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| Montana Administrative Register Notice 42-2-846 | No. 17 09/09/2010 | |
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BEFORE THE DEPARTMENT OF REVENUE OF THE STATE OF
TO: All Concerned Persons 1. On October 6, 2010, at 3:30 p.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Individuals planning to attend the hearing shall enter the building through the east doors of the 2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., October 1, 2010, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, The following rules are proposed to provide direction to the industry on a number of issues that have become litigated in the recent past. The intent of these rules is to lessen the amount of this litigation. The rules will maintain a constant and consistent amount of property tax revenue for the citizens of this state. The rules will affect centrally assessed companies. 3. The proposed new rule does not replace or modify any section currently found in the Administrative Rules of Montana. The proposed new rule provides as follows: NEW RULE I ADOPTION OF APPRAISAL METHODS AND APPRAISAL STANDARDS (1) The department adopts the 2009 WSATA-CCAP (Western States Association of Tax Administrators - Committee on Centrally Assessed Properties) appraisal handbook, published in August 2009, available at www.WSATA.org, user name WSATA, password member, as the reference and overall appraisal guide for conducting unit valuations of centrally assessed properties in Montana. (2) The department adopts the NCUVS (National Conference of Unit Valuation States) standards, published in October 2005, available at www.NCUVS.org, link to "standards", as standards when conducting unit valuations of centrally assessed properties. AUTH: 15-1-201, MCA
REASONABLE NECESSITY: The department is proposing to adopt New Rule I because the department utilizes the WSATA handbook and NCUVS standards when appraising properties in In addition, the adoption of the NCUVS standards promotes consistent appraisal methods and techniques of unit valuation among all states. 4. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined: 42.22.101 DEFINITIONS The following definitions apply to this chapter: (1) through (9) remain the same. (10) "Goodwill" means booked or accounting goodwill. The booked goodwill must be present on the subject properties' financial statements, and must have been created through the purchase price accounting process as defined by GAAP or other accounting authority. (10) remains the same but is renumbered (11). (12) "Intangible personal property" has the following attributes: (a) Intangible personal property must be separable from the other assets in the unit and capable of being held under separate title or ownership. (b) Intangible personal property must be able to be bought and sold, separate from the unit of operating assets, without causing harm, destroying, or otherwise impairing the value of the unit of assets being valued through the appraisal process. (c) Intangible personal property must have value as a result of its ability to create earnings that exceeds their contributory value to the unit; or, it must be capable of earning an income as a standalone entity or apart from the other assets of the unit. (d) Intangible personal property is not the same as intangible value. Intangible value is the value of an entity as a going concern - its ability to make excess revenues over the normal rate of return. Intangible value is part of the overall value of assets. Intangible value is not exempt from property taxation in (11) through (32) remain the same but are renumbered (13) through (34). AUTH: 15-23-108, 15-53-155, 15-72-117, MCA IMP: 15-6-156, 15-23-101, 15-23-104, 15-23-211, 15-23-213, 15-53-145, 15-53-147, 15-72-104, MCA REASONABLE NECESSITY: The department is proposing to amend ARM 42.22.101 to add the definition of "goodwill" and "intangible personal property", both key in instructing the taxpayer on what is included in the taxable value and what is not. The department has had numerous requests from taxpayers and taxpayer organizations to provide clarity in this area. These definitions constitute the practice of the department in valuing centrally assessed properties and provide the requested clarity that taxpayers and taxpayer organizations have asked for. 42.22.105 REPORTING REQUIREMENTS (1) Each year all centrally assessed companies shall submit to the department a report of operations, called the centrally assessed annual reporting form, for the preceding year. Railroads, railroad car companies, and pipelines shall submit the report by April 15 and all others by March 31, on forms supplied by the department. (2) If a centrally assessed company fails to file a report with the department the company will be subject to the penalties listed in 15-23-104, MCA. Submission of an annual business property reporting form to a local department county office does not relieve the company of its requirement to file the centrally assessed annual reporting form to the centrally assessed unit located in (a) Based on the appropriate statutory authority, the department shall determine if a company meets the requirements to be centrally assessed. If a company believes that the department has improperly determined that the company is centrally assessed, the company must still file the required centrally assessed annual reporting form, and if desired, appeal the department's centrally assessed determination to the appropriate venue. (a) balance sheet for the system; (b) statement of income for the system; (c) original cost and book depreciation for system property, including an estimate of current value of property leased from others; (d) statement of outstanding preferred stock, common stock, and debt, showing both book value and market value; (e) statement of actual revenue and expense for the (f) if nonoperating properties are included in (g) general description, original cost, and book depreciation of Montana properties, including description and location of property leased from others, together with name of lessor, current value or annual rental, and responsibility for the property tax (lessor or lessee); (h) if rolling stock is allocated to (i) pertinent statistical data on the company's operations within and without this state; (j) copy of annual report to stockholders; (k) copy of annual report to the federal regulatory agency if one is filed; (l) copy of annual report to the (m) in the case of centrally assessed railroads, all information required under ARM 42.22.106; (n) in the case of centrally assessed electric utilities, all information required under ARM 42.22.107, if applicable; (o) all other information requested by the department which will assist in valuing the properties; and (p) signed statement of correctness. (3) remains the same but is renumbered (4). AUTH: 15-6-218, 15-23-108, MCA IMP: 15-6-218, 15-23-103, 15-23-201, 15-23-212, 15-23-301, 15-23-402, 15-23-502, 15-23-602, 15-23-701, MCA REASONABLE NECESSITY: This department is proposing to amend ARM 42.22.105 to direct the taxpayer on how to file their Department of Revenue annual reports locally or with the
42.22.110 DEDUCTIONS FOR INTANGIBLE PERSONAL PROPERTY (1) Cost, income, and market indicators of the unit value of centrally assessed properties can generally be expected to include the value of real property, the value of personal property, and in some cases the value of specific intangible personal property. To the extent that each unit valuation indicator includes the value of intangible personal property it shall not be relied upon unless such value of the intangible personal property is excluded or removed. (2) The department recognizes that the following percentages may not necessarily provide a taxpayer-specific measurement of intangible personal property. However, accurately quantifying the value of intangible personal property is difficult and subject to controversy and litigation which would not clarify the issues for future appraisals. The percentages are a good faith effort to comply with the rulemaking requirements of 15-6-218, MCA, in a manner that is timely and efficient for both the taxpayers and the department. (a) Subject to the provisions of (i) Airlines 10% (ii) Pipelines 5% (iii) Electric cooperatives 5% (iv) Telephone cooperatives 5% (v) Electric utilities 10% (vi) Telecommunications 15% (b) Subject to the provisions of (i) Airlines 10% (ii) Pipelines 5% (iii) Electric cooperatives 5% (iv) Telephone cooperatives 5% (v) Electric utilities 10% (vi) Telecommunications 15% (c) Subject to the provisions of (i) Airlines 10% (ii) Pipelines 5% (iii) Electric cooperatives 5% (iv) Telephone cooperatives 5% (v) Electric utilities 10% (vi) Telecommunications 15% (d) For railroads assessed according to the provisions of 15-23-205, MCA, exempt intangible personal property, which shall be deducted from the railroad system value, is equal to 5% of the system value. If a railroad is not assessed pursuant to 15-23-205, MCA, but assessed using cost, income and market indicators to value, 5% of the value determined by each indicator shall be removed to reflect the value of intangible personal property in each indicator subject to the provisions of (3).
(4) In order for intangible personal property to be considered for a deduction higher than the default percentage prescribed in (2), the property must have the characteristics of intangible personal property as defined above. (5) A taxpayer may, at any time, make recommendations to the department, regarding the percentages in (2)(a), (b), or (c). AUTH: 15-23-108, MCA IMP: 15-6-218, 15-23-202, 15-23-303, MCA REASONABLE NECESSITY: The department is proposing to amend ARM 42.22.110 to address potential deductions of intangible personal property from the property tax value. The rule reflects the practice of the department. The rule is being amended to provide taxpayers and the department guidance in situations where the railroad valuation formula established in 15-23-205, MCA is not used to determine market value for a railroad. The amendments to the rule will allow the taxpayer to make recommendations anytime regarding the default percentages and not have to wait for a scheduled annual meeting. 5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail canderson@mt.gov and must be received no later than October 15, 2010. 6. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing. 7. An electronic copy of this Notice of Public Hearing is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems. 8. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-4375, or may be made by completing a request form at any rules hearing held by the Department of Revenue. 9. The bill sponsor contact requirements of 2-4-302, MCA do not apply. /s/ Cleo Anderson /s/ Alan G. Peura CLEO ANDERSON DAN R. BUCKS Rule Reviewer Director of Revenue Certified to Secretary of State August 30, 2010
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