BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the adoption of Rule I (ARM 42.3.115
), amendment of ARM 42.3.101
, and 42.3.120
, and repeal of ARM 42.3.112
relating to rules found in chapter 3 regarding waiver of penalties and interest
NOTICE OF ADOPTION, AMENDMENT, AND REPEAL
TO: All Concerned Persons
1. On December 21, 2006, the department published MAR Notice No. 42-2-771 regarding the proposed adoption, amendment, and repeal of the above-stated rules at page 3051 of the 2006 Montana Administrative Register, issue no. 24.
2. A public hearing was held on January 17, 2007, to consider the proposed adoption, amendment, and repeal. Written comments were received and are summarized as follows along with the response of the department:
COMMENT NO. 1: Mary Ann Phipps, CHMS, P.C., Glendive, Montana and Jane Egan, Executive Director, Montana Society of Certified Public Accountants, suggested that the rules be rewritten so the taxpayer does not have to complete a separate form to request the waiver of penalty. The waiver should be automatic so the form is not necessary.
Ms. Phipps suggested a statement on the notice that states, "If tax and interest due are not paid within 30 days, the Department will assess penalties from the original due date." Or, a box could simply be added to the amended return to be marked by the taxpayer requesting the waiver be considered.
RESPONSE NO. 1: In order to ensure that each taxpayer is treated fairly, the department must require a waiver request from individuals seeking a waiver of the late payment because the process for handling these requests is a manual review process. If the taxpayer did not affirmatively seek the request it is possible that some of these would be missed. Due to this requirement the department cannot automatically waive the penalty.
The department does agree that the waiver process should be as taxpayer friendly and administrative feasible as possible. As suggested this may include a statement on the first statement of account (SOA) notifying the taxpayer of the availability of the waiver followed by a box that can be marked to request the waiver. The same potential holds true for amended returns.
The department does not anticipate using a separate form for the SOAs but may be required to do so for amended returns until the 2007 tax returns are completed and programming is in place.
COMMENT NO. 2: Ms. Phipps and Ms. Egan stated they believe the definition of "habitual" once in a 3-year period seems harsh.
RESPONSE NO. 2: The department has reviewed the habitually definition along with several other definitions in the rule notice. The department has determined that the definition of "habitually", "purposely failing to file a return or pay the tax by the due date", and "voluntary" are not used in chapter 3; therefore, these definitions will be removed from the chapter. These definitions may be required at a later date and will be incorporated if necessary at that time.
COMMENT NO. 3: Jane Egan suggested the rule address the extension of the 30 days when the taxpayer has a reasonable cause to object to all or part of the additional tax assessed. In some cases, the statement of account (SOA) may be reduced or eliminated after correspondence with the department which may take longer than the 30 days.
RESPONSE NO. 3: The department appreciates the comment and request to expand the waiver of the late payment penalty but cannot agree to change the rule to reflect an extension of the waiver period beyond the 30 days when the SOA is being resolved. This type of language could be expanded beyond the intent of the rule and applied to all appeals, including those before the Office of Dispute Resolution, State Tax Appeal Board, District Court, and Supreme Court. This would include frivolous appeals where the department has very little in the way of enforcement tools.
COMMENT NO. 4: Ms. Phipps and Ms. Egan suggested the department include a waiver of penalty on extensions as well as amended returns in these rules.
RESPONSE NO. 4: New rule I (42.3.115) only applies to the waiver of the late payment penalty. Since extensions are only allowed for the filing of returns not extension for payment there shouldn’t be a need for the waiver of the late payment penalty.
3. Based on the comments received and further review by the department, ARM 42.3.101 is amended as follows:
42.3.101 DEFINITIONS The following definitions apply to terms used in this subchapter:
(1) through (4) remain as proposed.
(5) "Habitually" means more than once in a three-year period subsequent to notification by the department of a prior failure to file a return or to pay the tax due.
(6) "Purposely failing to file a return or pay the tax by the due date" includes, but is not limited to:
(a) habitually failing to file a return or to pay the tax due unless the taxpayer can establish that the failure was not done purposely or knowingly; or
(b) an attempt to evade or defeat the tax.
(7) remains as proposed but is renumbered (5).
(8) "Voluntary" means the taxpayer has filed a tax return without having been contacted by the department.
AUTH: 15-1-201, 15-30-305, 15-31-501, 15-35-122, 15-53-155, 15-60-104, 15-65-102, MCA
IMP: 15-1-206, 15-1-216, 15-30-321, 15-31-502, 15-35-105, 15-37-108, 15-38-107, 15-53-155, 15-59-106, 15-60-208, 15-61-205, 15-65-115, MCA
4. The department adopts New Rule I (42.3.115), amends ARM 42.3.101 as shown above, amends ARM 42.3.102, 42.3.103, 42.3.104, 42.3.105, 42.3.106, 42.3.107, 42.3.108, 42.3.109, 42.3.110, 42.3.111, 42.3.113, and 42.3.120, and repeals ARM 42.3.112 and 42.3.114 as proposed.
5. An electronic copy of this Adoption Notice 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 Adoption 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 April 16, 2007