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Montana Administrative Register Notice 42-2-822 No. 6   03/25/2010    
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BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the adoption of New Rule I and amendment of ARM 42.4.1702, 42.4.2501, 42.4.2502, 42.4.2503, 42.4.2504, 42.4.2601, 42.4.2602, 42.4.2605, 42.4.2701, 42.4.2703, 42.4.2704, 42.4.2705, 42.4.2706, 42.4.2707, 42.4.2708, 42.4.2802, 42.4.2902, 42.4.2903, 42.4.2904, 42.4.3003, 42.4.3102, 42.4.3202, 42.4.3303, 42.4.3304, 42.4.3305, and 42.4.3306 relating to tax credits for corporations and individual taxpayers

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

 

TO:  All Concerned Persons

 

1.  On April 22, 2010, at 9:00 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 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., 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 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  CLAIMING THE HISTORIC PRESERVATION CREDIT

(1)  Except as provided in (2) and (3), federal form 3468, the federal form used in claiming the federal rehabilitation credit, must be attached to the applicable Montana tax returns.  S corporations and entities taxable as partnerships must attach the form to their information returns and the owners of the pass-through entities must also attach a copy to their individual income or corporation license tax returns.

            (2)  Taxpayers claiming the alternate credit for creating a conservation easement must attach a statement identifying the historically significant property for which the credit is claimed and the costs of creating the conservation easement and the diminution in value of the historically significant property used in calculating the alternate credit.

            (3)  A taxpayer who elected to transfer the federal rehabilitation credit to a lessee must attach a copy of the election statement required by U.S. Treasury regulation 26 C.F.R. 1.48-4(f) and (g), and the lessee's form 3468 that identifies the taxpayer as the transferor.  If the credit calculation for certified historic structures on the lessee's form 3468 contains qualified rehabilitation expenditures other than those incurred by the taxpayer, the taxpayer must provide a schedule breaking out the taxpayer's own expenditures and a pro forma federal credit calculation.

 

AUTH: 15-30-2620, MCA

IMP:  15-30-2342, 15-31-151, MCA

 

            REASONABLE NECESSITY:  The department is proposing New Rule I so that the taxpayer will know what information and attachments must be included with the Montana tax return when the credit is claimed.  The department intends to place this rule in subchapter 29 with the other rules dealing with historic property preservation.

 

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

 

            42.4.1702  CREDIT FOR TEMPORARY EMERGENCY LODGING

            (1)  The owner or operator of an establishment in Montana that is licensed by the Montana Department of Public Health and Human Services (DPHHS) to provide lodging may claim the credit described in (2) against the taxes imposed in 15-30-103 15-30-2103, or 15-31-101, MCA, for furnishing temporary lodging in Montana, at no cost, to an individual who has been referred by a DPHHS designated charitable organization because the individual is in temporary immediate danger from an assault or potential assault by a partner or family member.  The list of organizations designated by DPHHS as authorized to make a referral is available at http://www.dphhs.mt.gov/PHSD/Food-consumer/emergency-lodging.shtml.  Additional information regarding the program is also available at this web site.

(2)  The amount of credit is $30 for each night, up to five nights, of gratis lodging provided to a referred individual during a calendar year.  The credit must be claimed by the person that owns or operates the licensed establishment in the Montana tax return or report that includes the establishment's lodging receipts for the period during which the creditable lodging was provided.  If the credit is claimed by an entity taxed as an S corporation or partnership, the credit must be attributed to shareholders or partners in the same proportion used to report the corporation's or partnership's income or loss for Montana income tax purposes.  The credit is "refundable," and if the amount of the credit exceeds the taxpayer's liability, if any, under 15-30-103 15-30-2103, or 15-31-101, MCA, for the period during which the creditable lodging was provided, the excess will be refunded to the taxpayer.

            (3)  The credit is $30 per night regardless of the number of individuals in the room.  For example, if two people are provided lodging in the same room for three nights, the amount of the credit is $90 (three nights of lodging multiplied by $30 per night).  If two or more referred individuals share a room for one night, each is treated as having been provided one night of lodging.  An establishment may offer a referred individual more than five night's emergency lodging during a calendar year, but only the first five nights qualify for the credit.

            (4)  When applying the limitation under 15-30-2381, MCA, each individual is treated as having been provided one night of lodging even if two or more referred individuals share a room for one night.  An establishment may offer a referred individual more than five night's emergency lodging during a calendar year, but only the first five nights qualify for the credit.

(4) remains the same but is renumbered (5).

(5)(6)  The credit must be claimed on Montana Form form TELC, Temporary Emergency Lodging Credit.

(6) through (8) remain the same but are renumbered (7) through (9).

 

            AUTH: 15-1-201, 15-30-305, 15-30-2620, 15-31-150 15-31-501, MCA

            IMP: 15-30-103, 15-30-196, 15-30-2103, 15-30-2381, 15-31-101, 15-31-102, 15-31-171, MCA

 

            REASONABLE NECESSITY:  The proposed amendments to ARM 42.4.1702 are necessary to improve the language for limitations and calculation of credit in the interest of enhancing taxpayer understanding.

            The department further proposes to amend the rule to update the authority and implementing statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2501  DEFINITIONS  (1) remains the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-32-701, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2501 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

            42.4.2502  CARRYOVER AND RECAPTURE OF OILSEED CRUSH FACILITY TAX CREDIT  (1) and (2) remain the same.

 

            AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

            IMP: 15-32-701, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2502 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2503  CARRYOVER AND RECAPTURE OF BIODIESEL OR BIOLUBRICANT PRODUCTION FACILITY TAX CREDIT  (1) and (2) remain the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-32-701, 15-32-702, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2503 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2504  CARRYOVER AND RECAPTURE OF BIODIESEL BLENDING AND STORAGE TAX CREDIT  (1) and (2) remain the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-32-703, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2504 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2601  DEFINITIONS  (1) through (6) remain the same.

 

AUTH: 15-30-305, 15-30-2620, 15-32-611, MCA

IMP: 15-32-601, 15-32-602, 15-32-603, 15-32-604, 15-32-609, 15-32-610, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2601 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2602  ADDITIONAL DEDUCTION FOR PURCHASE OF RECYCLED MATERIAL  (1)  remains the same

            (2)  For a taxpayer paying individual income tax, the deduction is an adjustment to federal adjusted gross income for individual income tax.  The deduction is available for tax years 1992 through 2005.

            (3)  For a corporation paying income/license tax, the deduction is an adjustment to federal taxable income for corporation income/license tax.  The deduction is available for tax years 1992 through 2005.

(4)  A shareholder of an S corporation may claim a share of the allowable deduction for expenditures that the S corporation incurred for purchase of qualified recycled material based on the shareholder's pro rata share of their ownership in the S corporation.  A partner of a partnership may claim a share of the allowable deduction for expenditures the partnership incurred for the purchase of qualified recycled material in the same proportion used to report the partnership's income or loss for Montana income tax purposes.

     (4) remains the same but is renumbered (5).

 

AUTH: 15-32-609, 15-32-611, MCA

IMP: 15-32-603, 15-32-609, 15-32-610, MCA

           

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.4.2602 to remove the sunset dates for the recycled material deduction made by the 2009 Legislature in HB 21 (Ch. 159, L. 2009).

            The addition of new (4) refers to the amount of the recycled material deduction allowed to the owners of a pass-through entity.  This portion of the rule clarifies that the deduction passes through to the owners of these entities.

 

42.4.2605  PERIOD COVERED FOR THE RECLAMATION AND RECYCLING CREDIT  (1)  The recycling credit is available for tax years 1992 through 2005.  The credit must be taken in the tax year in which the machinery/equipment was acquired and placed into service.

(2)  To be eligible for the recycling credit, qualifying equipment must be purchased and installed after January 1, 1990, and prior to January 1, 2006.

            (3) remains the same but is renumbered (2).

 

            AUTH:  15-32-611, MCA

IMP: 15-32-601, 15-32-602, 15-32-603, 15-32-604, 15-32-609, 15-32-610, MCA

 

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.4.2605 to remove the sunset dates for the recycle credit made by the 2009 Legislature in HB 21 (Ch. 159, L. 2009).

 

            42.4.2701  DEFINITIONS  The following definitions apply to this subchapter:

(1)  "Allowable contribution" for the purposes of the qualified endowment credit is a charitable gift made to a qualified endowment.  The contribution from an individual to a qualified endowment must be by means of a planned gift as defined in 15-30-165, 15-30-2327, MCA.  A contribution from a corporation, small business corporation, estate, trust, partnership, or limited liability company may be made by means of a planned gift or may be made directly to a qualified endowment.

(2)  "Beneficial interest" is a taxpayer who has a beneficial interest in a business when the taxpayer is either a sole proprietor, partner, or shareholder in an S corporation.

(3)  "Donor" means an individual, corporation, estate, or trust that contributes to a qualified charitable endowment as required by 15-30-165, 15-30-166, 15-30-167, 15-30-2327, 15-30-2328, 15-30-2329, 15-31-161, and 15-31-162, MCA.

(4)(3)  "Paid-up life insurance policies" are life insurance policies in which all the premiums have been paid prior to the policies being contributed to a qualified endowment.  The donor must make the tax-exempt organization the owner and beneficiary of the policy.  The paid-up life insurance policy does not have to be on the life of the donor.

(4)  "Permanent irrevocable fund" means a fund comprised of one or more assets that are invested for the production or growth of income, the principal of which must be retained and the income of which may be added to the principal or expended.  Investment assets may include cash, securities, mutual funds, or other investment assets.  A "building fund" or other fund that is used to accumulate contributions that will be expended is not a permanent irrevocable fund.  A fund from which contributions are expended directly for constructing, renovating, or purchasing operational assets, such as buildings or equipment, is not a permanent irrevocable fund.

(5)  "Present value of the charitable gift portion of a planned gift" is the allowable amount of the charitable contribution as defined in 15-30-121 15-30-2131, and 15-30-136, 15-30-2152, MCA, or for corporations as defined in 15-31-114, MCA, prior to any percentage limitations.

(6)  "Qualified endowment" means a permanent irrevocable fund established for a specific charitable, religious, educational, or eleemosynary purpose by an organization qualified to hold it as provided in ARM 42.4.2703.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-165, 15-30-166, 15-30-167, 15-30-2131, 15-30-2152, 15-30-2327, 15-30-2328, 15-30-2329, 15-31-114, 15-31-161, 15-31-162, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2701 is necessary to remove a term that is not used in the statutes or rules.  In addition, the 2007 Legislature in SB 150 (Ch. 208, L. 2007), added two definitions to 15-30-2327, MCA, although those definitions are contained in this statute, the department believes it is necessary to further define them in this rule in terms that are more common to the taxpayers.  In the definition of "permanent irrevocable fund" the department is clarifying the requirement for fund permanence also made by the 2007 Legislature in SB 150 (Ch. 208, L. 2007).

 

42.4.2703  ELIGIBILITY REQUIREMENTS TO HOLD A QUALIFIED ENDOWMENT  (1)  To hold a qualified endowment an organization must be:

(a)  incorporated or otherwise formed under the laws of Montana and exempt from federal income tax under 26 USC 501(C)(c)(3); or

(b)  a bank or trust company, as defined in 15-30-165 15-30-2327, MCA, holding an endowment fund on behalf of a Montana or foreign 501(C)(c) (3) organization.

            (2)  For the period December 31, 2000, through December 31, 2004, the affordable housing revolving loan account established in 90-6-133, MCA, is considered a qualified endowment for the purpose of qualifying for the endowment tax credit.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-165, 15-30-167, 15-30-2327, 15-30-2329, 15-31-161, 15-31-162, 90-6-133, MCA

 

            REASONABLE NECESSITY: The department is proposing to amend ARM 42.4.2703 to correct the reference in "c" for the Internal Revenue Code and to delete an obsolete reference to the state's affordable housing revolving loan account.

            The rule is further amended to update the statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

42.4.2704  TAX CREDIT AND DEDUCTION LIMITATIONS  (1) and (2) remain the same.

(3)  The balance of the allowable contributions not used in the credit calculation may be used as a deduction subject to the limitations and carryover provisions found in 15-30-121, 15-30-2131, MCA, or for corporations the limitations and carryover provisions found in 15-31-114, MCA.

(a) through (4) remain the same.

(5)  The contribution to a qualified endowment from a small business corporation, partnership, or limited liability company is passed through to the shareholders, partners, or members or managers in the same proportion as their distributive share of the entity's income or loss for Montana income tax purposes.  The proportionate share of the contribution passed through to each shareholder, partner, or member or manager becomes an allowable contribution for that donor for that year, and the credit allowed and the excess contribution deduction allowed are calculated as set forth in (1) and (2).  The credit maximums apply at the corporation and individual levels, and not at the pass-through entity's level for partnerships, small business corporations, and limited liability companies.

(6) and (7) remain the same.

(8)  The maximum credit that may be claimed in a tax year by any donor for allowable contributions from all sources is limited to the maximum credit stated in (1) and (2).  In the case of a married couple that makes a joint contribution, the contribution is assumed split equally.  If each spouse makes a separate contribution, each may be allowed the maximum credit as stated in (1) and (2).

(a)  Example 1:  Assume a married couple makes a joint planned gift to a qualified endowment on September 1, 2002 2008.  The allowable contribution made by the couple is $30,000.  That couple is eligible to take a credit of up to $9,000 12,000, with each claiming a credit of $4,500 6,000.

(b)  Example 2:  Assume a married couple makes separate planned gifts to qualified endowments on September 1, 2002 2008, which result in an allowable contribution of $20,000 for each person.  They each would be eligible to take a credit of up to $6,000 8,000.

(9)  A donor may, at a later date, name or substitute the Montana qualified endowment, as defined in 15-30-165 15-30-2327, MCA, to receive the planned gift provided that the original trust or gift document reserves in the donor the right to do so.

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-165, 15-30-166, 15-30-167, 15-30-2327, 15-30-2328, 15-30-2329, 15-31-161, 15-31-162, MCA

 

            REASONABLE NECESSITY: The department is proposing to amend ARM 42.4.2704 to remove inaccurate references to LLC managers.  Only members of LLCs, as owners, may claim the credit and deduction.  In addition, the years and related credit amounts referenced in the examples were updated to make the rule more relevant to the current tax periods for the taxpayer.

            The rule is further amended to update the statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

42.4.2705  CREATING A PERMANENT IRREVOCABLE FUND  (1) through (5) remain the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-165, 15-30-167, 15-30-2327, 15-30-2329, 15-31-161, 15-31-162, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2705 is necessary to reflect recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2706  REPORTING REQUIREMENTS  (1)  The donor must attach a copy of the following information to the tax return reporting the credit:

(a)  a receipt acknowledging the amount of the allowable contribution from the:

(i)  tax-exempt organization under 26 USC 501(C)(c)(3) holding the qualified endowment receiving the contribution;

(ii)  trustee of the trust administering the planned gift; or

(iii)  bank or trust company holding a qualified endowment on behalf of a tax exempt organization.

(b)  the date of the contribution to the qualified endowment or the planned gift;

(c)  the name of the organization incorporated or established in Montana holding the qualified endowment fund or the name of the tax exempt organization on behalf of which the qualified endowment fund is held;

(d)  in the case of a charitable trust where the charity is yet to be named, the donor shall include a copy of the disposition clause of the charitable trust which gives evidence that a qualified endowment fund has been created; and

(e)  a description of the type of gift, i.e. outright gift, charitable remainder unitrust, charitable gift annuity, etc.

(2)  The information required by these rules will be reported on forms prescribed and made available by the Department of Revenue department.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-166, 15-30-167, 15-30-2328, 15-30-2329, 15-31-161, 15-31-162, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.4.2706 to correct the internal reference from an upper case "C" to a lower case "c" which is the correct format when it is associated with the Internal Revenue Code provisions.

The rule is further amended to update the statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

42.4.2707  QUALIFIED ENDOWMENT CREDIT FOR CORPORATIONS 

(1) remains the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-165, 15-30-166, 15-30-167, 15-30-2327, 15-30-2328, 15-30-2329, 15-31-161, 15-31-162, MCA

 

            REASONABLE NECESSITY:  The proposed amendments to ARM 42.4.2707 are necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2708  DETERMINING PRESENT VALUE FOR THE ENDOWMENT CREDIT  (1) remains the same.

 

AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

IMP: 15-30-166, 15-30-2328, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2708 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2802  DISABILITY INSURANCE PREMIUMS HEALTH INSURANCE FOR UNINSURED MONTANANS CREDIT  (1)  Except as provided in (2), disability insurance is synonymous with health insurance and includes insurance of human beings:

(a)  against bodily injury, disablement, or death by accident or accidental means or the medical expense or indemnity involved; or

(b)  against disablement or medical expense or indemnity resulting from sickness.

(2)  Disability insurance does not include credit disability insurance or workers' compensation insurance.  Montana law provides two different tax credits for health insurance purchased by employers for employees.  A program administered by the commissioner of insurance, and referred to as the Insure Montana Credit, provides incentives, including a refundable tax credit provided in 15-30-2368 and 33-22-2006, MCA, for eligible, prequalified small employers.  The rules related to that program are located in ARM Title 6, chapter 6, subchapter 52.  No tax form is required to claim the preauthorized, refundable credit.  Rather, the prequalified employers claim it as a line item on their individual income or corporation license tax return or, if they are taxed as an S corporation or partnership, they report it as a line item on their information returns and the pass-through entity owners claim their part as a line item on their individual income tax or corporation license tax returns, including a copy of the certificate issued by the Montana State Auditor's Office, verifying the amount of the credit.

(2)  The rules in this subchapter apply to a second credit, referred to as the Health Insurance for Uninsured Montanans Credit, provided in 15-30-2367 and 15-31-132, MCA.  The credit under 15-30-2367, MCA, against individual income tax, and 15-31-132, MCA, against corporation license tax, is subject to specific conditions and limitations listed in 15-31-132, MCA.  It is not refundable, and any unused credit amount may not be carried over to another tax year.  An employer can not claim both the small employers credit provided in Title 33, chapter 22 and the Title 15, chapter 30 and 31, MCA tax credit.

(3)  The credit may not be claimed for any insurance policy must that does not meet the minimum requirements of the small employer health insurance availability act described Small Employer Health Insurance Availability Act imposed in 33-22-1801 Title 33, chapter 22, part 18, MCA, except to the extent that part of Title 33 is inconsistent with the provisions of 15-31-132, MCA, before the insurance premiums paid by the employer are eligible for the credit.

(4)  The credit may not be claimed for a period of more than 36 consecutive months that begins with the first month for which the credit is claimed.  The credit may be claimed for any month qualifying insurance is provided during the 36-month period even if the employer either stops paying for insurance or does not claim the credit for other months.  For example, company XYZ provides qualifying insurance for its employees from January 1, 2009, until December 31, 2009, but then stops paying in 2010.  The employer is eligible to claim the credit through 2011 if it starts covering its employees again in 2011.

(5)  For ten years after the last payment within the 35 months following the first month for which the credit is claimed, the employer or the employer's successor is ineligible to claim the credit.  The 10-year period of ineligibility expires sooner if the credit is not claimed for the full 36-month period.  For example, company ABC provides qualifying insurance for its employees from January 1, 2009 until December 31, 2010.  The employer, or its successor, is eligible to claim the credit again January 1, 2021.

(4)(6)  If a corporation qualifies for the credit and has elected the employer is an S corporation status, the credit may be claimed by the individual its shareholders based upon the their pro rata share of ownership in the corporation.

(5)(7)  If the employer is a partnership qualifies for the credit, the credit must be attributed to the partners in the same proportion used to report the partnership's income or loss for Montana income tax purposes.

(6)(8)  Form HI, Health Insurance for Unisured Montanans Credit, must be completed for the year the credit is claimed and attached to Montana form 2, for an individual taxpayer, and to form CLT-4, for a C corporation the appropriate tax return.

(7)(9)  A taxpayer who files a tax return electronically must complete form HI and retain the form and submit it to the department upon request.

(10)  The Health Insurance for Uninsured Montanans Credit is referred to in 15-31-132 and 15-30-2367, MCA, as the credit for providing disability insurance for employees.  Disability insurance is defined in 33-1-207, MCA.

 

AUTH: 15-31-501, MCA

IMP: 15-30-129, 15-30-2367, 15-31-132, 33-1-207, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.4.2802 to describe the relationship between the "Health Insurance for Uninsured Montanans Credit" that is administered by the department and is the subject of the rule, and the "Insure Montana Credit" that is administered by the Commissioner of Insurance, because both are allowed for employer-provided health insurance and taxpayers are confused about how they interrelate and how they are different.

            The definition of "disability insurance" is being stricken because the department has renamed the rule to refer to the tax credit by its commonly used name, "Health Insurance for Uninsured Montanans".  Most people do not associate the term "disability insurance" as health insurance, and this has caused confusion about the type of insurance that is eligible for the credit.  A reference to the definition of disability insurance has been included in (10) because that statute reference in Title 33, MCA, where disability insurance is defined as health insurance, was deleted in 2001.

            The department is also proposing amendments to address taxpayer questions about how the 36-consecutive-month credit limit and the 10-year period of ineligibility apply when there are months during the 36-month period when insurance is not provided or the credit is not claimed.

            The department is also proposing general amendments to update the tax credit form name and references to the tax form and to make nonsubstantive changes in style.

            The amendment to the implementation citation is necessary to reflect recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.2902  COMPUTATION OF THE TAX CREDIT FOR THE PRESERVATION OF HISTORIC PROPERTIES  (1)  Except as provided in (3), Montana's tax credit for the preservation of historic buildings is to be computed using the federal credit allowed by 26 USC 47 which is a component of the federal general business credit.  No other component of the federal general business credit may be used to compute Montana's credit for the preservation of historic buildings.

(2) remains the same.

            (3)  For tax years beginning January 1, 2002, through December 31, 2011, an alternative credit may be claimed for placing a conservation easement on historically significant property equal to 20% of the cost of creating the conservation easement and the diminution in value of the historically significant property.  Qualified costs used in computing the credit for creating a conservation easement are those direct costs incurred in connection with the creation of the conservation easement and do not include the cost of acquiring the property or for improvements made to the property unless they are directly related to creating the conservation easement.  This section applies to tax years beginning January 1, 2002 through December 31, 2011, as stated in 15-30-180, MCA.

 

            AUTH: 15-30-305, 15-30-2620, 15-31-501, MCA

            IMP: 15-30-180 15-30-2342, 15-31-151, MCA

 

REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2902 includes changes to improve the taxpayer's understanding of the time limitations and amount of the credit.

The rule is further amended to update the statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

            42.4.2903  COMPUTATION OF TAX CREDIT FOR PRESERVATION OF HISTORIC PROPERTY FOR MARRIED TAXPAYERS  (1) through (4) remain the same.

 

            AUTH: 15-30-305, 15-30-2620, MCA

            IMP: 15-30-180, 15-30-2342, 15-31-151, MCA

 

            REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.2903 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

42.4.2904  OWNERSHIP OF HISTORIC PROPERTY  (1)  The credit is allowed to owners of the property who make qualified rehabilitation expenditures.

            (2)  A lessee that makes its own qualified rehabilitation expenditures to a certified historical building for which it is allowed a federal rehabilitation credit in its own right under IRC 47(c)(2)(B)(vi) when the initial lease term is longer than the building's IRC 168(c) recovery period is allowed to claim the Montana rehabilitation credits based on its own investment.

            (3)  Third parties to whom the federal rehabilitation credit is transferred may not claim the Montana credit and, correspondingly, transfer of the federal credit by a person entitled to claim the Montana credit does not disqualify them from claiming the Montana credit.

(4)  A credit for the preservation of historic property generated by property jointly owned by more than one individual must be allocated between owners based on each owner's share of ownership in the property.  Unless specified otherwise when the property is purchased, percentage of ownership will be considered equal between to100% divided by the number of owners.

(5)  A credit for the preservation of historic property owned by an S corporation must be allocated to its shareholders based on their pro rata share of ownership in the corporation.

(6)  A credit for the preservation of historic property owned by a partnership must be attributed to the partners in the same proportion used to report the partnership's income or loss for Montana income tax purposes.

 

AUTH: 15-30-305, 15-30-2620, MCA

IMP: 15-30-180, 15-30-2342, 15-31-151, MCA

 

REASONABLE NECESSITY:  The proposed amendments to ARM 42.4.2904 are necessary to address questions that arose from taxpayers regarding who may or may not claim the credit when the corresponding federal credit is transferred.  The rule also addresses the issue of how the credit is allocated to pass-through entity owners.

The rule is further amended to update the statutes to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24, (Ch. 147, L. 2009).

 

            42.4.3003  CLAIMING THE INFRASTRUCTURE USER FEE CREDIT

(1) remains the same.

(2)  When claiming the credit, the taxpayer must attach to their tax return a completed copy of the form provided by the department IUFC, Infrastructure User Fee Credit.  This form must be certified by the county, verifying the amount of the infrastructure user fee paid and that the fee has been paid timely.

(3) remains the same.

(4)  The credit is nonrefundable.  Any excess credit must first be carried back to each of the three preceding taxable periods, reducing the tax liability to zero, and then carried forward to each of the seven taxable periods following the taxable period of the credit.  The credit cannot be carried back to any tax years beginning prior to January 1, 1995.  The current year credit must be applied first before any carry back will be allowed.

 

AUTH: 15-1-201, MCA

IMP: 17-6-309, 17-6-316, MCA

 

REASONABLE NECESSITY:  The department is proposing to amend ARM 42.4.3003 as form IUFC has recently been developed and this form is now used to report the infrastructure credit.

In addition, the reference to tax years beginning prior to January 1, 1995, has been deleted because that tax year is no longer applicable because the date is a stale reference.  For example, in tax year 2009 the carry back can only go back to 2006.  The remaining rule language and statute are clear as to the carry back and carry forward requirements and this language is not necessary.

 

42.4.3102  CREDIT FOR CONTRACTOR'S GROSS RECEIPTS TAX - INDIVIDUAL INCOME TAX  (1)  A resident or a nonresident taxpayer is allowed a credit against the taxpayer's Montana income tax liability for public contractor's gross receipts tax paid pursuant to the provisions of 15-50-205 and 15-50-206, MCA.  The credit is allowed with respect to the taxpayer's Montana income tax liability determined for the taxable year in which the net income from contracts subject to the gross receipts tax is reported.  If the taxpayer reports income from contracts on a percentage of completion basis, the credit must be allocated accordingly.  The amount of credit allowable is the net public contractor's gross receipts tax (after personal property tax credit) actually imposed and paid by the taxpayer but not in excess of the taxpayer's Montana income tax liability.  Any excess credit may be carried forward for up to five taxable periods.

(2)  In the event the public contractor's gross receipts tax is paid by a joint venture, partnership, S corporation, limited liability company, or limited liability partnership, the members, partners, or shareholders shall be are entitled to the credit for the tax as the respective interests appears.

 

AUTH: 15-50-103 15-1-201, MCA

IMP: 15-50-205, 15-50-206, 15-50-207, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.4.3102 to delete the reference to "joint venture" because a joint venture is a form of partnership.

In order to help taxpayers have a better understanding of the carry forward provision provided in 15-50-207, MCA, the department is proposing to add language to ARM 42.4.3102 to explain that taxpayers may carry any excess contractor's gross receipts tax credit forward for up to five tax periods.

The amendment to the authority citation is necessary because 15-50-103, MCA, was renumbered 37-71-103, MCA, and then subsequently repealed.  The authority citation is now the department's general rulemaking authority that provides for implementing rules that supervise the administration of all revenue laws of the state and assist in their enforcement.

The proposed amendment supports the statutory change made by the 2005 Legislature in SB 323, (Ch. 454, L. 2005).

 

42.4.3202  CREDIT FOR INCREASING RESEARCH ACTIVITIES

(1) and (2) remain the same.

(3)  Form RSCH may be obtained from the department upon request or is available on the department's web site under the downloadable forms at www.discoveringmontana.com/revenue revenue.mt.gov.

(4)  Form RSCH must be filed with the tax return and.

(a)  For individual taxpayers, including single member limited liability companies that are owned by an individual and are disregarded for income tax purposes, if the tax return is filed by paper, the return and form RSCH must be mailed to: the

Department of Revenue,

P.O. Box 5805,

Helena, Montana 59604-5805 for individual taxpayers and

(b)  For corporations, partnerships, and entities taxed as corporations or partnerships, if the tax return is filed by paper, the return and form RSCH must be mailed to:

Department of Revenue

P.O. Box 8021,

Helena, Montana 59604-8021 for corporations, small business corporations, partnerships, limited liability partnerships and limited liability companies.

(c)  If the tax return is filed electronically, form RSCH must be kept in the taxpayer's records and a copy provided to the department upon request.

 

AUTH: 15-30-2620, 15-31-150, 15-31-501, MCA

IMP: 15-30-2358, 15-31-150, MCA

 

REASONABLE NECESSITY:  The department is proposing to update ARM 42.4.3202 to reflect the department's new web site address and to add information to reflect electronic filing of the tax return.

In addition, the authority and implementing cites for individual income taxes were added.

 

            42.4.3303  SUBMISSION OF COSTS AND APPLICATION FOR TAX CREDIT  (1)  Upon notification from the Department of Commerce that a production company has been granted state certification, the department will send a Film Production Credit form to the production company along with the instructions for completing the form.

(2)  At the conclusion of the principal photography, the statement of expenditures and compensation paid to Montana residents referred to in 15-31-905, MCA, shall be sent to the department on form FPC-PP, Film Production Credit - Principal Photography.  However, when the production company ultimately files its application to receive the tax credit(s), it may supplement this statement of expenditures and compensation with an updated statement that reflects expenditures and compensation paid to Montana residents arising after principal photography is complete.

(3)(2)  When the production company files its tax return, it shall complete the application referred to in (1), form FPC, Film Production Credit, with supporting documentation and return it to the department along with form FPC-AF, Film Production Credit - Application Fee, and the appropriate fee as provided in 15-31-906, MCA, and supporting documentation.

(4)(3)  Allowed credits shall be claimed against the tax imposed under 15-30-103, 15-30-2103 or 15-31-121, MCA, for the income year in which the production expenses or costs were incurred.

 

AUTH:  15-30-2105, 15-31-911, MCA

IMP:  15-30-2103, 15-31-906, 15-31-907, 15-31-908, 15-31-911, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.4.3303 to delete the reference that the department sends the Film Production Credit form to the production company because the applicable forms are sent by the Department of Commerce.

Other amendments bring the rule into conformance with the applicable statutory language found in 15-31-905, MCA, and clarify the appropriate forms required to be filed.

Amendments to the authority and implementing cites are necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

            42.4.3304  CERTIFICATION FOR EMPLOYMENT PRODUCTION TAX CREDIT  (1) through (5) remain the same.

 

            AUTH: 15-31-911, MCA

            IMP: 15-30-101, 15-30-2101, 15-31-906, 15-31-907, 15-31-908, MCA

 

REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.3304 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.3305  QUALIFIED EXPENDITURES  (1) through (7) remain the same.

 

AUTH: 15-31-911, MCA

IMP: 15-30-101, 15-30-2101, 15-31-906, 15-31-907, 15-31-908, MCA

 

REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.3305 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

42.4.3306  PENALTY AND INTEREST  (1) and (2) remain the same.

 

AUTH: 15-31-911, MCA

IMP: 15-30-101, 15-30-2101, 15-31-906, 15-31-907, 15-31-908, MCA

 

REASONABLE NECESSITY:  The proposed amendment to ARM 42.4.3306 is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in HB 24 (Ch. 147, L. 2009).

 

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 April 30, 2010.

 

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 contact requirements of 2-4-302, MCA, apply and have been fulfilled.  The primary bill sponsor for HB 21 (2009), Representative Dickenson was contacted by regular mail on July 14, 2009 and the primary sponsor for HB 24 (2009), Representative Morgan was contacted on October 14, 2009 by electronic mail.  The primary bill sponsor for SB 150 (2007), Senator Gillan was notified of the initial changes to the rules relating to that bill on November 1, 2007.    No substantive changes are being proposed which require further notification for that bill at this time.  The primary bill sponsor for SB 323 (2005), Senator Black was notified on March 6, 2010, by electronic mail.

 

 

/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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