BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

TO: All Concerned Persons

1. On June 21, 2007, the department published MAR Notice No. 42-2-775 regarding the proposed adoption of the above-stated rules at page 845 of the 2007 Montana Administrative Register, issue no. 12.

            2. A public hearing was held on July 12, 2007, to consider the proposed adoption. No oral or written testimony was received. Dave Hunter, Deputy Director for the department explained that since the publication of the rules, a question of what constitutes "seven months" has been asked. This question involves two issues: 1) given that there is not the same amount of days per month, two taxpayers owning property for the same number of days may be treated differently unless the measure of seven months is standardized for all taxpayers, and 2) rounding is a common practice in taxation and given that the statute does not define the term "seven months," is rounding permitted to arrive at a seven month period? Is rounding, in fact, already implicit in the proposed New Rule I (42.20.802) that allows taxpayers switching principal residences within Montana during 2006, especially in June or July, to claim the credit?

3. As a result of the discussion mentioned above, the department believes it is necessary to define the term "seven months" which is contained in the statute and the rules. In defining seven months, the department standardizes at the average days per month of 30.4 days and allows rounding to the nearest month to arrive at the total of seven months. As noted, rounding is not only a common practice, but is consistent with and already implicit in the proposed New Rule I (42.20.802) concerning taxpayers switching principal Montana residences during 2006. The average number of days in a month is 30.4 and a taxpayer must have owned, paid taxes, and occupied their principal residence a minimum of 198 days: for six months (182 days) plus 16 additional days. Therefore, the department adopts ARM 42.20.801 as shown below to clarify this issue and amends New Rule I (42.20.802) and II (42.20.803) to correct the internal citation references to comply with the format established by the Legislative Services Division as follows:

42.20.801 DEFINITIONS The following definitions apply to rules contained in this subchapter:

(1) "Seven months" means a minimum of 198 days.

AUTH: 15-1-201, 15-30-105, 15-30-140, MCA

IMP: Ch. 6. Sp. Laws May 2007, 15-1-201, 15-30-140, MCA

NEW RULE I (42.20.802) QUALIFYING FOR THE 2006 PROPERTY TAX REFUND (1) If a taxpayer or taxpayers changed principal Montana residences during 2006, 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 2007 Mont. Laws, ch. 6 (effective June 1, 2007) Ch. 6. Sp. Laws May 2007.

(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 2007 Mont. Laws, ch. 6 (effective June 1, 2007) Ch. 6. Sp. Laws May 2007, the taxpayer or taxpayers must, during 2006:

(a) release ownership of the primary principal residence in Montana and take ownership of the successive principal residence in Montana;

(b) move out of the primary principal residence in Montana and into the successive principal residence in Montana; and

(c) 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 2007 Mont. Laws, ch. 6 (effective June 1, 2007) Ch. 6. Sp. Laws May 2007, for one of the residences.

AUTH: 15-1-201, 15-30-105, 15-30-140, MCA

IMP: 2007 Mont. Laws, ch. 6 (effective June 1, 2007) Ch. 6. Sp. Laws May 2007, 15-1-201, 15-30-140, MCA

NEW RULE II (42.20.803) PROPERTY TAX REFUND FOR ENTITIES OWNING A RESIDENCE (1) remains as proposed.

AUTH: 15-1-201, 15-30-105, 15-30-140, MCA

IMP: 2007 Mont. Laws, ch. 6 (effective June 1, 2007) Ch. 6. Sp. Laws May 2007, 15-1-201, 15-30-140, MCA

4. An electronic copy of this Adoption Notice 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 Adoption 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. 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.

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

CLEO ANDERSON                                          DAN R. BUCKS

Rule Reviewer                                                    Director of Revenue

Certified to Secretary of State July 30, 2007