BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the proposed adoption of New Rule I and amendment of ARM 42.17.105, 42.17.114, 42.17.304, and 42.17.305 relating to estimated tax payments

) ) ) )

NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

 

TO: All Concerned Persons

 

1. On December 14, 2007, at 9:00 a.m., a public hearing will be held in the Director's Office (Fourth Floor) Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the adoption and amendment of the above-stated rules.

Individuals planning to attend the hearing shall enter the building through the east doors of the Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.

 

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., December 5, 2007, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail canderson@mt.gov.

 

3. The proposed new rule does not replace or modify any section currently found in the Administrative Rules of Montana. The proposed new rule provides as follows:

 

NEW RULE I ESTIMATED PAYMENTS FOR MARRIED TAXPAYERS FILING SEPARATE RETURNS (1) Married taxpayers who make estimated payments and anticipate filing separate returns on the same form or separate returns on separate forms should submit the payments on behalf of the spouse whose tax liability the payments are intended to satisfy. For example, if spouse A and B are married, spouse A has wages that are subject to withholding and spouse B is self-employed, the estimated payments should be submitted indicating they are to be applied to spouse B's liability.

(2) Married taxpayers who have submitted estimated payments under one spouse's social security number but who subsequently determine that all or a portion of the payments should be applied to the other spouse's separate tax liability may reallocate the payments. Taxpayers who wish to reallocate payments can do so by either:

(a) contacting the department by phone or in writing prior to filing their Montana tax return; or

(b) indicating on the line for estimated payments how they wish the payments to be allocated when they file their Montana tax return.

 

AUTH: 15-30-305, MCA

IMP: 15-30-241, MCA

 

REASONABLE NECESSITY: The department is proposing to adopt New Rule I to provide assistance and guidance to married taxpayers who file separate Montana income tax returns. The proposed rule reflects current department practice and is being promulgated to inform the public.

 

4. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

 

42.17.105 COMPUTATION OF WITHHOLDING (1) Employers shall calculate the state income tax amount according to the "Montana State Withholding Tax Tables," provided by the department.

(2) The referenced tax tables in (1) may be obtained by:

(a) telephoning:

Department of Revenue

Customer Service Center

(406) 444-6900;

(b) writing to:

Montana Department of Revenue

P.O. Box 5835

Helena, Montana 59604-5835; or

(c) accessing:

the department's or revenue's web site

www.discoveringmontana.com www.mt.gov.

 

AUTH: 15-30-305, MCA

IMP: 15-30-103, 15-30-202, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.105 to correct the web site.

 

42.17.114 ANNUAL RECONCILIATION AND WAGE STATEMENTS

(1) through (4) remain the same.

(5) The federal form 1099R that has Montana state income tax withholding must be filed with the department in paper or electronic form by February 28 following the year that the tax was withheld.

 

AUTH: 15-30-305, MCA

IMP: 15-30-206, 15-30-207, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.114 to expand the requirement that certain 1099s be filed electronically, as well as on paper. The rule was originally adopted by the department when the technology was not available to read the 1099Rs in an electronic format.

 

42.17.304 DETERMINATION OF TAX LIABILITY FOR PRECEDING TAX YEAR; DETERMINATION OF TAX PAID FOR CURRENT TAX YEAR (1) A taxpayer's tax liability for the preceding tax year is the total tax imposed by Title 15, chapter 30, MCA, less any nonrefundable tax credits allowed under Montana law, as shown on the taxpayer's return.

Example: A taxpayer has a tax, before applying nonrefundable credits, of $5,000. The taxpayer has a nonrefundable energy conservation installation credit of $500. The taxpayer's tax liability for the prior year for estimated tax purposes is $4,500 computed as follows:

 

Tax before nonrefundable credit                                            $5,000

nonrefundable credits                                                             (    500)

tax liability                                                                                 $4,500

 

(2) The amount of tax paid for the current year is the sum of the withholding and estimated tax payments plus any refundable elderly homeowner/renter credit(s) claimed, as shown on the taxpayer's return.

 

Example: A taxpayer has a tax, before applying nonrefundable credits, of $5,000. The taxpayer has a nonrefundable energy conservation installation credit of $500. The taxpayer's tax liability for the prior year for estimated tax purposes is $3,500 computed as follows:

 

Tax before nonrefundable credit                                             $5,000

Nonrefundable credits                                                               (  500)

Tax liability                                                                                 $4,500

 

A taxpayer has $800 in Montana withholding, an elderly homeowner/renter credit of $400 and paid $200 in estimated payments. The amount of tax the taxpayer has paid for the current year for estimated tax purposes is $1,2001,400 computed as follows:

 

Montana tax withheld                                                                 $ 800

Estimated payments                                                                     200

Refundable elderly homeowner/renter credit                             400

Total taxes paid for the current year                                        $1,2001,400

 

(3) through (4) remain the same.

 

AUTH: 15-30-305, MCA

IMP: 15-30-241, MCA

 

REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.304 to address additional refundable individual income tax credits made available by recent legislation. The current rule provides guidance for how to treat the elderly homeowner/renter when calculating interest on underpayment of estimated tax. The rule does not address how to treat the film employment production, film qualified expenditure, and insured Montana credits or the individual income tax credit for property taxes paid that was enacted during the 2007 special session of the Legislature in House Bill 9. The amendments will provide guidance for the treatment of these credits as well as any refundable credits created under future legislation.

 

42.17.305 ESTIMATED TAX AND PAYMENT OF INSTALLMENTS

(1) Except as provided in 15-30-241, MCA, a taxpayer is required to pay at least 100% of their tax liability for the preceding tax year or 90% of their tax for the current tax year through employer withholding and estimated payments. If they do not, they will be liable for interest on the underpayment provided in 15-30-241, MCA. In addition, unless the department grants a taxpayer an extension to pay an installment of estimated tax as provided in ARM 42.17.306, a taxpayer required to make installment payments of estimated tax who fails to timely pay an installment is liable for interest on the unpaid installment from the due date of the installment to the earlier of the date of payment or the due date of their income tax return, not including extensions, as provided in 15-1-216, MCA, and ARM 42.2.306.

(2) through (7) remain the same.

 

AUTH: 15-30-305, MCA

IMP: 15-30-241, MCA

 

REASONABLE NECESSITY: Section 15-1-216, MCA, requires the department to establish by rule, the interest rate for individual income taxes for each calendar year. Because the rate also affects the calculation of interest on underpayment of estimates for individuals, the amendment to ARM 42.17.305 will provide clarification to the taxpayer regarding the correct rate.

 

5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail canderson@mt.gov and must be received no later than December 21, 2007.

 

6. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

 

7. An electronic copy of this Notice of Public Hearing 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 Notice of Public Hearing 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.

 

8. The Department of Revenue 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, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters. 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 person in 5 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

 

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

 

 

 

                       /s/ Cleo Anderson                                   /s/ Dan R. Bucks

                      CLEO ANDERSON                                DAN R. BUCKS

                      Rule Reviewer                                          Director of Revenue

 

Certified to Secretary of State November 13, 2007