BEFORE THE Department of REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.4.2902, 42.4.2904, and 42.4.2905 pertaining to tax credits for historic property preservation
NOTICE OF AMENDMENT
TO: All Concerned Persons
1. On October 29, 2015, the Department of Revenue published MAR Notice No. 42-2-945 pertaining to the public hearing on the proposed amendment of the above-stated rules at page 1862 of the 2015 Montana Administrative Register, Issue Number 20.
2. On November 19, 2015, a public hearing was held to consider the proposed amendment. No members of the public appeared to testify at the hearing. The department received written comments from Nick Kujawa, President, Kujawa Development, LLC.
3. The department amends ARM 42.4.2902 and 42.4.2905 as proposed.
4. Based upon the comments received and after further review, the department amends ARM 42.4.2904 as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:
42.4.2904 OWNERSHIP OF HISTORIC PROPERTY (1) and (2) remain as proposed.
(3) A lessor who elects under U.S. Treasury regulation 26 C.F.R. 1.48-4(f) and (g) to pass the federal rehabilitation credit to a lessee may not claim the Montana credit and, correspondingly, a lessee to whom the federal rehabilitation credit is transferred is entitled to claim the Montana credit.
(3) through (5) remain as proposed, but are renumbered (4) through (6).
5. The department has thoroughly considered the comments received. A summary of the comments and the department's responses are as follows:
COMMENT 1: Nick Kujawa, President, Kujawa Development, LLC, stated that as a developer focused on preservation and redevelopment of historic Montana buildings, he appreciates the department clarifying and aligning the rules governing the implementation of the Montana Historic Preservation Tax Credit Program with the legislative intent behind them, as well as their coordination with the federal Historic Preservation Tax Credit.
RESPONSE 1: The department appreciates Mr. Kujawa's comments and willingness to work with the department to better align the state rules with the federal rules.
COMMENT 2: Mr. Kujawa commented that the proposed deletion of ARM 42.2.2904(3) removes a conflict with federal rules relating to a pass-through lessee's utilization of historic preservation tax credits that created a difficulty for developers intending to utilize both Montana and federal historic preservation tax credits. He further commented, however, that even with the proposed deletion, the rules fail to address the issue of a federal pass-through lessee's ability to utilize the Montana tax credits.
Mr. Kujawa stated that while the proposed amendment to ARM 42.4.2904 provides some guidance, the amended rule does not sufficiently address the question of whether a federal pass-through lessee can claim the Montana tax credits and suggests that rather than completely deleting (3), the department amend that section to read, "Third parties to whom the federal rehabilitation credit is transferred shall be entitled to claim the Montana credit and, correspondingly a building owner who incurs the cost of rehabilitating an historic structure and elects under federal law to pass the federal rehabilitation tax credit to a third party shall be disqualified from claiming the Montana credit."
RESPONSE 2: After further review, the department agrees that the proposed amendments to ARM 42.9.2904 did not address the issue of a federal pass-through lessee's ability to utilize the Montana tax credits. Rather than striking ARM 42.9.2904(3) entirely, as was originally proposed, the department has revised the language in that section to more specifically identify the federal pass-through lessee's claim to the credit.
/s/ Laurie Logan /s/ Mike Kadas
Laurie Logan Mike Kadas
Rule Reviewer Director of Revenue
Certified to the Secretary of State December 14, 2015