BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.20.105 and 42.20.107 relating to the valuation of real property
TO: All Concerned Persons
1. On May 14, 2012, at 1:00 p.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, Helena, Montana, to consider the 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., May 4, 2012, 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) 444-4375; or e-mail firstname.lastname@example.org.
3. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:
42.20.105 CONDOMINIUMS/TOWNHOMES (1) It is the intention of the department to employ an appraisal methodology for condominiums and townhouse/townhomes (as defined in 70-23-102, MCA) which is consistent with 15-8-111 and 15-8-511, MCA. The terms "townhouse" and "townhome" are interchangeable and, therefore, reference to one term incorporates the other term. The methodology must provide for a separate assessment of each condominium/townhome unit, and allocation of the percentage interest of common elements must meet the market value standard. The methodology must include the consideration, use, and where applicable, the reconciliation of the cost approach, the sales comparison approach, and the income approach to valuation using accepted appraisal treatises and manuals. This rule relates solely to the administration of revenue laws, and nothing in this rule should be construed to affect the legal requirements of any other purpose.
(2) The department will employ the following appraisal and assessment methodology for the appraisal of condominiums/townhomes, except for time-share condominiums.
(a) The preferred approach for the appraisal of
the residential condominium/townhome units is the sales comparison approach, where comparable sales are available. The common elements of residential condominiums are inherent in the individual unit values when the sales comparison approach is employed. When comparable sales are not available, the cost approach must be used. In that instance, the condominium/townhome declaration's percentage of ownership interest required by 15-8-511, 70-23-301, and 70-23-403, MCA, should will be used to allocate the value. Allocation of value for each condominium unit will be determined by multiplying the percentage, (expressed as a decimal ), times by the appraised value of the entire condominium/townhome project or by adding the individual unit cost to the individual unit's allocation of those elements deemed common. The common elements are deemed to be inherent in the individual unit's declaration percentage when the cost approach value is determined and allocated as specified in this subsection.
(b) The preferred approach for the appraisal of commercial condominium units is the income approach where reliable condominium income and expense data are available. The common elements of income-producing condominiums are inherent in the individual unit values when the income approach is employed. When reliable income and expense data are not available, the cost approach must be used. In that instance, the condominium declaration's percentage of ownership interest required by 15-8-511, 70-23-301, and 70-23-403, MCA,
should will be used to allocate the value. Allocation of value for each condominium unit will be determined by multiplying the percentage, (expressed as a decimal ), times by the appraised value of the entire condominium project. The common elements are deemed to be inherent in the individual unit's declaration percentage when the cost approach value is determined and allocated as specified in this subsection.
(3) For new townhome projects, a townhome declaration must identify the location and dimensions of each townhome unit's lot and must have been filed with the County Clerk and Recorder.
(4) For existing townhome projects, an amended townhome declaration must be filed that includes a description of the size in square footage or acreage of land associated with each townhome unit, and identify the remaining square footage or acreage associated with the common land and/or improvement elements.
(5) The deadline for filing new or amended townhome declarations is January 1. For tax year 2012 only, the deadline for filing new and amended townhome declarations is June 1.
(3)(6) The department will employ the following appraisal and assessment methodology for the appraisal of time-share condominiums.
(a) The entire condominium project will be appraised using accepted appraisal techniques or methods and, as appropriate, the cost replacement manuals identified in rule. The use of accepted techniques or methods means the consideration, use, and where applicable, the reconciliation of the cost approach, the sales comparison approach, and the income approach to valuation.
(b) Any units in a condominium project
which that are not owned and operated as time-share condominium units will be valued pursuant to the methodology set forth in (2)(a) or (b).
(c) The total appraised value for all time-share condominium units comprising a condominium project will be calculated and assessed to the owner of record (time-share association). Thereafter, it will be incumbent upon the association to allocate its total tax liability among the various parties having interest in the time-share condominiums.
IMP: 15-7-103, 15-8-511, 70-23-102, 70-23-103, 70-23-301, 70-23-403, MCA
REASONABLE NECESSITY: The department proposes to amend ARM 42.20.105, to properly implement House Bill 460 (Title 70, Chapter 2, MCA) as enacted by the 2011 Legislature. The statute requires the Department of Revenue to establish a rule pertaining to the methodology that would be used to value townhomes/townhouses.
Because the Legislature has granted the department the authority to make rules to supervise the administration of revenue laws of the state and assist in their enforcement in 15-1-201, MCA, nothing in the rule shall affect any legal requirements outside this purpose. The department proposes adding this clarifying language in (1), responding in part to an inquiry from the Director of Missoula City/County Office of Planning and Grants about the perceived impact of the rule on subdivision requirements not relating to revenue laws.
The rule brings the same method of valuing a condominium to a townhome/townhouse by applying the Unit Ownership Act, based on common elements associated with townhomes/townhouses that hold separate title to the land beneath the unit. This rule provides consistent methodology of valuation statewide and provides a mechanism for financial institutions to rely on for mortgage purposes in the state of Montana. The proposed amendments to ARM 42.20.105 implement that understanding and are also necessary to ensure the provisions of House Bill 460, relative to operation requirements and timelines, are clear and understandable for local governments.
The department also proposes to update the implementing citations for ARM 42.20.105 to include relevant references within the new law.
42.20.107 VALUATION METHODS FOR COMMERCIAL PROPERTIES
(1) remains the same.
(2) When the department uses an appraisal method that values land and improvements as a single unit, the department shall establish a combined appraised value of land and improvements. The single unit value method includes, but is not limited to, the comparable sales method for residential condominiums and the income method for commercial property. The assessment notice must contain a single combined appraised value of the land and improvements.
(2) and (3) remain the same, but are renumbered (3) and (4).
AUTH: 15-1-201, 15-7-139, MCA
IMP: 15-7-101, 15-7-102, 15-7-103, 15-7-111, 15-7-139, 15-7-201, 15-44-103, MCA
REASONABLE NECESSITY: The department proposes to amend ARM 42.20.107, to properly implement House Bill 132 (15-7-101, MCA) as enacted by the 2011 Legislature, which requires the department to report one "unit value" for residential condominiums and income producing properties when the department values the land and improvements as a unit.
The department values residential condominiums using the sales comparison method. The department values commercial property using the income method. Both methodologies require the department to value the property as one unit, but on the assessment notice the values are currently being reported separately.
The department also proposes to update the implementing citations for ARM 42.20.107 to include relevant references within the new law.
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) 444-4375; or e-mail email@example.com, and must be received no later than May 18, 2012.
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 is available on the department's web site at www.revenue.mt.gov. Select the "Legal Resources" link in the left hand column, and click on the "Rules" link within to view the options under the "Current Rulemaking Actions – Published Notices" heading. The department 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. While the department also strives to keep its web site accessible at all times, in some instances it may be temporarily unavailable 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 notice regarding a 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, faxed to the office at (406) 444-4375, 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, apply and have been fulfilled. The primary bill sponsor of House Bill Number 132, L. 2011, Representative Brian Hoven, and the primary sponsor of House Bill Number 460, L. 2011, Representative Ken Peterson, were notified by regular mail on December 15, 2011. Both sponsors were subsequently notified by regular mail on March 19, 2012.
Cleo Anderson Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State April 2, 2012