of Revenue. It does not include issues of fact or law that are considered by the department's Office of Dispute Resolution.

(1) Section 15-1-223, MCA, creates within the Department of Revenue, the Office of Taxpayer Assistance (OTA). The OTA has five major purposes which are to:

(a) assist taxpayers with problems and provide easily understandable tax information related to:

(i) instructions and forms;

(ii) audits and corrections;

(iii) collections; and

(iv) appeal procedures.

(b) monitor compliance with the Taxpayer Bill of Rights, as required in 15-1-222, MCA;

(c) receive and evaluate complaints of improper or abusive behavior by employees and make recommendations to the director regarding appropriate actions to be taken;

(d) monitor and report any abuses in collection activities and make recommendations to the director of appropriate actions to be taken; and

(e) perform other functions that will assist taxpayers with their compliance of the Montana's tax laws.

(1) The OTA is independent of the department's divisions and reports directly to the director.

(2) The OTA intercedes on a priority basis on behalf of taxpayers when the department's normal procedures and communications with taxpayers break down, especially concerning citizen rights guaranteed by the Taxpayer Bill of Rights.

(3) The department seeks to resolve all questions and problems at the lowest possible level, especially through the regular activities of staff working directly with citizens. Whether staff is responsible for processing returns, conducting audits, appraising property, maintaining records, collecting taxes, or other work, all staff is expected to meet the needs of the public in a respectful manner consistent with relevant laws, rules, and procedures. When staff members are unable to answer questions or resolve problems, those matters are typically referred to division supervisors or specialists. In the limited cases where staff or supervisors cannot solve problems, the matter may be referred by the director to the OTA for handling.

(4) Referrals to the OTA are generally instances where the taxpayer has first tried unsuccessfully to resolve the problem through the department's normal channels. Referrals come from the director's office, legislators, and other agencies, especially the Governor's Citizen Advocate Office, but normally go first through the director. The OTA also receives direct calls and referrals through the department's call center.

(5) The OTA works with the taxpayer until the problem is resolved and often convenes division and bureau experts to assist with additional reviews. The OTA compiles data on the number and type of taxpayer problems and complaints received and evaluates the actions taken to resolve these problems or complaints.

(6) The OTA works with the director's office, divisions, bureaus, and units to provide easily understandable information for taxpayers on taxes, audits, corrections, collections, and appeal procedures. It advocates for clarity and usefulness in all forms of communication, especially for clearer and simpler letters, forms, reports, and web site content.

(7) The OTA relies on the department's divisions, especially the Citizen Services and Resource Management Division and its call center, to answer taxpayer questions regarding:

(a) preparing and filing returns and reports;

(b) Montana statutes administered by the department;

(c) understanding correspondence and assessments;

(d) locating documents and payments;

(e) compiling data on problems received; and

(f) conducting taxpayer surveys to obtain evaluations of the quality of service provided by the department.

(8) The OTA receives, evaluates, and responds to complaints from taxpayers related to improper or abusive behavior by employees of the department within 60 days unless the period is mutually extended. The major points in a complaint must be made in writing and taxpayer conferences on these issues are informal and confidential. The complaints are recorded, unless requested otherwise, and a copy is provided to the taxpayer. The OTA reports its recommendations to the director and the taxpayer.

(9) The OTA monitors the department's collection activities, immediately addresses any abuses, and recommends to the director whether a collection activity should be stopped if the taxpayer has not had an adequate opportunity to discuss alternative means of making payments.

(10) The functions of the OTA are distinguished from the Office of Dispute Resolution (ODR), which is an adjudicatory office considering and resolving issues of fact and law for matters under the department's jurisdiction and finalizes the department's decisions on contested maters. In instances where a problem or complaint cannot be resolved through the OTA, this office provides guidance to the taxpayer concerning further proceedings before the ODR. Taxpayers are directed to the ODR rules and procedures found in ARM 42.2.613 through 42.2.621.