| HOME | SEARCH | ABOUT US | CONTACT US | HELP | ||
 |
 |
|
|
| Montana Administrative Register Notice 42-2-856 | No. 5 03/10/2011 | |
|
||
| Prev | Next | ||
|
BEFORE THE DEPARTMENT OF REVENUE OF THE STATE OF
TO: All Concerned Persons 1. On October 28, 2010, the department published MAR Notice No. 42-2-856 regarding the proposed adoption and amendment of the above-stated rules at page 2554 of the 2010 Montana Administrative Register, issue no. 20. 2. A public hearing was held on November 17, 2010, to consider the proposed adoption and amendment. Oral and written testimony received at and subsequent to the hearing is summarized as follows along with the response of the department:
COMMENT NO. 1: Ms. Mary Whittinghill, President, Montana Taxpayers Association, commented on the department's recommended revisions to the original proposal language provided at the hearing, that she likes the consistent use of the word "postmark" and that the estimating language is also okay, particularly that it spells it out and splits it into two rules. Ms. Whittinghill also commented on the department's additional proposed new language for New Rule I (5)(a) and (b), which addresses a taxpayer's inability to timely comply with reporting requirements under certain circumstances, and asked where, in other parts of the administrative rules, has it ever mentioned that these conditions existed at significant levels from January 1 to February 15. She further explained that, in her view, a lot of people will wait until right before the form is due to submit it, so to imply that they have to be sick the entire period doesn't make sense and would be a difficult level for the taxpayer to achieve. She suggested the department change that language. RESPONSE NO. 1: The department appreciates Ms. Whittinghill's comments on these rules. The language in New Rule I (5)(a) and (b) is consistent with language in ARM 42.19.401 and 42.19.501 and is intended to make an allowance for taxpayers who have missed the reporting deadline due to illness. In response, the department has modified the language in the rules to address Ms. Whittinghill's concerns regarding the need for the illness to have existed at significant levels from January 1 to February 15.
COMMENT NO. 2: Ms. Whittinghill also commented on the personal property reporting forms. She first asked why the date is being changed from March 15 to February 15 and testified that, with the exception of livestock, as she recalls the reason the March 15 date was chosen was to provide consistent dates for taxpayers to submit their reports. Ms. Whittinghill questioned the department's attempt to gather information on all personal property in the state through this means. She stated that initially, when there was a new business that filed with the Secretary of State, that there was some coordination with the department in order to locate the new taxpayer and notify them of their potential filing obligation. She further explained that because there isn't really a real property form, per se, the department uses this as an attempt to work as a business register under the One Stop Licensing concept to get the necessary reports to the taxpayer so they know what their reporting requirements are. Ms. Whittinghill additionally commented that, if it's not a date certain anymore, just whenever the department decides they want a full population again (and that she doesn't know if this is based on the Governor's new announcement to exempt personal property and wanting more accurate information), but that it is not consistent with how people have understood the process to be since the personal property was first exempt to a certain level. She also commented that the whole purpose was to reduce the reporting requirements of businesses throughout Ms. Whittinghill further commented that she would like to know if the department plans to increase its efforts to correspond with the affected taxpayers so they will have some type of notification about this change, because they are not typically going to be looking for this form if they have not been reporting this in the past. Further, there would need to be significant advertising to let people know they have this filing obligation and this additional correspondence would be a cost to the Property Assessment Division, and also added that the March 15 and February 15 is going to be confusing. RESPONSE NO. 2: Stating a definite due date of February 15 makes the taxpayer's reporting responsibility clear. In the current rule, the deadline, "30 days from the date of receipt of any request for information," is ambiguous. Without the rule change it is impossible for the department to determine, with certainty, when a taxpayer received an item of correspondence and, likewise, the taxpayer may not know for certain when they received it. This could leave the taxpayer unsure of their responsibility. The amendments in (4) and (5) provide the taxpayer with: · a clearly stated reporting deadline; · relief from the burden of requesting a filing extension; · a notice if they have missed a filing deadline; · an explanation that they have until March 15 to file and avoid penalty; and · an explanation that reporting forms postmarked after March 15 would be assessed a penalty. As written, the current rule adopted in 2009 stated the department's plan to require a report of all class eight property in 2011. That full report is necessary to assist both the taxpayer and the department in ensuring that the legislatively established threshold for personal property valuation is complied with. A biennial reporting requirement would not be overly burdensome to the taxpayer, would keep taxpayers informed of, and familiar with, the reporting process and would enhance equity by keeping assessment records current. Taxpayers who haven’t had a reporting obligation for several years can easily forget or neglect to report new equipment. Because the department adopted a rule in 2009 stating its intention to begin reporting requirements in 2011, the rule amendment that implements that intent on a biennial basis is unrelated to any recent events. The department took many steps to inform business owners of this reporting obligation in 2011. For instance, the department provided informational flyers to all local Department of Revenue offices for display and distribution; utilized statewide radio stations to broadcast public service announcements; and published notices in newspapers statewide. COMMENT NO. 3: Ms. Whittinghill further commented that she had recently visited with a member of the Montana Stockgrowers Association in regards to determining if this livestock reporting form could become the responsibility of the Department of Livestock and, because they expressed interest in pursuing this, she encouraged them to further visit with the Department of Revenue about it. RESPONSE NO. 3: The department is definitely open to considering a move of these responsibilities to the Department of Livestock, where that agency would then obtain and maintain all livestock reporting.
COMMENT NO. 4: In addition to her oral testimony, Ms. Whittinghill provided a written comment at the hearing that the reporting period is not sufficient for industrial or large commercial properties. RESPONSE NO. 4: The change in the reporting deadline from February 15 to March 15 will not impact personal property reporting for industrial property. Commercial property, such as chain stores, already comply with this class eight property filing requirement. Thus, this rule does not create a change for either industrial or large commercial properties.
COMMENT NO. 5: Mr. Harold Blattie, Executive Director, Montana Association of Counties (MACo), provided written comments. He stated that, under current ARM 42.21.158, taxpayers with class eight property valued under $20,000 in the aggregate are not required to report that personal property, and that under the proposed amendments, it appears that taxpayers would be required to itemize all class eight property, including the property in the aggregate valued at less than $20,000. He asked if it is the department's intent to require reporting of all class eight property, including property that is specifically exempt under 15-6-219, MCA, or only property that is not specifically exempt, and offered the following three examples: Example 1. A taxpayer owns $40,000 of hand tools. Under 15-6-219(2) MCA, the first $15,000 is exempt. Is the department's intent that a taxpayer report only those tools having a value over $15,000, or all hand tools? Example 2. 15-6-219(3), MCA, exempts bicycles. Would bicycle owners now be required to report them if used as a part of a business? Example 3. 15-6-219(3), MCA, exempts household goods and furniture. Would household goods and furniture now be subject to reporting if owned by a "business" pursuant to 15-6-122 MCA? Many farms and ranches own household furnishings such as appliances. Would those now be subject to reporting by virtue of ownership pursuant to 15-6-122, MCA? Mr. Blattie stated that while the rule appears to be well intentioned, it also appears that the proposed rule would create significantly increased reporting of items that are exempt from taxation, and asked if taxpayers will be required to list hand tools down to each wrench, socket and saw, etc. In citing 15-8-301(2), MCA, Mr. Blattie recommended that the proposed rule be amended to include a minimum value for property to be reported, such as individual tools valued at less than $500 or $1,000, to reduce the reporting burden on taxpayers and the administrative burden on the department. He stated that without a minimum value for each item, it appears the department would spend dollars chasing pennies. RESPONSE NO. 5: The department appreciates Mr. Blattie's comments. It is important to note that current practices are not changing. ARM 42.21.158(2), as currently written, provides language allowing for the department to require a report of all class eight properties for tax year 2011 and, if judged necessary, for additional future tax years. This includes property that is currently valued below the $20,000 threshold. Property that is specifically exempt under 15-6-219, MCA, only needs to be reported to the extent that it enables the department to determine whether or not it meets the exemption definitions. The following are the department's responses per example: Example 1. All hand-held tools must be reported so that the department can determine the market value of the property, 15-8-301(2), MCA. This is current practice. Example 2. The exemption in 15-6-219(4), MCA, is specific to bicycles used by the owner for personal transportation. If the bicycles are business equipment, for example, rented to the public or used for making deliveries, they should be reported. This is also current practice. Example 3. Many types of household goods and furniture can also be found in businesses. Refrigerators and lounge chairs for example. The exemption in 15-6-219(3), MCA, applies to items used by the owner for personal and domestic purposes or for furnishing the family residence. Household goods and furniture that are owned by a business and used for business purposes should be reported. As previously noted, current practices are not changing. Hand-held tools are typically reported as a total dollar amount acquired in a given year. The instructions for hand-held tools will be further explained in the reporting form instructions. Section 15-8-301(2), MCA, provides that the department determine the market value of the property. The department, not the taxpayer, determines assessed value the property for the various types of personal property based upon the guidelines provided in law, including applying the exemptions after the taxpayer has reported. Taxpayers with more than $20,000 reportable value, including the exemption portion, report annually. Taxpayers with less than $20,000 reportable value, report biennially. The existence of exemptions, either in the past or in the future, does not relieve the taxpayer of the reporting requirement. 3. Based on the comments received, and the proposed edits presented at the hearing by the Property Assessment Division, the department amends New Rule I (42.21.165); and further amends ARM 42.21.140 and 42.21.158 as follows, stricken matter interlined, new matter underlined:
NEW RULE I (42.21.165) LIVESTOCK REPORTING REQUIREMENTS (1) A taxpayer who raises livestock in the state of Montana subject to the per capita fees under 15-24-921 MCA, and the requirement of a written statement under 15-24-903, MCA, must (2) The department must receive the completed statement postmarked no later than February 15. If a taxpayer fails to timely return a completed livestock reporting form, the department will issue written notice to the taxpayer advising the taxpayer of their obligation to return a completed livestock reporting form. The notice shall also advise the taxpayer that they are subject to penalty under the provisions of 15-8-309 and 15-24-904, MCA, for failure to return the reporting form within ten days of receiving the reminder notice. (3) If a taxpayer fails to return (4) If, after issuance of the notice required in (2), a taxpayer fails to return a completed livestock reporting form, the department will estimate livestock numbers based upon the best information available. The department may utilize previously reported livestock numbers, brand inspections, or other available information as a basis for its estimation. (5) Statements postmarked after the deadline in (2) will be assessed a penalty unless: (a) the taxpayer provides evidence of their inability to comply due to hospitalization, physical illness, infirmity, or mental illness; and (b) evidence that this/these conditions(s), while not necessarily continuous, existed at sufficient levels in the period of January 1 to March 15 to prevent timely filing of the reporting form. AUTH: 15-1-201, MCA IMP: 15-8-309, 15-24-903, 15-24-904, 15-24-921, MCA 42.21.140 OIL DRILLING RIGS (1) The department will obtain pricing information from manufacturers of oil drilling rigs. The pricing information obtained will be used to determine current replacement cost based on the depth ratings shown below. Each depth rating will consist of two replacement cost categories. One category will represent current replacement cost of a mechanical rig and the second category will represent current replacement cost of an electric rig. Each rig as it is assessed will be placed in a value category based on its depth.
The depth capacity for drilling rigs will be based on the "Manufacturers Depth Rating." These replacement costs will then be depreciated to arrive at market value according to the schedule mentioned in (2). (2) through (4) remain as proposed. AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921, 15-24-922, 15-24-925, MCA 42.21.158 PROPERTY REPORTING REQUIREMENTS (1) A taxpayer having property in the state of Montana on January 1 of each tax year, must complete the statement as provided in 15-8-301, MCA by submitting a completed personal property reporting form. (2) If the statewide aggregate market value of a person or business entity's class eight property is $20,000 or less as determined by the department, the person or business entity is exempt from class eight taxation. To ensure fair and accurate reporting of all taxable class eight property, the department may require all persons or business entities to report their class eight property periodically. (3) remains as proposed. (4) The taxpayer's completed personal property statement as provided for in 15-8-301, MCA, must be returned to the department postmarked no later than (5) Statements postmarked after March 15 will (a) the taxpayer (b)
(6) through (9) remain as proposed. AUTH: 15-1-201, MCA IMP: 15-1-303, 15-8-104, 15-8-301, 15-8-303, 15-8-309, 15-24-902, 15-24-903, 15-24-904, 15-24-905, MCA 4. Therefore, the department adopts New Rule I, (42.21.165) and amends ARM 42.21.140 and 42.21.158 with the amendments listed above. /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
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A directory of state agencies is available online at http://www.mt.gov/govt/agencylisting.asp.
For questions about the organization of the ARM or this web site, contact sosarm@mt.gov.
