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Montana Administrative Register Notice 18-133 No. 4   02/23/2012    
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BEFORE THE DEPARTMENT OF TRANSPORTATION

OF THE STATE OF MONTANA

 

In the matter of the adoption of New Rules I and II pertaining to fuel tax refund for agricultural uses

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NOTICE OF PROPOSED ADOPTION

 

NO PUBLIC HEARING CONTEMPLATED

 

TO:  All Concerned Persons

 

1.  On March 26, 2012, the Department of Transportation proposes to adopt the above-stated rules.

 

2.  The Department of Transportation will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice.  If you require an accommodation, contact Department of Transportation no later than 5:00 p.m. on March 15, 2012, to advise us of the nature of the accommodation that you need.  Please contact Tracy Halubka, Department of Transportation, P.O. Box 201001, Helena, Montana, 59620; telephone (406) 444-0806; fax (406) 444-5411; TDD/Montana Relay Service (406) 444-800-335-7592 or (406) 444-7696; or e-mail thalubka@mt.gov.

 

3.  The rules as proposed to be adopted provide as follows:

 

NEW RULE I  DEFINITIONS  (1)  "Gross earned agricultural or farm income" means all taxable income and wages, before expenses, a person or business receives from: cultivating, operating, or managing a farm for gain or profit, either as owner or tenant; operating a livestock, dairy, poultry, fish, fur-bearing animals, or horticultural commodities business; operating a feed yard for the fattening of cattle; operating a fruit or truck farm; operating an agricultural commodities business; operating a plantation, ranch, range, nursery or orchard; and sale of crop shares if the person materially participates in producing the crop.

(2)  "Gross earned income" means all taxable income and wages, before expenses, a person or business earns from: services, sale of goods, working for someone, or working in a business the person owns or operates.  Examples of gross earned income generally include but are not limited to: wages, salaries, tips, and other taxable employee pay; union strike benefits; long-term disability benefits received prior to minimum retirement age; earnings from self-employment if the person owns or operates their own business; and gross income received as a statutory employee.  Examples of gross income that are not considered earned include:  passive income, such as interest, dividends, and capital gains; retirement income; social security; unemployment benefits; alimony; and child support. 

 

AUTH: 15-70-104, MCA

IMP: 15-70-223, 15-70-362, MCA

 

REASON:  The proposed new rule is necessary to define terms that are later used in New Rule II on Agricultural Use Fuel Tax Refunds.  The terms are not elsewhere defined in MDT fuel tax statute or rule.

 

            NEW RULE II  AGRICULTURAL USE FUEL TAX REFUND  (1)  The use of gasoline or special fuel by a person who earns income while engaged in the business of farming or ranching, which qualifies as agricultural use, may apply for a refund of the applicable tax on the gallons of gasoline or special fuel used in carrying on a trade or business of farming, ranching, or other agricultural purposes.  An applicant may claim a fuel tax refund according to the ratio of the applicant's gross earned agricultural or farm income to the total gross earned income, excluding unearned income.

            (2)  An application for an agricultural use fuel tax refund shall include the applicant's appropriate state or federal tax return (based on type of entity) with supporting federal forms, schedules, and statements for one of the three previous tax years.

            (3)  To determine an applicant's eligibility for fuel tax refund under 15-70-223 and 15-70-362, MCA, the ratio between the gross earned agricultural or farm income to the total gross earned income must be determined as follows:

(a)  Gross earned agricultural or farm income is determined using a combination of the following federal Internal Revenue Service (IRS) or state of Montana tax information, including but not limited to:

(i)  Schedule F – gross income less custom hire;

(ii)  Form 4835 – gross farm rental income and active participation;

(iii)  Form 1065(partnerships) – any third-party payments, gross receipts or sales and other income with corresponding statements showing agriculture;

(iv)  Form 1120 (corporations) – total of third-party payments and gross receipts or sales and other income with corresponding statements;

(v)  Form 1120s (corporations) – total of third-party payments and gross receipts or sales and other income with corresponding statements;

(vi)  Federal farm schedule – gross income less custom hire and miscellaneous income;

(vii)  1099-MISC – crop insurance proceeds; or

(viii)  Form 4797 – gross sales of agricultural products.

(b)  Gross earned income is determined by using the applicant's gross earned agricultural or farm income plus a combination of the following federal IRS or state of Montana tax information, including but not limited to:

(i)  Form 1040 –wages, salaries, tips;

(ii)  MT Form 2 – wages, salaries, tips;

(iii)  Schedule C – total gross receipts;

(iv)  1099-MISC – other income, fishing boat proceeds and nonemployee compensation;

(v)  K-1 (1120S) – ordinary business income;

(vi)  K-1 (Form 1065) – taxable income from passive activities and taxable income from other activities;

(vii)  Schedule F – custom hire;

(viii)  Federal farm schedule – custom hire; or

(vix)  Form 1065(partnerships) – any third-party payments, gross receipts or sales and other income not agriculture.

(4)  All federal tax forms are available on the IRS web site at www.irs.gov.  All state of Montana tax forms are available on the Montana Department of Revenue web site at www.revenue.mt.gov.

 

AUTH: 15-70-104, MCA

IMP: 15-70-223, 15-70-362, MCA

 

REASON:  The proposed new rule is necessary because the current process to determine standard deduction eligibility is confusing to the public as to how the department determines the ratio between gross earned farm/agricultural income and gross earned income and the sources from which the information is derived.  This rule will clarify the process and the income tax forms, schedules, and statements that are used to determine eligibility.

 

4.  Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to: Tracy Halubka, Department of Transportation, P.O. Box 201001, Helena, Montana, 59620; telephone (406) 444-0806; fax (406) 444-5411; or e-mail thalubka@mt.gov, and must be received no later than 5:00 p.m., March 22, 2012.

 

5.  If persons who are directly affected by the proposed action wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to Tracy Halubka at the above address and must be received no later than 5:00 p.m., March 22, 2012.

 

6.  If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date.  Notice of the hearing will be published in the Montana Administrative Register.  Ten percent of those directly affected has been determined to be 478 persons based on an estimated number of 4776 persons eligible for fuel tax refunds for agricultural uses.

 

7.  The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency.  Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices.  Notices will be sent by e-mail unless a mailing preference is noted in the request.  Such written request may be mailed or delivered to the contact person in 4 above or may be made by completing a request form at any rules hearing held by the department.

 

8.  An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register.  The Secretary of State 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 Secretary of State works 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.

 

9.  The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

 

 

/s/ Carol Grell Morris                                    /s/ Timothy W. Reardon     

Carol Grell Morris                                         Timothy W. Reardon

Rule Reviewer                                             Director

                                                                        Department of Transportation

           

Certified to the Secretary of State February 13, 2012.

 

 

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