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Montana Administrative Register Notice 42-2-855 No. 5   03/10/2011    
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BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.19.401, 42.19.406, and 42.19.501, relating to property tax assistance programs for the disabled veterans and elderly homeowners

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NOTICE OF AMENDMENT

 

TO:  All Concerned Persons

 

1.  On October 28, 2010, the department published MAR Notice No. 42-2-855 regarding the proposed amendment of the above-stated rules at page 2546 of the 2010 Montana Administrative Register, issue no. 20.

 

2.  A public hearing was held on November 17, 2010, to consider the proposed amendment.  No oral comments were received during the hearing.  Written comments received at, and subsequent to, the hearing are summarized as follows along with the response of the department:

 

COMMENT NO. 1:  Ms. Karen Powell, Chairwoman of the State Tax Appeal Board, provided written comments on ARM 42.19.401(9) and 42.19.501(9) stating that these new sections impermissibly attempt to exert department authority over the State Tax Appeal Board (STAB) by attempting to limit which appeals the STAB may accept, and specifically referenced the language "In no case shall an appeal be accepted more than 37 days after the date of the department's determination letter."  Ms. Powell explained that this is in contravention to statute, which sets out that an appeal may be filed with the board within 30 days after the taxpayer receives the notice (15-2-302, MCA).

Ms. Powell further commented that the authorization the department lists for this amendment fails to reference the filing statutes and also fails to provide any authority for the department to control the determination of the STAB and, she referenced 15-2-101, MCA, in her explanation that STAB has sole jurisdiction over tax appeals and is the proper entity to determine which appeals may qualify for acceptance; and that it is the duty of the STAB to hear appeals from decisions of the department.  She added that it is improper for the department to attempt to usurp the authority of the agency which reviews its determinations, and commented that the STAB strongly opposes this language and requests the removal of new section 9 from both of these rules.

 

RESPONSE NO. 1:  The department appreciates and agrees with Ms. Powell's comments.  To address her concerns, the department has stricken the portion of the rules that reads "In no case shall an appeal be accepted more than 37 days after the date of the department's determination letter."  It was never the intent of the department to usurp the STAB's authority with these rule amendments.  The department apologizes to the STAB for creating any perception in that regard.

 

COMMENT NO. 2:  Ms. Powell commented that there is an additional conflict within the current notification methods and deadlines used for the property tax assistance program (PTAP).  She cited an example that while April 15 filing requirements are set out in statute for the PTAP, a taxpayer may also receive notification of the effects of the PTAP application on their assessment notice; and the same scenario may occur with the disabled veterans program (DAV).  She explained that because there may also be a change listed on the assessment notice, there may be some ambiguity as to whether that will trigger an additional appeal process.  She added that the STAB specifically makes no determination about this notification matter, but want to notify the department of this potential issue.  She further stated that the STAB has been notified that taxpayers may be filing AB-26s relating to PTAP filings, after receiving an assessment notice.

 

RESPONSE NO. 2:  The department currently notifies the taxpayers via decision letter.  Additionally, however, the taxpayer may also receive an assessment notice, as the department is required to provide one whenever a change in classification occurs on a taxpayer's property.  For example, if the taxpayer qualifies for a benefit percentage that differs from the prior year, the result would be a change in class code and an assessment notice is generated.  However, because the letters are the department's final agency decision regarding the application, they are the department's official notice to taxpayers on the matter.  A taxpayer's right to appeal begins to accrue with this notice of a final agency decision.  To address Ms. Powell's concerns and eliminate taxpayer confusion, we are currently amending the language in the letters and on the assessment notices.

 

COMMENT NO. 3:  Relative to ARM 42.19.401(7), Ms. Powell commented that the department's requirement of low-income taxpayers to submit documentation to provide the lack of income is a concern, and suggested that it would be better to develop a mechanism to allow certain low or no income taxpayers to attest or certify to the lack of income, rather than require them to provide documentation.

 

RESPONSE NO. 3:  Because the PTAP is income-based, when one taxpayer qualifies for and receives property tax relief, a portion of their property tax burden shifts to other taxpayers.  To ensure that a taxpayer is qualified, and at the same time administer this income-based relief program in a manner that is fair to all who pay property tax in Montana, it is important that the department obtain verifiable information upon which to base its qualification determinations.

 

COMMENT NO. 4:  Ms. Powell also commented that for each of the rules in this notice, the department proposes requiring the application to be received before April 15, yet the applications require that the income tax filings also be submitted, and income tax filings are considered timely if postmarked by April 15.  She pointed out that because the department is requiring property tax exemptions to be received prior to the time required for income tax filings, there may be instances where taxpayers have not completed the required income tax forms before the deadline for property tax filings.  Ms. Powell added that this is not the best practice and may prevent eligible taxpayers from timely filing their application.

 

RESPONSE NO. 4:  Ms. Powell is correct.  Many taxpayers do request extensions for the filing of their income tax returns.  As a result, the department has withdrawn the proposal to change the requirement for a PTAP or DAV application to be received by April 15 and amending the rule to continue the practice of requiring the application to be postmarked by April 15, which was in the current rules prior to these amendments.  That change will eliminate the conflict that Ms. Powell noted concerning applications being due on April 15.

 

COMMENT NO. 5:  Ms. Mary Whittinghill, President of the Montana Taxpayers Association, provided a written comment on the language in ARM 42.19.401(1)(b), recommending that "January 1" be removed and replaced with "immediately prior to" or some other similar language.

 

RESPONSE NO. 5:  The department appreciates Ms. Whittinghill's comments.  Because the PTAP has the effect of shifting a qualifying individual's property tax burden to others, it is important that those individuals apply for the benefit in a timely manner.  Because some individuals may not be able to timely apply for property tax assistance, as a result of a medical condition for example, the language of ARM 42.19.401(1)9(b), allows the department to review certain applications that are not timely received.  It is the applicant's responsibility to provide documentation that he or she could not have filed an application at any time between January 1 and April 15 of a given year.  The department has amended the rule to reflect Ms. Whittinghill's concerns.

 

COMMENT NO. 6:  Mr. Rich Bechtel, Director of the Office of Taxpayer Assistance at Montana Department of Revenue, provided written comments on this rulemaking action in his role as an advocate for taxpayers, and in this case specifically for senior citizens and disabled veterans.  He commented that he has seen many instances where these taxpayers have had difficulty understanding and complying with the eligibility process for the department's PTAP, and provided two recommendations.

In reference to ARM 42.19.401(1)(b) and 42.19.501(1)(b), Mr. Bechtel recommended inserting a new sentence which reads "The department may waive this requirement and renew eligibility on a case-by-case basis where an applicant participated in the program in the prior year, would meet income requirements in the current year, and confusion due to infirmity may have arisen."  His reasoning, he explained, is that the April 15 application deadline, which is also the due date for income tax filing, can cause confusion with Montana's elderly homeowner and renter tax credit, which applies to the income tax but not the property tax.  He added that, despite the department's attempt to distinguish between these programs by mailing out assistance program applications in January, many taxpayers still have misplaced or not understood the applications and not applied in a timely fashion.  Mr. Bechtel further commented that he recognizes the need for deadlines, but added that as people simply become infirm, not necessarily ill or bedridden, they may find it difficult to comply with such programs.

Mr. Bechtel also commented that vigor in all its forms can decline as individuals age and confusion can easily arise as a result, yet the need for the exemption often increases in retirement while the ramification for not paying property taxes can lead to the loss of a home and he suggested the department needs flexibility to better serve taxpayers and recognize the realities they may face.

Additionally, Mr. Bechtel suggested that in some cases, taxpayers do not realize that they have failed to qualify or reapply for the assistance program until they receive their property tax bill from the county treasurer, which is long after the April 15 application deadline.

 

RESPONSE NO. 6:  The department appreciates Mr. Bechtel's comments on these rules and further understands and agrees with many of his suggestions.  The department has added the waiver language that he recommended, along with additional text explaining that the taxpayer will be responsible for providing a written statement, plus any documentation, explaining their circumstances upon which the department may base its determination. 

The rules allow for an extension to July 1 if certain circumstance exist and this time period is necessary because of the timing of the annual certification process for submitting property tax values to local governments.  The department will take under consideration the request to extend the application period beyond July 1 for unique circumstances in a potential future rulemaking process.

 

COMMENT NO. 7:  Mr. Bechtel further recommended ARM 42.19.401(8) be amended by adding the sentence "A decision to deny such an application due to inability to provide sufficient information will be reviewed by a supervisor" to the end; and, similarly, ARM 42.19.501(4) be amended by inserting the sentence "A decision to deny an application by a non-filer due to the inability to provide sufficient information will be reviewed by a supervisor," also at the end.

Mr. Bechtel included comments that both rules are a wonderful improvement over current practice, in that it is very difficult to prove a negative, as in the case of providing a lack of income, and the new rules require instead the submission of documents in support of the income that is reported.  He noted, however, that this can still prove to be a challenge for citizens who earn income below the federal and state income tax thresholds and, as a result, do not file income tax returns.

 

RESPONSE NO. 7:  The department appreciates Mr. Bechtel's concerns and recommendations.  In order to administer this income-based relief program in a manner that is fair to all who pay property tax in Montana, the department must have the opportunity to review the applying taxpayer's income.  The department recognizes that providing documentation may be difficult in instances where a return has not been filed and, therefore, provides a list of alternative sources of documentation the taxpayer can use to identify and report his or her income.

The department understands that there are unique situations where documenting income may be difficult and in those cases, the application shall be reviewed by an area manager or regional manager for a final determination.

 

3.  Based on the comments received, and the proposed edits presented at the hearing by the Property Assessment Division, the department amends ARM 42.19.401, 42.19.406, and ARM 42.19.501 as follows, stricken matter interlined, new matter underlined.

 

42.19.401  PROPERTY TAX ASSISTANCE PROGRAM  (1)  The property owner of record or the property owner's agent must make annual application through the local department office, in order to receive the benefit provided for in 15-6-134, MCA.  An application must be filed on a form available from the local department office on or before April 15 of the year for which the benefit is sought.  Applications received postmarked after April 15 will not be considered for that year unless the department determines the following conditions were met:

(a)  the applicant was unable to apply for the current year due to hospitalization, physical illness, infirmity, or mental illness; and

(b)  these the taxpayer can demonstrate the impediments must be demonstrated to have listed above, while not necessarily continuous, existed at significant sufficient levels from in the period of January 1 of the current year to the time of application, but in no case later than July 1 to April 15 to prevent timely filing of the reporting form.  The department may waive this requirement, on a case-by-case basis, and upon receipt of a written statement, plus any documentation explaining circumstances where:

(i)  an applicant who participated in the program in the prior year, would meet income requirements in the current year; and

(ii)  confusion due to infirmity may have arisen; and

(c)  The department may waive this requirement on a case-by-case basis, if:

            (i)  the applicant qualified for the program in the prior year; and

            (ii)  upon receipt of a written statement, plus any documents explaining the circumstances of why the applicant failed to meet the deadline.

(2)  Telephone extensions and written extensions will be granted through  The department may accept and process the application and proof of income if submitted or postmarked no later than July 1 of the current year for the above-listed reasons which benefit is sought.  Willful misrepresentation of facts pertaining to income or the impediments that prevent timely application filing will result in the automatic rejection of the application.

(3)  The applicant is required to list total household income from all sources, excluding losses, depletion, and depreciation, that is attributable to all owner occupants who are applying for the assistance.  Total household income includes, but is not limited to:

(a)  net business income modified to exclude losses, depletion, and depreciation; and

(b)  income of all other owners of the property.

(4)  Income includes, but is not limited to:

(a)  wages, salaries, and tips;

(b)  taxable interest;

(c)  ordinary and qualified dividends;

(d)  alimony received;

(e)  capital gains;

(f)  other gains;

(g)  taxable refunds, credits, or offsets of state and local income taxes;

(h)  business and/or farm income excluding losses, depreciation, and depletion;

(i)  taxable amounts of IRA distributions, pensions, and annuities;

(j)  rent, royalty, partnership, S corporation, and trust income before subtracting losses, depletion, or depreciation;

(k)  unemployment compensation;

(l)  taxable amounts of social security benefits; and

(m)  other income reported or reportable on the tax return or returns required by Title 15, chapter 30 or 31 of the Montana Code Annotated.

(5) through (7) remain as proposed.

(8)  The department will review the application and any supporting documents.  The department may review income tax records to determine accuracy of information.  The department will approve or deny the application.  A decision to deny such an application due to the inability to provide sufficient information will be forwarded to and reviewed by an area manager or regional manager.

(9)  The department will advise the applicant of its decision in writing.  The date the taxpayer receives the department's determination shall be calculated by adding seven days to the date on the determination letter.  An applicant aggrieved by the department's determination may appeal the determination to the State Tax Appeal Board within 30 days of receipt as defined in this section.  In no case shall an appeal be accepted more than 37 days after the date of the department's determination letter.

(10) remains as proposed.

(11)  For purposes of this benefit, the land beneath and immediately adjacent to the residence shall not include any separately described or assessed parcels of land, regardless of whether the parcel is contiguous with or adjacent to the parcel upon which the qualified residence is located.  In those cases in which the qualified residence is a mobile home that is assessed separately from the land, the benefit will apply to the land upon which the qualified residence is located only if the land and the mobile home are owned by the applicant.

 

AUTH: 15-1-201, MCA

IMP: 15-6-134, MCA

 

42.19.406  EXTENDED PROPERTY TAX ASSISTANCE PROGRAM

(1)  through (3) remain as proposed.

(4)  In order to receive the tax rate adjustment, the qualified residence property owner of record, the qualified residence property owner's agent, or a qualifying entity of a qualified residence must annually complete and forward an application to the Department of Revenue, P.O. Box 6169 8018, Helena, Montana 59604-6169 -8018.  Beginning with tax year 2010 and all subsequent tax years, the completed application must be received by the department on or before postmarked no later than April 15 in order for an applicant to receive the tax rate adjustment for the year the tax rate adjustment is sought.  Applications received postmarked after April 15 will not be considered for the tax rate adjustment provided for under this section. unless:

(a)  the applicant was unable to apply for the current year due to hospitalization, physical illness, infirmity, or mental illness;

(b)  the taxpayer can demonstrate the impediments listed above, while not necessarily continuous, existed at sufficient levels in the period of January 1 to April 15 to prevent timely filing of the reporting form.  The department may waive this requirement, on a case-by-case basis, and upon receipt of a written statement, plus any documentation explaining circumstances where:

(i)  an applicant who participated in the program in the prior year, would meet income requirements in the current year; and

(ii)  confusion due to infirmity may have arisen; and

(c)  The department may waive this requirement on a case-by-case basis, if:

            (i)  the applicant qualified for the program in the prior year; and

            (ii)  upon receipt of a written statement, plus any documents explaining the circumstances of why the applicant failed to meet the deadline.

(5) through (15) remain as proposed.

(16)  The department will advise the applicant of its decision in writing.  The date the taxpayer receives the department's determination shall be calculated by adding seven days to the date on the determination letter.  An applicant aggrieved by the department's determination may appeal the determination to the State Tax Appeal Board within 30 days of receipt as defined in this section.

(16) through (19) remain as proposed but are renumbered (17) through (20).

 

AUTH: 15-1-201, MCA

IMP: 15-6-193, MCA

 

            42.19.501  PROPERTY TAX EXEMPTION FOR QUALIFIED DISABLED VETERANS  (1)  The property owner of record or the property owner's agent must make application to the local department office, in order to obtain a property tax exemption.  An application must be filed, on a form available from the local department office, on or before April 15 of the year for which the exemption is sought.  Applications received postmarked after April 15 will not be considered for that tax year unless the agent of the department determines the following conditions are met:

(a)  the applicant was unable to apply for the current year due to hospitalization, physical illness, infirmity, or mental illness; and

(b)  these the taxpayer can demonstrate the impediments must be demonstrated to have listed above, while not necessarily continuous, existed at significant sufficient levels from in the period of January 1 of the current year to the time of application, but in no case later than July 1 to April 15 to prevent timely filing of the reporting form.  The department may waive this requirement, on a case-by-case basis, and upon receipt of a written statement, plus any documentation explaining circumstances where:

(i)  an applicant who participated in the program in the prior year, would meet income requirements in the current year; and

(ii)  confusion due to infirmity may have arisen; and

(c)  The department may waive this requirement on a case-by-case basis, if:

            (i)  the applicant qualified for the program in the prior year; and

            (ii)  upon receipt of a written statement, plus any documents explaining the circumstances of why the applicant failed to meet the deadline.

            (2)  Telephone extensions and written extensions will be granted through The department may accept and process the applications and proof of income if submitted or postmarked no later than July 1 of the current year for the above-listed reasons which the benefit is sought.  Willful misrepresentation of facts pertaining to income or the impediments that prevent timely application filing will result in the automatic rejection of the application.

            (3)  The following documents must accompany the application:

            (a)  letter from the Veterans' Administration which verifies that the applicant is currently rated 100% percent disabled or is paid at the 100% percent disabled rate.  If the disability is permanent, the letter need be submitted only once;

            (b)  copies of the applicant's completed federal income tax return for the preceding calendar year, including all schedules;

(c)  if applicable, an extension of time to file the applicant's income tax return, along with the completed individual estimated income tax worksheet (ESW) for the tax year immediately preceding the year of the application the applicant has applied for an extension of time to file the applicant's income tax return, the applicant must provide a completed individual estimated income tax worksheet (ESW) for the tax year immediately preceding the year of the application; and

(d)  if the applicant is not required to file an income tax return, the applicant must provide documentation that identifies the applicant's income.  Examples of the required documentation include, but are not limited to:

(i)  social security statements;

(ii)  pension statements; or

(iii)  bank statements.

(4)  The department or its agent will review the application and the supporting documents and may perform a field evaluation.  The department or its agent will approve or deny the application.  A decision to deny such an application due to the inability to provide sufficient information will be forwarded to and reviewed by an area manager or regional manager.

            (5) and (6) remain as proposed.

            (7)  The department will advise the applicant of its decision in writing.  The date the taxpayer receives the department's determination shall be calculated by adding seven days to the date on the determination letter.  An applicant aggrieved by the department's determination may appeal the determination to the State Tax Appeal Board within 30 days of receipt as defined in this section.  In no case shall an appeal be accepted more than 37 days after the date of the department's determination letter.

            (8) through (12) remain as proposed.

 

AUTH:  15-1-201, MCA

IMP:  15-6-211, MCA

 

4.  Therefore, the department amends ARM 42.19.401, 42.19.406, and 42.19.501 as shown above.

 

            5.  An electronic copy of this notice is available on the department's web site at www.revenue.mt.gov.  Locate "Legal Resources" in the left hand column, select the "Rules" link and view the options under the "Notice of Proposed Rulemaking" heading.  The department strives to make the electronic copy of this notice 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.

 

 

/s/ Cleo Anderson                                         /s/ Dan R. Bucks

CLEO ANDERSON                                      DAN R. BUCKS

Rule Reviewer                                               Director of Revenue

 

Certified to Secretary of State February 28, 2011

 

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