(1) Irrigated farm land values for each year are:
(a) Calculated by using the formula defined in 15-7-201, MCA, where the agricultural land productivity valuation formula is:
(i) V = I/R;
(ii) V is the productivity value of the agricultural land;
(iii) I is the net income attributed to the acre of land using a crop share approach, which means applying the percentage of income from production (the share) that is attributed to the landlord (owner) of the land; and
(iv) R is the capitalization rate or the rate that converts an ongoing income stream into an estimate of value.
(b) The per acre irrigated farm land value is calculated as follows:
(i) Gross income per acre = Number of tons per acre times the average price per ton for alfalfa;
(ii) Net income per acre = Gross income per acre times 25 percent, which is the landlord's crop share percentage for irrigated farm land;
(iii) Less water cost = Net income per acre minus water cost allowance; and
(iv) Productivity value per acre = Net income per acre less water cost allowance divided by the capitalization rate.
(c) The allowable water cost classes for irrigated farm land are as follows:
(2) Water costs are the combination of allowable labor costs, on-farm energy costs, and a $15 base water cost which is applicable to every acre of irrigated land. Total allowable water costs may not exceed $50 for each acre of irrigated land.
(3) Allowable labor costs which pertain to this rule are $15 for flood irrigation, $10 for sprinkler irrigation, and $5 for pivot irrigation, as provided in 15-7-201, MCA.
(4) Allowable energy costs, expressed as cost per acre, are the actual costs incurred in the energy cost base year, which is the calendar year immediately preceding the year published by the department in ARM 42.18.124, for energy to provide water from a definitive source to identifiable fields by use of commonly accepted irrigation system practices.
(5) Energy costs shall be documented with electrical or fuel statements. The taxpayer shall furnish specific information about the irrigation system and pumps. If receipts for the taxpayer's irrigation energy costs cannot be separated from the overall farm operation, a letter to the department explaining how the irrigation energy costs were calculated will be sufficient.
(6) By July 1 of the year following the energy cost base year, all irrigated land taxpayers must provide all required irrigation type, irrigated acreage, and energy cost information incurred in the energy cost base year to the department on the prescribed forms. Failure to provide the required information will result in no energy cost deduction to the irrigated land value calculated by the department for property tax purposes.
(7) The minimum value of irrigated land is determined by using 23 bushels of spring wheat and the nonirrigated continuously cropped farm land methodology.
(8) To make changes in the irrigated land values for tax years after the year published by the department in ARM 42.18.124, irrigated land taxpayers must provide to the department updated information by the first Monday in June of the current tax year or within 30 days of receiving a notice of classification and appraisal, whichever is later. That information will be limited to land use and irrigation system changes. A change in ownership is not a basis for using energy costs from a different year other than the energy cost base year. Failure to provide the updated information by the deadline will result in no change being made in the irrigated land values previously calculated by the department.
(9) The department may conduct field reviews and gather data on energy costs to ensure equality of treatment for all irrigated land taxpayers. The department may adjust the irrigated land values if information supports that action. The irrigated land taxpayer will be notified in writing of that action.