BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.15.107, 42.15.110, 42.15.213, 42.15.216, 42.15.315, 42.15.316, 42.15.318, 42.15.403, 42.15.605, 42.15.901, 42.15.902, and 42.15.903 relating to income tax

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

TO:  All Concerned Persons

 

1.  On December 17, 2012, at 3:30 p.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, at 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 p.m., December 3, 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 canderson@mt.gov.

 

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

 

42.15.107  DEFINITIONS  The following definitions apply to rules found in this subchapter:

(1)  "Part-year resident" means an individual who either was a Montana resident at the start of the year that established residency in another state during the year, or who was a nonresident at the start of the year that established residency in Montana during the year.  The term does not include individuals such as:

(a)  retirees, commonly referred to as "snowbirds," who are residents of Montana but live in another state for a portion of each year;

(b)  a resident of another state who works in Montana on a seasonal basis, but does not establish residency in Montana; or

(c)  a Montana resident attending an out-of-state college who has not established residency elsewhere.

(1)(2)  "Permanent place of abode" means a dwelling place habitually used by an individual as the individual's home, whether or not owned by the individual or a dwelling the individual may someday leave.

 

AUTH:  15-30-2620, MCA

IMP:  15-30-2101, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.15.107 in order to help taxpayers determine the correct residency status to use when filing their Montana tax return.  Some individuals mistakenly believe that because they maintain and occupy dwellings in two or more states, or because they work in multiple states for extended periods of time, that they should file their Montana income tax return using the residency status of "part-year resident."

The proposed amendments will add detail to make it clear that a part-year resident is someone who actually changed their residency status from one state to another during the tax year.

 

42.15.110  TAXATION OF PART-YEAR RESIDENTS AND NONRESIDENTS 

(1)  Nonresidents and part-year residents Part-year residents and nonresidents are subject to the same filing requirements as residents unless otherwise expressly exempted in statute.

(2) and (3) remain the same.

(4)  Part-year resident and Nonresident nonresident estates and trusts are subject to the same filing requirements set forth in (1) through (3) unless otherwise expressly exempted in statute.

 

AUTH:  15-30-2104, MCA

IMP:  15-30-2101, 15-30-2103, 15-30-2104, 15-30-2110, 15-30-2111, 15-30-2114, 15-30-2131, 15-30-2132, 15-30-2151, 15-30-2152, 15-30-2153, 15-30-2154, MCA

 

REASONABLE NECESSITY:  The department proposes revising the title of ARM 42.15.110 from "Taxation of Nonresidents" to "Taxation of Part-Year Residents and Nonresidents" in order to better reflect the content of the rule and, therefore, provide better information to individuals looking to the rules for guidance.  The department also proposes to amend the rule content to use consistent language in regard to references to part-year resident and nonresident.

 

42.15.213  SMALL BUSINESS CORPORATION DIVIDEND AND CAPITAL GAIN EXCLUSION  (1) remains the same.

 

AUTH:  15-30-2620 15-33-105, MCA

IMP:  15-33-2103 15-33-106, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.15.213 to correct errors in the statutory citations that support the rule.

 

42.15.216  EXCLUSION OF INTEREST ON OBLIGATIONS OF UNITED STATES GOVERNMENT AND U.S. POSSESSIONS  (1) and (2) remain the same.

(3)  United States obligations that are exempt include:

(a)  series E, EE, F, G, and H, and HH savings bonds;

(b)  U.S. treasury bills;

(c)  U.S. government notes; and

(d)  U.S. government certificates.

 

AUTH:  15-30-2620, MCA

IMP:  15-30-2110, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.15.216 to provide taxpayers with additional information on which interest earned from United States obligations is exempt from Montana income tax.

 

42.15.315  ORIGINAL AND AMENDED RETURNS  (1) remains the same.

(2)  Original returns are Montana Forms 2, 2M, 2EZ, and FID-3 only.  Form 2S is also used for tax years prior to 2006 as an original return.

(3) through (11) remain the same.

 

AUTH:  15-30-2620, MCA

IMP:  15-1-216, 15-30-2512, 15-30-2602, 15-30-2609, 15-30-2641, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.15.315 to remove a reference to a tax form that is no longer in use.

 

42.15.316  EXTENSIONS AND ESTIMATED PAYMENTS  (1) through (7) remain the same.

(8)  For tax years beginning after December 31, 2011, an individual whose income tax liability for the current year is $200 or less, and who pays the entire tax liability and files his or her return on or before the extended due date provided for in 15-30-2604(3)(a), will not be charged interest or the penalties for late filing and late payment.

(8)(9)  Taxpayers who are either first time filers, or have a zero or negative taxable income for the previous year, are considered to have paid 100 percent of the previous year's tax for purposes of meeting the threshold requirements in 15-30-2604, MCA.

 

AUTH:  15-30-2620, MCA

IMP:  15-1-201, 15-1-216, 15-30-2604, 15-30-2651, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.15.316 to outline a new means by which taxpayers can receive an extension to file their income tax return, and to implement a provision included in Senate Bill 166 (SB166) as passed by the 2011 Montana Legislature.  Taxpayers, such as college students and some retirees, may have a straightforward tax return but are not able to file by April 15 for some reason.  It may not occur to these individuals that they still may need to make a payment in order to have an extension to file.  Montana law requires the assessment of a penalty for late filing at the lesser of $50 or the amount of tax owed.  Some of these individuals are charged a penalty which can be as much as the tax, effectively doubling the amount they owe.

Effective with the passage of SB166, L. 2011, for tax years beginning after December 31, 2011, individuals with a tax liability of $200 or less are relieved of interest and the penalties for filing late and paying late if they file their return and pay the tax owed within six months of when the return and tax were originally due.

 

42.15.318  MONTANA NET OPERATING LOSSES  (1) through (4) remain the same.

(5)  The election to waive the carryback of a net operating loss on the federal return does not waive the carryback for Montana purposes and a separate election must be made.  A taxpayer may elect to waive the carryback of a net operating loss even if the taxpayer has not made the election to waive the carryback on the federal return.  The election to waive the carryback is made on Form NOL, Montana Net Operating Loss.

(5)(6)  An election to waive the carryback of the net operating loss is irrevocable.  If a taxpayer elects to waive the carryback, the election must be made by the due date (including extensions of time) for filing the taxpayer's return for the tax year of the net operating loss.

 

AUTH:  15-30-2620, MCA

IMP:  15-30-2119, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.15.318 to inform individuals of an option regarding the treatment of their net operating losses which provides some flexibility in managing their taxes.  Montana law allows individuals to elect to waive the carryback of a net operating loss regardless of the election they made on the federal return.  The amendment outlines this and explains the appropriate manner for making the election.

 

42.15.403  EXEMPTIONS FOR DEPENDENTS  (1) through (3) remain the same.

(4)  For tax years beginning after December 31, 2002, the The taxpayer must have a physician's certification of qualifying disability that they retain as a tax record and provide the department upon request.  In addition, the taxpayer makes the following representations when filing a return claiming a dependent disabled child exemption:

(a)  if the taxpayer has filed the physician's certification with a prior year's return, the taxpayer represents there is no change in the dependent's physical circumstances to the extent the dependent no longer qualifies for the exemption; and

(b)  if the taxpayer has not filed the physician's certification with a prior year's return, the taxpayer represents they have a copy of the certification of a licensed physician of a qualifying disability and there is no change in the dependent's physical circumstances to the extent the dependent no longer qualifies for the exemption.

(5) through (7) remain the same.

(8)  A taxpayer claiming a dependent disabled child deduction for a tax year beginning after December 31, 2002, is required to notify the department if the child's physical circumstances have changed and the child no longer has a permanent disability constituting 50 percent or more of the whole body and of any other change in the child's eligibility for the dependent disabled child exemption.  The notice must be in writing and mailed to:

 

Department of Revenue

P.O. Box 5805

Helena, MT 59604-5805.

 

AUTH:  15-30-2620, MCA

IMP:  15-30-2114, 15-30-2152, 15-30-2641, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.15.403 to remove references to older tax years.  The proposed amendments will not change the content of the rule.  The department further proposes to remove an incorrect implementing statute.

 

42.15.605  DEFINITIONS  The following definitions apply to this subchapter:

(1) and (2) remain the same.

(3)  "Descendant" means a lineal descendant and a collateral descendant related by blood.  Sections 72-11-102, 72-11-103, and 72-11-104, MCA, describe how kinship and degrees of kinship are determined.

(4)  "Immediate family member" means any individual who is a lineal descendent of the account holder and also includes their spouse.  Stepchildren are considered lineal descendents if that relationship was created before the child's eighteenth birthday.

(5) through (8) remain the same but are renumbered (3) through (6).

 

AUTH:  15-30-2620, MCA

IMP:  15-30-2114, 15-61-102, 15-61-201, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department proposes to amend ARM 42.15.605 to remove definitions of terms not referred to in the applicable statutes for the Medical Care Savings Account set forth in Title 15, Chapter 61, nor included with the administrative rules that were promulgated in support of these statutes.

 

42.15.901  DEFINITIONS  The following definitions apply to this subchapter:

(1)  "Montana form Form FTB" means the Montana first-time home buyer's savings account form containing annual reporting information for self-administered individual accounts.

(2)  "Montana form FTB-P" means the Montana first-time home buyer's savings account form used to report penalties assessed for nonqualified withdrawals made other than on the last business day of the tax year of the account holder.

(3)(2)  "Self-administered account holder" is synonymous with that of an account holder as defined in 15-63-102, MCA, but a self-administered account holder may also be an account administrator.  For purposes of these rules, the term may be used in place of account administrator.

 

AUTH: 15-1-201, MCA

IMP: 15-63-102, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.15.901 to make a capitalization revision and to remove a reference to the discontinued Form FTB-P. For taxpayer convenience, the two forms related to the tax administration of the first-time home buyer's saving account have been combined.  The penalty information previously included on Form FTB-P is now reported as a separate section on Form FTB.

 

42.15.902  FIRST-TIME HOME BUYER ACCOUNT ADMINISTRATOR REGISTRATION  (1)  Every account administrator, except a self-administered account holder, is required to register on form FTB, which is provided by with the department.

(2)  The registration form does not need to be in a specific format but it must contain the following information:

(a)  the name, address, identification number of the entity, and the names of the owners or officers for a business; or

(b)  the name, address, and social security number for a sole proprietorship or partnership.

(3) and (4) remain the same.

 

AUTH:  15-1-201, MCA

IMP:  15-63-102, 15-63-204, MCA

 

REASONABLE NECESSITY:  The department proposes to amend ARM 42.15.902 to simplify the registration process for account administrators.  An account administrator can submit a registration in any format as long as the required information is provided.

 

42.15.903  ACCOUNT ADMINISTRATOR REPORTING AND PAYMENTS

(1) through (7) remain the same.

(8)  Each self-administered account holder must file the information required in (1) either on a Montana form Form FTB provided by the department or any means available, so long as the necessary information is provided and remitted with the individual income tax form for the corresponding tax year.

(9)  Self-administered account holders or account administrators who withhold penalties on monies used for items other than eligible expenses must submit the penalties to the department.

(a)  Account administrators, other than self-administered account holders, must remit the penalties monthly by the 15th day of the following month when the total amount of penalties exceeds $500.

(b)  Account administrators, other than self-administered account holders, whose total penalties withheld during the calendar year are less than $500 must remit the penalties on or before January 31 of the following year to the department.

(c)  Self-administered account holders must complete and file Montana form FTB-P Form FTB and remit the penalty shown on Montana form FTB-P Form FTB with the individual income tax return (Montana form Form 2).

(10) remains the same.

 

AUTH:  15-1-201, MCA

IMP:  15-63-202, 15-63-204, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.15.903 to make a capitalization revision and to remove discontinued Form FTB-P, as the penalty information it contained is now included in a separate section on Form FTB.

 

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 canderson@mt.gov and must be received no later than January 4, 2013.

 

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 "Laws and Rules" link in the left hand column, and click on the "Rules" link within to view the options under the "Current Rule 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 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 4 above or 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 Senate Bill 166, L. 2011, Senator Joe Balyeat, was notified by regular mail on July 25, 2011.  Senator Balyeat was subsequently notified on October 23, 2012.

 

 

 

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

CLEO ANDERSON                         DAN R. BUCKS

Rule Reviewer                                   Director of Revenue

 

Certified to Secretary of State November 13, 2012