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| Montana Administrative Register Notice 42-1007 | No. 20 10/18/2019 | |
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BEFORE THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA
TO: All Concerned Persons
1. On November 13, 2019, at 11:30 a.m., the Department of Revenue will hold a public hearing in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, located at 125 North Roberts, Helena, Montana, to consider the proposed amendment of the above-stated rules. The conference room is most readily accessed by entering through the east doors of the building.
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, please advise the department of the nature of the accommodation needed, no later than 5 p.m. on October 25, 2019. Please contact Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or todd.olson@mt.gov.
3. GENERAL STATEMENT OF REASONABLE NECESSITY. In MAR Notice No. 42-2-999, effective January 1, 2019, the department proposed and adopted, among other amendments, the general reorganization of ARM Title 42, chapter 21, subchapter 1, through the consolidation or repeal of several rules regarding the department's personal property descriptions, valuation methodologies, and reporting requirements. MAR Notice No. 42-2-999 also stated that the rulemaking was the first step of a two-step process, where the second step would contain the department's proposal to remove the trended depreciation schedules for tangible personal property (schedules) and trend factor tables for industrial machinery and equipment (tables) from publication in administrative rule and cross-reference their official publication on the department's internet website at http://www.mtrevenue.gov. The department notes that, as a matter of current and past business practice, it posts the annual schedules and tables on its website for ease of public reference. The department now proposes to amend ARM 42.21.155 and 42.22.1311 to complete the removal of the lengthy schedules and tables from these rules as described above and proposes to adopt and incorporate by reference the department's Personal Property Depreciation Schedules and Trend Tables publication. The proposed 2020 Personal Property Depreciation Schedules and Trend Tables publication has been posted to the department's website concurrent with the publication of this proposal notice in the Montana Administrative Register. The department determines these actions are necessary to officially adopt into rule its current and past business practice to provide more-readily available resources via the internet, which is intended to streamline the department's administrative rules and provide taxpayers with greater transparency to the personal property reporting process. The department also proposes to amend ARM 42.21.154 to address other necessary revisions to personal property valuation methodologies. Lastly, the department also proposes removing current ARM 42.21.154(8), because the department no longer believes it necessary to specify the rule's effective date. Unless otherwise provided in law, valuation and reporting laws apply to an entire tax year beginning January 1 of each year. As for the department's proposed removal of ARM 42.21.155(5) and 42.22.1311(4), these amendments are necessary because the adoption and incorporation of the department's annual Personal Property Depreciation Schedules and Trend Tables publication will make the effective dates in the rules unnecessarily redundant.
While this general statement of reasonable necessity covers the basis for the following proposed rulemaking actions, it is supplemented below, where necessary, to explain rule-specific changes.
4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:
42.21.154 ANNUAL VALUATION OF PERSONAL PROPERTY (1) Except as provided in (2) Taxable supplies, defined in ARM 42.21.160, are valued at 100% of their acquired cost. (2) through (5) remain the same but are renumbered (3) through (6).
(a) The market value will be the "average wholesale" or a comparable category of value as shown in the online version of the national agricultural and implement valuation guide known as Equipment Watch (Equipment Watch), as of September-October of the year prior to the year of assessment. Equipment Watch is adopted and incorporated by reference in accordance with 15-8-111, MCA, and may be reviewed in a department field office or purchased from the publisher: (b) remains the same. (c) For all farm machinery and equipment, and heavy equipment that cannot be valued under (a) and (b), the department may determine
(7) remains the same but is renumbered (8).
AUTH: 15-1-201, 15-23-108, MCA IMP: 15-6-135, 15-6-138, 15-6-202, 15-6-207, 15-6-213, 15-6-219, 15-8-111, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, it is necessary for the department to amend ARM 42.21.154 to provide taxable supplies valuation in proposed (2), the updated Equipment Watch publisher's address described in proposed (7)(a), and revisions to the valuation method hierarchy for farm machinery and equipment and heavy equipment in proposed (7)(c) and (d). Taxable supplies are referenced in other portions of the department's administrative rules and reporting forms but have been inadvertently omitted from inclusion in the personal property valuation rules. The department proposes to add this personal property type which is necessary to provide taxpayers with descriptions of all personal property classes that are subject to annual reporting and valuation. The department proposes the amendment of the publisher's address in (7)(a), which is necessary for the adoption and incorporation of the published resource to comply with 2-4-307, MCA, and ARM 1.2.210. The department also proposes amending the valuation method hierarchy for farm machinery and equipment, and heavy equipment in proposed (7)(c) as the department intends to discontinue determinations of value based on original free on board (FOB) value or a trended FOB value, if the original FOB value cannot be ascertained. The removal of FOB values is necessary because the department has analyzed FOB values since implementation of the rulemaking in MAR Notice No. 42-2-999, and it concludes that approximately 85% of the personal property valuations fall into the guidelines described in (a), (b), and (d), and removal of FOB values in favor of trended average wholesale value will provide taxpayers with a more stable, consistent, and predictable values from year to year and when valuation methods change. The department also proposes to add a sentence to proposed (7)(d) that provides that the department will estimate fair market value for equipment when the owner does not provide the item's value at the time of acquisition or provides information that does not accurately reflect the item's fair market value in the opinion of the department. This proposed amendment is necessary for the department to fulfill its valuation duties when a taxpayer's reporting form is missing information, when the taxpayer declines to provide information, or when information is misreported or otherwise unreported. Based on the department's proposed amendments in proposed (2), it will be necessary to renumber rule sections, and renumber sections in proposed (7) based on the proposed amendments.
42.21.155 (3) Prior to January 1 of each year, the department will use cost index trends for equipment and depreciation percentages for furniture and fixtures from the previous July's edition of Marshall & Swift Valuation Service Guide (Marshall & Swift Guide) to calculate the trend factors and the trended percent good for the schedules in (4). The Marshall & Swift Guide is a widely recognized valuation authority which the department adopts and incorporates by reference. The Marshall & Swift Guide may be reviewed at the department's central office or purchased from the publisher: Corelogic, (a) and (b) remain the same. (4) The department shall post its trended depreciation schedules for the upcoming tax year for the categories of personal property described below on the department's internet website located at http://www.mtrevenue.gov. The department adopts and incorporates by reference its 2020 Personal Property Depreciation Schedules and Trend Tables publication, effective January 1, 2020. The Depreciation Schedules and Trend Tables publication contains the detailed schedules and tables the department uses for valuing personal property and industrial machinery and equipment. The personal property categories and trended depreciation methodologies that apply to the Depreciation Schedules and Trend Tables publication are as follows: (a) Computerized Equipment - a four-year depreciation and a residual percentage will be applied to computerized equipment such as computers, peripheral equipment that cannot function independently of a computer, computerized medical equipment, and gaming machines. The four-year depreciation schedule was developed and implemented after consultation with industry representatives; the trend factors are calculated from the office equipment category of the Marshall & Swift Guide.
(b) Office and Commercial Equipment - a five-year depreciation and a residual percentage will be applied to non-computerized equipment such as office equipment and furnishings, specialized medical equipment, janitorial equipment, coin-operated washers and dryers, beauty and barber shop equipment, tanning beds, furnishings for hotels, motels, rental apartments, rental homes, nursing home and other care facilities, and locally assessed cable tv dishes. The trend factors are calculated from the average of all category of the Marshall & Swift Guide.
(c) Furniture, Fixtures, and Miscellaneous Equipment - a ten-year depreciation and a residual percentage will be applied to all other commercial furniture and fixtures such as handheld and non-handheld shop and construction tools and equipment, medical and dental chairs and tables, theater equipment, survey equipment, billboards and signage, garbage bins, coin-operated pool and other game tables, gas pumps, bar and restaurant equipment and furnishings, bowling alleys and equipment, excepting auto-scorers which have a four-year depreciation, photo and developing equipment, mortuary equipment, safes, security systems, port-a-potties, locally assessed cable tv towers, ski lift equipment including aerial lifts, surface lifts, portable lifts and tows including the towers, cables, ropes, sheave assemblies, the conveying devices, power units, and all accessories. The trend factors are calculated from the average of all category of the Marshall & Swift Guide.
(d) Seismograph Units and Allied Equipment - a five-year depreciation and a residual percentage will be applied to seismograph units and allied equipment. An 80 percent wholesale factor is used for wheeled seismograph units. The trend factors are calculated from the chemical industry category of the Marshall & Swift Guide.
(e) Oil Drilling, Workover, and Service Rigs - a ten-year depreciation and a residual percentage will be applied to all oil drilling, workover, and service rigs. An 80 percent wholesale factor is applied to self-propelled wheeled workover and service rigs. The trend factors are calculated from the chemical industry category of the Marshall & Swift Guide.
(f) Oil and Gas Field Machinery and Equipment - a fifteen-year depreciation and a residual percentage will be applied to oil and gas field machinery and equipment. The trend factors are calculated from the chemical industry category of the Marshall & Swift Guide.
(g) Farm Machinery and Equipment - a twenty-year depreciation and a residual percentage will be applied to farm machinery and equipment. A 50 percent wholesale factor is applied. The trend factors are calculated from the average of all category of the Marshall & Swift Guide.
(h) Heavy Equipment - a twenty-year depreciation and a residual percentage will be applied to heavy equipment. A 50 percent wholesale factor is applied. The trend factors are calculated from the contractor's equipment category of the Marshall & Swift Guide.
AUTH: 15-1-201, 15-23-108, MCA IMP: 15-6-135, 15-6-138, 15-6-202, 15-6-207, 15-6-213, 15-6-219, 15-8-111, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, the department proposes to amend ARM 42.21.155 by revising the rule catchphrase to reflect the rule's updated content in accordance with ARM 1.2.214. The department also proposes the amendment of the publisher's address in (3), which is necessary for the adoption and incorporation of the published resource to comply with 2-4-307, MCA, and ARM 1.2.210.
42.21.158 PERSONAL PROPERTY REPORTING REQUIREMENTS (1) through (13) remain the same.
IMP: 15-1-121, 15-1-123, 15-1-303, 15-6-138, 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, 15-24-3001, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, it is necessary for the department to amend ARM 42.21.158 to remove (14) as the provision is obsolete. With the passage of Senate Bill 96 in the 2013 Legislative Session, the department fulfilled the rule requirement stated in (14) by providing notice to business equipment owners in November 2013 that the first $100,000 in the statewide aggregate market value of an individual or business entity's class eight business equipment would be exempt from taxation beginning in tax year 2014.
42.22.1311 INDUSTRIAL MACHINERY AND EQUIPMENT TREND FACTORS (1) Prior to January 1 of each year, the department calculates
(2) The department shall post its trend factor tables for industrial machinery and equipment for the upcoming tax year on the department's internet website located at http://www.mtrevenue.gov. The department adopts and incorporates by reference its 2020 Personal Property Depreciation Schedules and Trend Tables publication, effective January 1, 2020. The Depreciation Schedules and Trend Tables publication contains the detailed schedules and tables the department uses for valuing personal property and industrial machinery and equipment. (3) Mining machinery and equipment is engaged in the extraction, excavation, burrowing, or otherwise freeing raw material from the earth. Mobile mining equipment moves under its own power or on its own wheels and chassis, including any attachments used with or attached to such equipment, but does not include equipment that requires a foundation for the performance of the function for which it was designed and built. Mobile mining equipment used for extraction is valued by using the procedures established for heavy equipment found in ARM 42.21.154 and 42.21.155.
AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-8-111, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, the department proposes amending ARM 42.22.1311 by transferring language from (2) to proposed (1) to provide necessary background regarding the structure and general methodology of the industrial trend factor tables, specify that equipment remains taxable at the level of the final year of life expectancy until of its disposal, and make small clarifying amendments. The relocation and clarification is necessary for consistency in rule organization and content.
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: Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail todd.olson@mt.gov and must be received no later than 5:00 p.m., November 20, 2019.
6. Todd Olson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.
7. 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 notice regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in number 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.
8. An electronic copy of this notice is available on the department's web site at www.mtrevenue.gov, or through the Secretary of State's web site at sosmt.gov/ARM/register.
9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.
10. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will not significantly and directly impact small businesses.
/s/ Todd Olson /s/ Gene Walborn Todd Olson Gene Walborn Rule Reviewer Director of Revenue
Certified to the Secretary of State October 8, 2019. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A directory of state agencies is available online at http://www.mt.gov/govt/agencylisting.asp.
For questions about the organization of the ARM or this web site, contact sosarm@mt.gov.
