BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.12.301, 42.12.302, and 42.12.307, and the repeal of ARM 42.12.303 and 42.12.306 pertaining to resort areas, resort determinations, and resort licenses
NOTICE OF AMENDMENT AND REPEAL
TO: All Concerned Persons
1. On December 27, 2019, the Department of Revenue published MAR Notice No. 42-1014 pertaining to the public hearing on the proposed amendment and repeal of the above-stated rules at page 2322 of the 2019 Montana Administrative Register, Issue Number 24.
2. On January 22, 2020, a public hearing was held to consider the proposed amendment and repeal. No proponents were present, no proponent oral testimony was received, and the department received no written comments in support. The following opponents were present and provided oral testimony: Jessie Luther, Taylor Luther Group, PLLC, on behalf of the Hospitality Development Association of Montana (HDAM); Joel Silverman, Silverman Law Office, PLLC; and Neil Peterson. The following persons also provided written comments: Jessie Luther, Taylor Luther Group, PLLC, on behalf of HDAM; Joel Silverman, Silverman Law Office, PLLC; and Senator Terry Gauthier, Senate District 40, sponsor of Senate Bill 358 (2019) (SB 358).
3. The department has amended ARM 42.12.302 and repealed ARM 42.12.303 and 42.12.306 as proposed.
4. The department has amended the following rules as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined:
42.12.301 RESORT LICENSES (1) through (4) remain as proposed.
(5) The licensee shall maintain records of all alcoholic beverage deliveries made on the resort area. The delivery records must be retained for three years. The records shall include:
(a) the date and time the delivery occurred;
(b) the quantities and brands of alcoholic beverages delivered;
(c) the address of the accommodation unit;
(d) the name of the employee delivering the alcoholic beverages; and
(e) the name of the individual who accepted the alcoholic beverages at the time of delivery.
AUTH: 16-1-303, MCA
IMP: 16-4-201, 16-4-213, MCA
42.12.307 RESORT AREA DETERMINATION APPLICATION PROCESS
(1) A developer or landowner seeking a resort area designation shall submit to the department, at its sole expense:
(a) through (c) remain as proposed.
(d) processing fees as provided in ARM 42.12.111;
(e) an appraisal from an appraiser, as defined in 37-54-102, MCA, which provides a detailed analysis of the current actual valuation of the resort or recreational facilities, including land and improvements, of not less than $1 million, at least half of which valuation must be for a structure or structures within the resort area; and
(e) (f) any additional information the department may request other reasonably necessary documents for the department to reach a final decision.
(2) The valuation must be not less than $1,000,000, and at least half of which valuation must be for a structure or structures within the resort area.
(3) The department shall determine the appraised market value of the resort area.
(4) If the developer or landowner disagrees with the department's determination of actual market value, the applicant can submit its own appraisal for department consideration.
(5) (2) If the documents in (1) are not provided, the department will notify the developer or landowner of the missing items and request submission prior to the hearing date.
AUTH: 16-1-303, MCA
IMP: 16-4-212, MCA
5. The department has thoroughly considered the comments and testimony received. A summary of the comments received, and the department's responses are as follows:
COMMENT 1: Messrs. Peterson and Silverman, and Ms. Luther, thanked the department for its efforts to put forward proposed rulemaking to implement SB 358 amendments pertaining to resort areas, resort determinations, and resort licenses.
Mr. Silverman commented his opinion, and Ms. Luther concurred, that the department could have improved the development of the proposed rule changes through meetings with, or prior input from, alcoholic beverage industry and resort area stakeholders.
RESPONSE 1: The department appreciates the comments provided. The Montana Administrative Procedure Act (MAPA) affords all interested persons, including industry stakeholders, the opportunity to attend rules hearings and/or to submit data, testimony, or comments to the department for its consideration and response before the conclusion of the comment deadline, and within a statutory schedule. In most instances, the department believes MAPA process works well and is sufficient.
COMMENT 2: Mr. Peterson asked the department whether the permissible delivery of alcoholic beverages in proposed ARM 42.12.301(3) includes guests who are renting the accommodations units.
RESPONSE 2: An accommodation unit is defined in 16-4-213(2)(d), MCA, and means a unit that is available for short-term guest rental. The statute continues to describe the types of included rental units. Since proposed ARM 42.12.301(3) is consistent with statute, delivery to short-term guests is permissible as long as the accommodations unit is a type provided in statute and the guests are neither the owner of the unit or a long-term tenant or occupant because those persons are not a short-term guest.
COMMENT 3: All commenters challenged the necessity, purpose, and statutory authorization of the department's proposal in proposed ARM 42.12.301(5) to include transaction-specific information of alcoholic beverage deliveries to a guest of an accommodation unit on a resort area. Each of the commenters provided their own questions as to the purpose of the records retention requirements and stated their opinions as to the privacy complications such a requirement would introduce for the resort licensees, for the resort guests, and the department's use of that information.
Senator Gauthier and Ms. Luther further stated that alcoholic beverage delivery transaction compliance in 16-4-213(5), MCA, only requires determination of the presence of the purchaser, that the purchaser is the legal age to purchase alcoholic beverages, and that the purchaser is not actually, apparently, or obviously intoxicated.
RESPONSE 3: The department has amended ARM 42.12.301 upon adoption without proposed (5) in the rule.
COMMENT 4: Ms. Luther commented that ARM 42.12.301(4)(a) restricts " . . . [a]ny non-resort licensee whose business is located on the resort area . . ." from delivering alcoholic beverages in a resort area. HDAM requests the department entertain an exception in the instance where the resort licensee has the same ownership as a non-resort alcohol license operating within the resort area; as employees under either license should be able to deliver alcoholic beverages to accommodation units. Ms. Luther also comments that the service restriction in (4)(b) does not accurately reflect how hospitality participants currently engage in activities in certain resort areas; and in (4)(c), that the retail sales restrictions cross-referenced in Title 16, MCA are overbroad and should be more specifically stated for applicability to resort licensees.
Similar to Ms. Luther, Mr. Silverman asked whether a licensee can serve to other places within the resort, that are not a resort area accommodation unit.
RESPONSE 4: The department's proposed restrictions in ARM 42.12.301 are a necessary reiteration of 16-4-213, MCA, which confines delivery for resort licensees only and to short-term guests in accommodation units on the designated resort area property only. Deliveries to areas outside of accommodation units are not permissible and the department cannot create an exception as any modification to these requirements requires legislation.
As for Ms. Luther's comments regarding the overbreadth of licensing requirements for resort licensees, the department directs Ms. Luther to 16-4-213(4) and (4)(a), MCA, which state that " . . . [a] resort retail all-beverages license within the resort area . . . is subject to all other requirements of an all-beverages license in this code." The Montana Alcoholic Beverage Code (MABC) is codified in the Montana Code Annotated at Title 16, and the applicable portions that pertain to resort licensees can be somewhat narrowed to chapters 3, 4, and 6, which the department contends is the smallest statutory cross-reference of authority that it can cite without exclusion.
For licensee assistance, the department's Alcoholic Beverage Control Division (ABCD) offers many different training resources and publications to assist in the education of alcoholic beverages licensees, which can be found at https://mtrevenue.gov or through contacting the ABCD directly. The department encourages all licensees involved in this industry to become informed and to seek education or additional information, as needed.
COMMENT 5: All commenters stated their respective objections to the language of proposed ARM 42.12.307(1)(e) that requires developer or landowner seeking a resort area designation shall submit to the department ". . . [a]ny additional information the department may request." Senator Gauthier stated the requirement is overbroad and contrary to legislative intent. Mr. Peterson and Ms. Luther also commented that the purpose of administrative rules is to further clarify statutory requirements, not greatly expand the department's authority granted in statute to request information.
RESPONSE 5: The department has further amended ARM 42.12.307 on adoption which restates the requirement in (1)(e) to include " . . . reasonably necessary documents for the department to reach a final decision." The department contends such a provision is necessary since every application is different, as is the information the department may require to fully qualify and approve each
COMMENT 6: Messrs. Peterson and Silverman, and Ms. Luther, had several questions or concerns regarding the department's proposals contained in ARM 42.12.307(2) through (4) pertaining to the resort area determination criteria and valuation or appraisal processes of structures or improvements.
Messrs. Peterson and Silverman questioned the department's proposed appraisal processes described in proposed ARM 42.12.307(3) and (4), whether the appraisals would be formal appraisals, whether valuation is based on an applicant's "book value," and how the department would determine "current actual market value."
Ms. Luther similarly commented that ARM 42.12.307(2) through (4) are related to the value of the resort area, but the language in each section is inconsistent in addition to being inconsistent with the statute, creating confusion as to the true meaning of the requirement. ARM 42.12.307(2) refers to a valuation of not less than $1,000,000; (3) uses appraised market value of the resort area; and (4) describes disagreement between the department and applicant over the actual market value. Ms. Luther recommends the department revise the rule sections to use the same language as statute - current actual valuation - and define exactly what that value is and how it is determined.
RESPONSE 6: In response to the questions and comments received, the department has amended ARM 42.12.307, upon adoption, through the removal of proposed (3) and (4). In doing so, the department will continue its current appraisal submission requirement of the applicant - present in ARM 42.12.303 prior to its repeal in this rulemaking - as final amendments to ARM 42.12.307(1) and (1)(e). Subsection (1)(e) incorporates text from proposed (2), which has been removed, and continues the appraisal reference of "current actual market value," which was historically in ARM 42.12.303 and is provided in 16-4-212(2)(a)(ii), MCA. The remaining rule sections are renumbered, accordingly.
The department believes the amendments address the commenters' concerns with rule and statutory language consistency and the department's proposed appraisal processes, in favor of the continuation of the department's role as a reviewer and approver of a developer or landowner's valuation of a prospective resort area.
COMMENT 7: Mr. Peterson commented that the appraisal process in ARM 42.12.307(3) and (4) should be optional, at the request of the applicant, and he questions whether the department has the resources to undertake such appraisals.
RESPONSE 7: The department directs Mr. Peterson to Response #6.
COMMENT 8: Mr. Silverman asks what type of appraisal or valuation the department is going to find acceptable for satisfying a "complete application" definition. Is the department going to conduct an appraisal for every resort application? Would the department accept an "evaluation" appraisal report? May the resort owner/taxpayer submit its own appraisal report, without having to wait for the department's appraisal?
Ms. Luther agreed with Messrs. Peterson and Silverman and suggests the department rely on documentation other than an actual appraisal to determine that the value of the improvements and land exceed the $1 million threshold.
Mr. Silverman also asks the department to clarify whether the property value is used only for $1 million threshold, or if it can also be applied to the $30 million valuation.
RESPONSE 8: The department directs all commenters to Response #6.
In response to Mr. Silverman's additional question whether the valuation process provided in 16-4-212, MCA, and ARM 42.12.307 can be applied to the $30 million valuation for existing resort areas, the department responds "no."
The process described in 16-4-212, MCA, and ARM 42.12.307 pertain to applications and valuations of new resort areas. The $30 million current actual valuation threshold applies to approved resort areas and the issuance of up to ten additional all-beverages licenses pursuant to 16-4-213, MCA. Substantiating the $30 million resort area valuation is a license-specific application requirement.
The department acknowledges the possibility that additional rulemaking may be necessary to establish applicant appraisal submission guidelines in connection with 16-4-213, MCA, resort license applications, but this was not contemplated and exceeds the scope of this rulemaking.
Because the number of potential applicants that fall under the resort criteria of 16-4-213(2)(b), MCA, is small at this time, the department will monitor whether its existing license application requirements and approval processes are sufficient or if additional rulemaking is necessary.
COMMENT 9: Messrs. Peterson and Silverman, and Ms. Luther, further questioned how the department will address the 16-4-213(2)(b), MCA, valuation process for the issuance of licenses in an existing, approved resort area with a perimeter containing at least 1,000 contiguous acres that has a current actual valuation of completed recreational facilities, including land and improvements, of not less than $30 million.
Mr. Silverman questioned whether the department will be able to value a resort area for value if it exceeds $30 million and is the determination of value for the property or is it cost-based? He also asks what appraisal methodology the department will implement.
RESPONSE 9: The department directs all commenters to Responses #6 and #8.
COMMENT 10: Messrs. Peterson and Silverman, and Ms. Luther commented that it is unclear, in the case of a disagreement over valuation between the department and the applicant, whether formal protest or some other process must be undertaken prior to the applicant's ability to submit its own appraisal, or other documentation, for consideration as to the value of the resort area.
RESPONSE 10: The department directs all commenters to Response #6.
/s/ Todd Olson /s/ Gene Walborn
Todd Olson Gene Walborn
Rule Reviewer Director of Revenue
Certified to the Secretary of State April 7, 2020.