BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

TO: All Concerned Persons

1. On December 17, 2007, at 1:00 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., December 5, 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 canderson@mt.gov.

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 ENERGY PRODUCTION OR DEVELOPMENT TAX ABATEMENT ELIGIBILITY FOR NEW INVESTMENT IN THE CONVERSION, TRANSPORT, MANUFACTURE, RESEARCH, AND DEVELOPMENT OF RENEWABLE ENERGY, CLEAN COAL ENERGY, AND CARBON DIOXIDE EQUIPMENT AND FACILITIES (1) The property owner of record, the property's owner's agent, or the operator of the qualifying property must apply to the Department of Environmental Quality (DEQ) for a certification of eligibility for equipment or facilities for which the abatement is sought. Upon review of the application, the DEQ shall provide the Department of Revenue (department) with a certification of eligibility for qualifying equipment or facilities.

(2) The department shall classify the property in the appropriate class of property and shall assess the qualifying facilities for which the certification is granted at 50% of its taxable value for the qualifying period which includes the construction period and the first 15 years after the facility commences operation or the clean advanced coal research and development equipment or renewable energy research and development equipment is purchased. The total time of the qualifying period may not exceed 19 years.

(3) For clean advanced coal research and development equipment or renewable energy research equipment, the qualifying equipment, up to the first $1 million of the value of the equipment at the facility, shall be assessed by the department at 50% of its taxable value for the qualifying period identified in (2). The abatement does not extend to any equipment in excess of the first $1 million of equipment located at the facility.

(4) For centrally assessed property, the department shall determine the market value of the property or equipment by multiplying the depreciated value of the approved class fourteen, fifteen, or sixteen qualifying equipment of facilities by a market to book ratio then multiplying by 0.50. The market to book ratio shall be determined by dividing the system or unit value after deduction of the exempt intangible personal property by the system net book value after deduction of the exempt intangible personal property. This value shall then be deducted from the Montana value and certified to the counties as class fourteen, fifteen, or sixteen property.

(5) For industrially assessed property, the department shall determine the market value of the qualifying industrially assessed property in accordance with ARM 42.22.1309 and then multiply the qualifying property or equipment by 0.50.

(6) Upon revocation of a certification by the DEQ, the department will, if necessary, reclassify the property and assess the property at 100% of its taxable value beginning January 1 of the year or years for which the certification is revoked.

(7) If a taxpayer's certification is revoked, the taxpayer forfeits the abatement or classification under 15-6-157, or 15-6-158, MCA, and may not reapply for abatement for that property.

(8) If the department finds that a certification for a transmission line which was previously granted was based on an application that the applicant knew was false or fraudulent or subsequently revoked, the department must reclassify property as class nine under 15-6-141, MCA. In addition, the department may assess the applicant for additional taxes, penalty, and interest from the time the certification was in effect.

AUTH: 15-24-3116, MCA

IMP: 15-6-141, 15-6-157, 15-6-158, 15-6-159, 15-24-3101, 15-24-3102, 15-24-3111, 15-24-3112, 15-24-3116, MCA

REASONABLE NECESSITY: The department is proposing to adopt New Rule I(1) to clarify the roles and responsibilities for the Department of Environmental Quality (DEQ) and the Department of Revenue (department). Section (2) establishes the department's responsibility for classification of the property. Section (3) clarifies that for clean advanced coal research and development equipment or renewable energy research equipment only the first $1 million in value is valued at 50%. Any value over $1 million does not receive the 50% value abatement. Sections (4) and (5) explain in detail the process of valuation for centrally assessed and industrially assessed properties. Section (6) establishes that the DEQ is responsible for revoking a certification for value abatement. Section (7) establishes that property listed in 15-6-158, MCA, which is a new property classification, are subject to the same treatment as property classified in 15-6-157, MCA. That is the property owner of record, the property's owner's agent, or the operator of the qualifying property cannot reapply for the tax abatement after the certification has been revoked. Section (8) clarifies that if a certification for a transmission line contains false or fraudulent information the department will pursue the proper amount of tax in prior years where the improper abatement was received. This rule will be placed in chapter 4 of the department's rules with the other credit rules.

NEW RULE II DUAL PURPOSE PROPERTIES (1) For facilities which may serve more than one purpose or have different processes and part of the facility meets the definitions which would qualify for the abatement under this rule, the department will determine the portion to receive the abatement by allocation procedures which will vary depending on the availability of the information and the type of company. The department may use, but not be limited to, ratios such as quantity, use, and productivity ratios that are readily available and accurate.

AUTH: 15-24-3116, MCA

IMP: 15-6-141, 15-6-157, 15-6-158, 15-6-159, 15-24-3101, 15-24-3102, 15-24-3111, 15-24-3112, 15-24-3116, MCA

REASONABLE NECESSITY: The department proposes to adopt New Rule II to advise taxpayers how the department will treat facilities with a dual purpose when only one of the facility's purposes qualifies for the abatement. This rule will be placed in chapter 4 with other department credit rules.

NEW RULE III EXEMPTION FOR LAND ADJACENT TO TRANSMISSION LINE RIGHT-OF-WAY OR EASEMENT (1) The property owner of record, the property owner's agent, or the operator of a transmission line must make application to the Department of Revenue's (department) local county office for an exemption from property taxes for land that is within 660 feet on either side of the midpoint of a transmission line right-of-way or easement. The transmission line must have a design capacity of 30 megavoltamperes or greater, as certified by the Department of Environmental Quality (DEQ), and be constructed after January 1, 2007. Application will be made on a form available from the department's local county office before March 1 of the tax year for which the exemption is sought. The DEQ certification shall be attached to and be part of the application for exemption under this part.

(2) The applicant must provide to the department's local county office, along with the application, a legal description for the property described on the application provided for in (1) and a digitized certificate of survey prepared by a surveyor registered with the Board of Professional Engineers and Professional Land Surveyors provided for in 2-15-1763, MCA, which specifically provides the boundaries of the property listed on the application provided for in (1). The acceptable format for the digitized certificate of survey is an Environmental System Research Institute (ESRI) Shapefile file format in State Plane single zone projection. Shapefiles spatially describe points, polygons, and lines. State Plane refers to the State Plane Coordinate System.

(3) The application will be forwarded to the department's Property Assessment Division (PAD) office in Helena referred to as the "central office". The central office will process the application and determine if the property meets the requirements of exemption.

(4) The central office will issue a letter indicating whether the application for exemption has been granted or denied and provide a copy of the letter to the applicant, the local county office, and Business Income Taxes Division (BITD).

(5) If the transmission line is constructed after January 1 of a tax year and an application for exemption is submitted for the right-of-way or easement by March 1 of that tax year and the property qualifies for the exemption, the exemption will be effective for the whole tax year.

AUTH: 15-24-3116, MCA

IMP: 2-15-1763, 15-6-229, MCA

REASONABLE NECESSITY: The department is proposing to adopt New Rule III in compliance with the provisions of Section 9 of House Bill 3 enacted by the 60th Legislature. This section provides for a property tax exemption for certain land adjacent to a transmission line right-of-way or easement which has been properly certified by the Department of Environmental Quality. The legislation requires the application process set forth in this proposed rule. This rule will be placed in chapter 20 with the valuation of real property rules. 

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 December 21, 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 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 notice requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor, Llew Jones, was notified on September 12, 2007, by regular mail.

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

CLEO ANDERSON                                                  DAN R. BUCKS

Rule Reviewer                                                            Director of Revenue

Certified to Secretary of State November 13, 2007