BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.21.116, 42.21.158, and 42.21.162 regarding personal property valuation
NOTICE OF AMENDMENT
TO: All Concerned Persons
1. On September 5, 2013, the department published MAR Notice Number 42-2-895 regarding the proposed amendment of the above-stated rules at page 1591 of the 2013 Montana Administrative Register, Issue Number 17.
2. On September 26, 2013, a public hearing was held to consider the proposed amendments. Montana Chamber of Commerce representative Michael Green appeared and testified at the hearing and subsequently submitted written comments. The oral and written comments received are summarized as follows, along with the department's responses:
COMMENT NO. 1: Mr. Green commented that the Chamber appreciates the department's undertaking of the rulemaking and that the substantive part, ARM 42.21.158(6), seems to carry out the intent of Senate Bill 96. He further commented that they appreciate the department's efforts and clarifying in rule the breakdown between the $100,000 exemption and the two tax rates.
Mr. Green stated that the Chamber appreciates the department's efforts to provide taxpayers with additional time and for alleviating some of the reporting requirements on new businesses that fall within the new exemption amount.
RESPONSE NO. 1: The department appreciates the Chamber's interest in this rulemaking action and thanks Mr. Green for appearing to testify.
COMMENT NO. 2: Mr. Green asked for an explanation on the rationale behind the inclusion of new (11) in ARM 42.21.158, regarding the reporting of installed costs. He commented that the term "installed costs" is not necessarily a term that he would affiliate with intangible personal property and requested that the department clarify or modify the language that's included there to the extent they can.
He also asked whether the department has reconsidered inclusion of this and asked the department to strike this portion of the amended rule in light of the recent Verizon Wireless decision from the Montana Supreme Court regarding the accounting and the exemptions for intangible personal property.
RESPONSE NO. 2: Department staff responded to Mr. Green at the hearing. Sherri Diemert, Management Analyst, Property Assessment Division, clarified that this is not new language, but rather a relocation of the language to another section within the rule. New (11) was previously (6), and the affiliated entities language is being relocated from (7). Both were just part of the reorganization of the rule.
The department is further amending ARM 42.21.158(11) to reflect the Verizon Wireless decision.
COMMENT NO. 3: Mr. Green stated that the Chamber requests the department eliminate the provisions of new (2), (3), and (4) of ARM 42.21.158. He stated that while originally adopted in 2011, the affiliate rules embodied in these sections exceed the authority granted by the statute and directly contradict the language of 15-6-138(4), MCA. The Chamber is concerned that the current proposed language will deny or improperly reduce the new statutory exemption for a wide class of taxpayers.
Mr. Green further commented that 15-6-138(4), MCA, expressly indicates that the first $100,000 of property of "a person or business entity" is exempt. The tax rate brackets above the exemption incorporate this language because they specifically refer to taxable values in excess of the exemption in (4). See 15-6-138(3)(a), MCA. This language does not imply the concept of affiliate ownership and does not authorize the department's indirect ownership rules. As a result, the Chamber requests the department eliminate these rules to provide taxpayers the full benefit of the exemption and tiered rates the Legislature created.
RESPONSE NO. 3: The department appreciates Mr. Green's comments. The department respectfully declines, however, to eliminate the provisions of (2), (3), and (4) of ARM 42.21.158. Section 15-6-122, MCA, provides for the taxation of business personal property; specifically, personal property that belongs to, is claimed by, is in the possession of, controlled by, or managed by a sole proprietor, firm, association, partnership, business, corporation, or limited liability company.
The amount of the exemption was changed by the 2013 Legislature, but the application of the affiliate rules was not changed and was in place prior to the legislative changes. The language in these sections is the result of restructuring and renumbering existing rule content. It is clear from the legislative history that there was no intent to change the reporting requirements. The provisions of (2), (3), and (4) of ARM 42-2-158 are clarification of the reporting requirements that are currently in place.
Further, 15-1-201, MCA, authorizes the department to make rules to administer the tax laws. ARM 42.21.158(2) through (4) explain that personal property is taxable to a sole proprietor, firm, association, partnership, business, corporation, or limited liability company that owns, claims, possesses, controls, or manages more than half of the value of the personal property.
3. To comply with 2-4-305(3), MCA, the department amends ARM 42.21.158(2) and 42.21.162(2) to strike the general chapter and section statute references and add the individual statutes as implementing citations instead; and as a result of the comments received, amends ARM 42.21.158(11) as follows:
42.21.158 PERSONAL PROPERTY REPORTING REQUIREMENTS
(1) remains as proposed.
(2) For the purposes of this rule, the statewide aggregate taxable market value of a taxpayer's personal property includes all property owned, claimed, possessed, controlled, or managed by an individual or business entity, either directly or indirectly through an affiliated entity or family member, unless that property is specifically exempted
in Title 15, chapter 6, part 2, of MCA by law.
(3) through (10) remain as proposed.
(11) Industrial and commercial property taxpayers shall provide documentation of the installed costs of intangible personal property included on the taxpayer's accounting records, or provide other alternative methodologies or information regarding market value for consideration by the department.
(12) remains as proposed.
AUTH: 15-1-201, 15-9-101, MCA
IMP: 15-1-121, 15-1-303, 15-6-138,
Title 15, chapter 6, part 2 15-6-201,15-6-202, 15-6-203, 15-6-206, 15-6-213, 15-6-215, 15-6-217, 15-6-218, 15-6-219, 15-6-220, 15-6-225, 15-6-228, 15-8-104, 15-8-301, 15-8-303, 15-8-309, 15-9-101, 15-24-902, 15-24-903, 15-24-904, 15-24-905, 15-24-3001, MCA
42.21.162 PERSONAL PROPERTY TAXATION DATES (1) remains as proposed.
order to obtain an exemption for personal property, other than class eight property that is automatically exempt under Title 15, chapter 6, part 2, MCA, an all cases in which an application for personal property tax is required by law, the application for exemption must be filed before March 1 of the year for which the exemption is sought. If the applicant acquires the personal property after January 1, they must submit an application for exemption:
(a) by March 1; or
(b) within 30 days of acquisition of a motor vehicle.
(3) through (7) remain as proposed.
AUTH: 15-1-201, MCA
Title 15, chapter 6, part 2 15-6-201, 15-6-202, 15-6-211, 15-6-229, 15-6-230, 15-8-201, 15-16-613, 15-24-301, 15-24-303, 15-24-3001, MCA
4. The department amends ARM 42.21.116 as proposed.
5. An electronic copy of this notice is available on the department's web site, revenue.mt.gov. In the left hand column under Quick Links, select "Laws and Rules," then "Rules" and then "Adoption Notices." 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. While the department also strives to keep its web site accessible at all times, in some instances it may be temporarily unavailable due to system maintenance or technical problems.
/s/ Laurie Logan /s/ Mike Kadas
LAURIE LOGAN MIKE KADAS
Rule Reviewer Director of Revenue
Certified to Secretary of State December 16, 2013