BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the proposed adoption of New Rule I and II relating to tax year 2007 property tax credit
NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION
TO: All Concerned Persons
1. On November 28, 2007, at 2:00 p.m., a public hearing will be held in the Director's Office (Fourth Floor) Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the adoption 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., November 19, 2007, 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 firstname.lastname@example.org.
3. The proposed new rules do not replace or modify any section currently found in the Administrative Rules of Montana. The proposed new rules provide as follows:
NEW RULE I QUALIFYING FOR THE 2007 PROPERTY TAX REFUND
(1) If a taxpayer or taxpayers changed principal Montana residences during 2007, the department may consider the ownership and occupancy of the successive residence as a principal residence when determining whether the taxpayer or taxpayers qualify for the minimum term of residence for the property tax refund as provided in 15-30-140, MCA.
(2) For the successive residence to be considered as a principal residence for purposes of a minimum term of residence for the property tax refund as stated in 15-30-140, MCA, the taxpayer or taxpayers must, during the tax year:
(a) move out of the primary principal residence in Montana and into the successive principal residence in Montana; and
(b) have paid Montana property taxes on either or both residences for at least seven months.
(3) The taxpayer or taxpayers may only make a claim for a refund under 15-30-140, MCA, for one of the residences.
(4) Ad-valorem taxes and fees paid for trailers and other recreational vehicles do not qualify for this credit.
AUTH: 15-1-201, 15-30-105, 15-30-140, MCA
IMP: 15-1-201, 15-30-140, MCA
REASONABLE NECESSITY: The department is proposing to adopt New Rule I because the 60th Legislature during Special Session enacted HB 9, Chapter 6, which provides for an individual income tax credit for property taxes for residents of Montana who resided in their principal residential property for more than seven months during the tax year. This rule is necessary to clarify the criteria the department will use when determining eligibility for this tax refund when a Montana taxpayer moved from one principal residence to another principal residence within the state during the tax year.
NEW RULE II CALCULATION OF THE 2007 REFUNDABLE INDIVIDUAL INCOME TAX CREDIT (1) Section 15-30-140, MCA, provides that the amount of the 2007 refundable income tax credit is to be determined by applying a factor known as "the relief multiple" to the amount of property taxes that would otherwise be owed by class four residential property owners on $20,000 of market value, for the mills levied under 20-9-331, 20-9-333, and 20-9-360, MCA, for tax year 2007. This calculation requires determination of, first, the value of the relief multiple; and, second, the amount of property taxes that would be owing on $20,000 of market value of class four residential property for the mills levied under 20-9-331, 20-9-333, and 20-9-360, MCA, for tax year 2007. The product of these two amounts determines the individual income tax credit amount for tax year 2007.
(2) The base value of 0 is established in 15-30-140, MCA, as the relief multiple, and further provides that, for tax year 2007 only, this value shall be increased by 0.1 for each $1,000,000 of unaudited general fund revenue received in fiscal year 2007 in excess of a threshold amount of $1,802,000,000. As required by 15-30-140, MCA, the Department of Administration certified the unaudited general fund revenue to be $1,838,053,331 in a July 27, 2007, memorandum addressed to the Budget Director from the Director of the Department of Administration. Based on this certified amount, and the formula provided for in statute, the relief multiple for tax year 2007 is determined to be 3.6, calculated as follows:
Certified fiscal 2007 unaudited general fund revenue: $1,838,053,331
Revenue threshold contained in HB9: $1,802,000,000
Revenue in excess of threshold: $ 36,053,331
Excess revenue rounded down to nearest million: $ 36,000,000
Rounded excess revenue expressed in millions: 36
Relief multiple for each $1,000,000 of excess revenue: 0.1
Relief multiple for tax year 2007: 3.6
(3) The amount of tax year 2007 property taxes owing on $20,000 of market value for a class four residential property owner depends on the applicable tax year 2007 homestead exemption percentage and taxable valuation rate; and the number of mills levied under 20-9-331, 20-9-333, and 20-9-360, MCA, for tax year 2007.
(4) As provided in 15-6-222, MCA, the homestead exemption for tax year 2007 is 33.2%. Alternatively, this means that only 66.8% of the market value of class four property is subject to property tax for tax year 2007. Also as provided in 15-6-134, MCA, the taxable valuation rate for tax year 2007 is 3.07%. Finally, a total of 95 mills are levied under 20-9-331, 20-9-333, and 20-9-360, MCA, for tax year 2007. These statutory parameters result in a net property tax of $38.96 being levied on $20,000 of class four residential property for tax year 2007, calculated as follows:
Market value: $20,000
Taxable market value factor: 66.8%
Taxable market value: $13,360
Taxable valuation percentage: 3.07%
Taxable valuation: $410.15
Multiply by 95 mills: 0.095
Tax credit per unit of relief multiple: $ 38.96
As shown above, the total value of the individual income tax credit provided to Montana homeowners for tax year 2007 is the product of:
(a) the amount of tax year 2007 tax liability on $20,000 of class four residential property associated with the 95 mills levied under 20-9-331, 20-9-333, and 20-9-360, MCA; and
(b) the relief multiple as calculated above.
(5) The tax credit for tax year 2007 is $140 when rounded to the nearest whole dollar:
Property tax on $20,000 of market value (95 mills): $38.96
Tax year 2007 relief multiple: 3.6
Tax year 2007 individual income tax credit amount
(rounded to nearest whole dollar): $ 140
AUTH: 15-30-140, MCA
IMP: 15-6-134, 15-6-222, 15-30-140, MCA
REASONABLE NECESSITY: The department is proposing to adopt New Rule II because, while the 60th Montana Legislature in House Bill 9 provided for the general formula for determining the tax year 2007 individual income tax credit amount, no specific calculation of the credit amount is officially available from other sources. The department is mandated to administer the credit and accordingly is obligated to make this calculation of the credit amount.
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 email@example.com and must be received no later than December 6, 2007.
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 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 notice requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor, Representative Jon Sonju, was notified on October 26, 2007, 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 October 29, 2007