Montana Administrative Register Notice 42-2-821 No. 6   03/25/2010    
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In the matter of the amendment of ARM 42.4.1604, relating to tax credits for corporations






TO:  All Concerned Persons


1.  On April 22, 2010, at 8:30 a.m., a public hearing will be held in the (Third Floor) Reception Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the amendment of the above-stated rule.

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., April 12, 2010, 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 rule proposed to be amended provides as follows, stricken matter interlined, new matter underlined:


            42.4.1604  MANUFACTURING  (1)  A manufacturing corporation is one engaged in the mechanical or chemical transformation of materials or substances into new products or the production of energy by means of an alternative renewable energy source as defined in 90-4-102, 15-6-225, MCA.  The manufacturing facilities for the transformation of materials or substances into new products are usually described as plants, factories, or mills and characteristically use power driven machines and materials handling equipment.  Corporations engaged in assembling component parts of manufactured products are also considered to be manufacturing, if the new product is neither a structure nor other fixed improvement.  Included in this definition is the blending of materials such as lubricating oils, plastics, resins, or liquors.

(2) and (3) remain the same.

            (4)  If it is difficult to determine the classification between manufacturing and other divisions of the 1972 Standard Industrial Classification Manual system North American Industry Classification System (NAICS), the department shall classify according to its best judgment.

            (5) remains the same.

            (6)  There are also some manufacturing-type activities performed by corporations which are primarily engaged in activities covered by other divisions of the Standard Industrial Classification Manual of 1972 North American Industry Classification System (NAICS), and are thus not classified as manufacturing.  A few of the important examples are:

            (a)  agriculture, forestry, and fishing (Processing on farms is not considered manufacturing if the raw materials are grown on the farm and if the manufacturing activities are on a small scale without the extensive use of paid labor.  Other exclusions are custom grist milling, threshing, and cotton grinning ginning);

            (b)  mining with the dressing and beneficiating of ores; the breaking, washing, and grading of coal; the crushing and breaking of stone; and the crushing, grinding, or otherwise preparing of sand and gravel and nonmetallic chemical and fertilizer minerals other than barite classified as mining;

            (c)  construction (Fabricating operations performed at the site of a construction by contractors are not considered manufacturing.  The prefabrication of sheet metal, concrete, and terrazzo products and similar construction materials shall be classified as manufacturing.);

            (d)  wholesale and retail trade, with corporations engaged in the following types of operations included in wholesale or retail trade:

            (i)  cutting and selling purchased carcasses;

            (ii)  preparing feed at grain elevators and farm supply stores:;

            (iii)  stemming leaf tobacco at wholesale establishments;

            (iv)  production of wiping rags;

            (v)  breaking of bulk and redistribution in smaller lots, including packaging, repackaging, or bottling products such as liquors or chemicals;

            (vi)  primarily selling products to the general public which are produced on the same premises from which they are sold, such as bakeries, candy stores, ice cream parlors, and custom tailors;.

            (e)  services with tire retreading and rebuilding, sign painting and lettering ships, and the production of motion picture films classified as services and with repair activities, with the following exceptions, classified as services:

            (i)  ship and boat building and repair;

            (ii)  the rebuilding of machinery and equipment on a factory basis; and

            (iii)  machine shop repair.

            (7)  Alternate renewable energy sources defined in 15-6-225, MCA, include solar energy, wind energy, geothermal energy, conversion of biomass, fuel cells that do not require hydrocarbon fuel, small hydroelectric generators producing less than one megawatt, and methane from solid waste.


            AUTH: 15-31-127, 15-31-501, MCA

            IMP: 15-8-111, 15-6-225, 15-31-124, MCA 


            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.1604 is necessary to remove a repealed statute and replace it with the proper cross-reference.

            The title reference has been updated in (4) and (6).

            The department is correcting the term "cotton grinning" referred to in (6)(a) because the department has not be able to define that term but can define "cotton ginning".

            New (7) addresses the types of renewable energy sources that are allowed in order to clarify for the taxpayer the types of energy described in 15-6-225, MCA.

            The department is proposing to remove the implementing reference of 15-8-111, MCA, which sets forth exceptions to the market value standards of valuing property because it does not apply to the subject matter of this rule and add the implementing statute of 15-6-225, MCA.


4.  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 April 30, 2010.


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


6.  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.


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 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 4 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.  The bill sponsor contact 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 March 15, 2010



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