BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the adoption of New Rule I (42.20.118), and the amendment of ARM 42.20.102 relating to property tax exemptions
NOTICE OF ADOPTION AND AMENDMENT
TO: All Concerned Persons
1. On January 12, 2012, the department published MAR Notice Number 42-2-873, regarding the proposed adoption and amendment of the above-stated rules at page 41 of the 2012 Montana Administrative Register, Issue Number 1.
2. A public hearing was held on February 6, 2012, to consider the proposed adoption and amendment. Mr. Terry Pitts, Confederated Salish and Kootenai Tribes (CSKT) Tribal Council, Ms. Teresa Wall McDonald, CSKT Tribal Representative, Mr. Ranald McDonald, CSKT Attorney, and Mr. Joel Clairmont, CSKT Member; all appeared and testified at the hearing. In addition, the department received written comments from Joe Durglo, CSKT Tribal Chairman, and Senator Shannon J. Augare, the sponsor of SB 412, L. 2011. Oral testimony and written comments received are summarized as follows along with the responses of the department:
COMMENT NO. 1: Mr. Terry Pitts testified that the tribal council is in favor of the passage of the rules. He thanked the department and sponsors for their efforts. Mr. Pitts further stated that the proposed rules benefit the tribes and allow them to be more prudent with their resources and become more self-sufficient.
RESPONSE NO. 1: The department appreciates Councilman Pitts' comments. The department welcomes opportunities to work cooperatively with tribal governments.
COMMENT NO. 2: Ms. Teresa McDonald submitted written comments from Tribal Chairman Joe Durglo, and read them aloud for the record. In his written comments, Chairman Durglo stated that the tribe is in favor of the passage of the rules and appreciates the efforts of department leadership, staff, and the bill sponsors. He further stated that the proposed rules simplify the property tax rules and administrative burden for both the department and tribal governments when putting acquired property into trust status.
Chairman Durglo stated that, as a self-governance tribe, their fee to trust process follows the federal handbook standard with some unique elements, in that they have a local working relationship with the local United States Department of Interior (DOI), Bureau of Indian Affairs (BIA) decision maker, the Flathead Agency Superintendent, on each parcel going from fee to trust.
Chairman Durglo further commented that the CSKT have adapted an application for approval of the fee to trust process and the tribe is currently positioning itself to meet the department's requirements for obtaining a temporary fee to trust property tax exemption. Chairman Durglo stated that while CSKT generally supports the rule, the tribe requests that New Rule I (ARM 42.20.118) be modified in (1)(a) to read "the tribe's initial written request or application is deemed complete…."
RESPONSE NO. 2: The department agrees with Chairman Durglo's requested modification. The federal fee to trust process specifically recognizes a tribal government's written request when seeking fee to trust status. The department presented amendments at the hearing to modify the proposed rule accordingly.
COMMENT NO. 3: Senator Shannon Augare, in his written comments, also asked the department to insert "written request" into the proposed language in New Rule I, as a matter of consistency with the language in Senate Bill 412. Senator Augare further commented that the term "written request" is important, as the U.S. trust acquisition regulations do not require an application and recognize written requests.
Senator Augare's primary concern was the department's determination of when an application or written request is considered "complete." He provided excerpts from the fee to trust handbook where the BIA is mandated to acknowledge receipt of the request package to the tribe within ten days to commence the process, and to communicate with the tribe within 30 days regarding missing or incomplete information. He further stated that the BIA does not provide a statement that the request is complete – only an acknowledgement of receipt.
Senator Augare also stated that it would appear logical that when the tribe submits the initial request with the identified items that the request would be completed, and proposed that the department agree that the ten-day acknowledgement would suffice as a complete initial request.
Senator Augare further stated that if the state decides "complete" to mean when all 16 steps are completed and a final decision is pending, the tax exemption would be meaningless because completion of the steps is time-consuming, and that he has concern that the BIA would be leery to provide the certification of completeness prior to completion of the steps.
RESPONSE NO. 3: The department agrees with Senator Augare regarding the addition of "written request" in the proposed rule and, as stated in Response Number 2, the department presented such amendments at the hearing to modify the proposed rule.
In response to Senator Augare's concern regarding the department's determination of when the tribe's initial written request or application is deemed complete, the department agrees that the proposed rule would be meaningless if "complete" meant when all 16 steps are completed and a final decision is pending. The department also included amendments to the proposed rule at the hearing in regards to this issue. The amendments require the tribe to provide the department with a copy of the United States DOI, BIA correspondence that the initial written request or application has been received prior to January 1, or that it is complete as of a specific date.
The amendments also address the instance when the tribe's written request or application is incomplete. In the case of incompleteness, the proposed rule requires the tribe to certify that: 1) it has received notification from the United States DOI, BIA, that the tribes' initial written request or application was incomplete; 2) the tribe has satisfied all requirements regarding incompleteness that were set out in the United States DOI, BIA, letter; and 3) the tribe satisfied the requirements as of the date the tribe made application to the department.
COMMENT NO. 4: Mr. Ranald McDonald submitted additional written comments from Chairman Durglo and highlighted them through oral testimony.
Mr. McDonald testified that while the tribe feels the proposed rules do a good job of reflecting the intent of the legislation, they are concerned about the essential government services language, in the bill itself, being broader than the language in the proposed rule, and requested that the essential government services language be revisited.
In his written comments, Chairman Durglo, stated that he appreciates the efforts of the department leadership and staff and bill sponsors to correct the situation where tribal governments were not eligible for property tax exemptions. Chairman Durglo further stated, however, that the proposed rules do not include the depth and breadth of essential governmental services provided by a tribal government such as police, fire, public transit, and water and sewer services. Chairman Durglo requested that the rule be expanded to include the broader definition of essential governmental serves as described in House Bill 618, L. 2011.
4 The department appreciates Chairman Durglo pointing out that the statute and proposed rule do not seem to coincide. The proposed rule is the department's guideline for its administrative process in the implementation of the statutory language.
All essential government services delineated in statute are eligible for an exemption, even though they are not explicitly stated in the proposed rule. ARM 42.20.102(3) specifies the documentation that the tribe must submit when the property is an "essential government service." Sections (6)(b), (7)(e), (8)(b), (9)(c), and (10)(b) require the tribe's resolution to specifically state how the property in which the tribe is requesting an exemption, qualifies under that specific exemption category. The department agrees, however, with Chairman Durglo that the language in the proposed rule could be more clear. The department is further amending ARM 42.20.102(12), by specifically identifying essential government services in statute as eligible exemptions under the proposed rule.
The proposed rules inform tribal governments, non-tribal governments, and public entities of the required documentation needed to determine properly whether the property identified in the exemption application qualifies. Thus, the department implicitly accepts all property identified by statute as eligible for a property tax exemption.
COMMENT NO. 5: Mr. McDonald further commented that they are concerned with the 15-acre limitation on the parks and recreation exemption, and that their primary concern is with regard to mitigation properties the reservation has acquired with funding from the Bonneville Power Administration (BPA). Mr. McDonald commented that the way the tribe treats those mitigation properties is similar to the way the state treats them relative to use permits and that the 15-acre limitation would create a burden for some of the larger land tracts they consider to be park land.
Mr. Durglo asked whether the 15-acre limitation on property tax exemptions apply to the BPA mitigation parcels acquired by the State of Montana.
RESPONSE NO. 5: No, the 15-acre limitation does not apply to the state parcels. HB 618, L. 2011, incorporated tribal governments in the law specifically for certain property tax exemptions, but specifically placed the 15-acre limit on park and recreational lands.
The department acknowledges that tribes may have park and recreational lands that exceed the statutory 15-acre limitation. The department lacks legal authority, however, to expand the statutory requirement beyond the 15-acre limit.
COMMENT NO. 6: Mr. McDonald further testified about the language concerning the dedication of religious tracts and the materials that must be provided by a tribe seeking an exemption for a cemetery and for religious purposes.
He commented that while many cemeteries transferred to the tribe are clearly identifiable, the council does express concern about the sites that are considered sacred. In the interest of not exposing those lands to vandalism and desecration, Mr. McDonald stated they would like the regulations to reflect the need for confidentiality, and see a method put in place to protect the confidentiality of the reason or justification provided to the department on those tracts.
RESPONSE NO. 6: While the department recognizes the tribe's need to maintain heightened confidentiality of lands designated for cemetery or religious purposes, there is no provision within the current property tax system to effectively shield property tax information (e.g., location) that supports granting such an application.
COMMENT NO. 7: Mr. Joel Clairmont testified that, as a CSKT member, he supports the leadership of the tribe, their interest in and review of the proposed rules, and their actions.
RESPONSE NO. 7: The department appreciates Mr. Clairmont's comments and looks forward to opportunities to collaborate with the tribes.
3. As a result of the comments received, the department adopts New Rule I (ARM 42.20.118) with the following changes:
NEW RULE I (42.20.118) TRIBAL GOVERNMENT'S APPLICATION FOR A TEMPORARY PROPERTY TAX EXEMPTION (1) A federally recognized tribe in Montana is eligible for a temporary property tax exemption of tribal fee land on January 1, under the following conditions:
(a) the tribe submits to the department the following:
the a United States Department of Interior, Bureau of Indian Affairs , submits a written response to the tribe, or certification to the director of the department, that the tribe's initial letter dated prior to January 1 acknowledging receipt of the tribe's written request or application for the acquisition of trust title to the tribal fee land; a tribal certification regarding whether the tribe subsequently received notice from the United States Department of Interior, Bureau of Indian Affairs that the tribe's written request or application was incomplete; and a tribal certification regarding whether the tribe has satisfied the requirements regarding incompleteness that were set out in the United States Department of Interior, Bureau of Indian Affairs letter as of the date of the application to the department; was complete as of a specific date; and or
(ii) a United States Department of Interior, Bureau of Indian Affairs written certification to the director of the department that the tribe's initial written request or application for the acquisition of trust title to the tribal fee land was submitted prior to January 1 and the initial written request or application was complete as of the dates of the exemption application to the department; and
(b) the tribe makes timely application to the local department office in the year in which the exemption is sought.
(2) remains as proposed.
(3) The following documents must accompany the tribe's application to the department:
(a) a United States Department of the Interior, Bureau of Indian Affairs' letter
stating that acknowledging receipt of the tribe's initial written request or application for acquisition of trust title to the tribal fee land, or a United States Department of Interior, Bureau of Indian Affairs is deemed complete, or certification to the director of the department, that the tribe's written request or application for acquisition of trust title to the tribal fee land was complete as of a specific date; and
(b) a tribal resolution identifying the fee land, by legal description, for which the tribe has applied for federal trust title.
(4) The tribe must also certify in the application to the department whether the United States Department of Interior, Bureau of Indian Affairs has notified the tribe that its written request or application for acquisition of trust title to the tribal fee land was incomplete, and whether the tribe has satisfied the requirements regarding incompleteness that were set out in the United States Department of Interior, Bureau of Indian Affairs letter, as of the date of the application to the department.
(4)(5) The temporary exemption will:
(a) apply only during the timeframe in which the tribe's written request or application is pending with the United States Department of Interior, Bureau of Indian Affairs;
(b) not exceed five years; and
(c) be removed on December 31 of the year in which the United States Department of Interior, Bureau of Indian Affairs, denies the tribe's written request or application for the acquisition of trust title. The department will:
(i) assess taxes on January 1 of the year after the tribe's written request or application is denied; and
(ii) no longer make available all property associated with a denied written request or application.
(5)(6) The tribe shall annually certify to the director of the department, by March 1, that their trust written request or application for the acquisition of trust title is still under consideration by the United States Department of Interior, Bureau of Indian Affairs.
(6) and (7) remain as proposed, but are renumbered (7) and (8).
(8)(9) When a tribe has administrative or contractual responsibilities, related to their own federal trust request or application process, the Secretary of Interior, or the person delegated authority by the Secretary of Interior, must certify to the director of the department that the property has been properly accepted into trust by, and is now subject to, the management of the United States, and the specific date that each property was taken into trust. Upon receipt of the certification, the department will direct the local office to contact the county treasurer and remove the parcel(s) from the tax rolls.
AUTH: 15-1-201, 15-6-230, MCA
IMP: 15-6-230, MCA
4. Based on the comments received, the department further amends ARM 42.20.102 as follows, stricken matter interlined, new matter underlined:
42.20.102 APPLICATIONS FOR PROPERTY TAX EXEMPTIONS (1) The property owner of record, the property owner's agent, or a federally recognized tribe, must file an application for a property tax exemption on a form available from the local department office before March 1, except as provided in
[NEW RULE I] ARM 42.20.118 for 2012, of the year for which the exemption is sought or within 30 days after receiving an assessment notice, whichever is later. Applications postmarked after March 1 or more than 30 days of receiving the assessment notice, whichever is later, will be considered for the following tax year only, unless the department determines any of the following conditions are met:
(a) the taxpayer receives notice by way of an AB-34 (Removal of Property Tax Exemption) that the property will be placed on the tax roll. The taxpayer shall have 30 days after receipt of the notice to submit an application for exemption; or
(b) the applicant was unable to apply for the current year due to hospitalization, physical illness, infirmity, or mental illness.
(2) through (11) remain as proposed.
(12) If the property is owned by a governmental entity (such as city, county, or state), the federal government (unless Congress has passed legislation allowing the state to tax property owned by a federal entity), tribal government, nonprofit irrigation districts organized under Montana law, municipal corporations, public libraries, or rural fire districts and other entities providing fire protection under Title 7, chapter 33, MCA, the department will employ the following exemption criteria for real property when considering exemption claims based upon 15-6-201, MCA:
(a) the properties will be tax-exempt as of the purchase date that is reflected on the deed or security agreement;
(b) if a property is tax-exempt as of January 1 of the current tax year and is sold to a nonqualifying purchaser after January 1 of the current tax year, it becomes taxable upon the transfer of the property. The tax is prorated according to 15-16-203, MCA;
(c) if a property is tax-exempt, as stated in (12)(b), and is sold as tax-deed property to a nonqualifying purchaser after January 1 of the current tax year, it becomes taxable on January 1 following the execution of such contract or deed as provided in 7-8-2307, MCA; and
(d) if a tribal government is requesting an exemption of an essential government service, as provided by statute, that service must be identified in the application.
(13) remains as proposed.
AUTH: 15-1-201, 15-6-230, MCA
IMP: 7-8-2307, 15-6-201, 15-6-203, 15-6-209, 15-6-211, 15-6-216, 15-6-221, 15-6-230, 15-7-102, MCA
5. An electronic copy of this notice is available on the department's web site at www.revenue.mt.gov. Select the "Legal Resources" link in the left hand column, and click on the "Rules" link within to view the options under the "Notice of Proposed Rulemaking" 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.
/s/ Cleo Anderson /s/ Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State March 12, 2012