BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.20.701, 42.20.705, 42.20.725, 42.20.740, 42.20.745, and the repeal of ARM 42.20.171, 42.20.505, 42.20.710, 42.20.715, 42.20.720, 42.20.730, 42.20.735, and 42.20.750 pertaining to forest land classification requirements and valuation
NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND
TO: All Concerned Persons
1. On August 31, 2020, at 10:00 a.m., the Department of Revenue will hold a public hearing via remote conferencing to consider the proposed amendment and repeal of the above-stated rules. Interested persons may access the public hearing in the following ways:
(a) Join Zoom Meeting: https://mt-gov.zoom.us/j/97768295012, Meeting ID: 97768295012;
(b) Dial by Telephone: +1.406.444.9999 or +1.646.558.8656, Meeting ID: 97768295012;
(c) Join by SIP: email@example.com;
(d) Join by H.323 (Polycom): 22.214.171.124##97768295012; or
(e) Join by Skype for Business: https://mt-gov.zoom.us/skype/97768295012.
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, please advise the department of the nature of the accommodation needed, no later than 5 p.m. on August 14, 2020. Please contact Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or firstname.lastname@example.org.
3. GENERAL STATEMENT OF REASONABLE NECESSITY. ARM Title 42, chapter 20, subchapter 7 contains the department's administrative rules regarding its methodologies and practices for the classification and valuation of forest land, as authorized by the Montana Legislature under the Forest Lands Tax Act (15-44-101, MCA, et. seq).
Based on the department's periodic review of the rules subchapter and other related rules, and in preparation for the upcoming six-year reappraisal cycle/valuation cycle which begins January 1, 2021, the department observes that certain rules contain redundancies to statute, contain outdated definitions, text usage, or writing styles; and in some cases, do not reflect current department practices.
The department proposes to revise and relocate the most relevant content of six rules: ARM 42.20.710, 42.20.715, 42.20.720, 42.20.730, 42.20.735, and 42.20.750 into two rules: ARM 42.20.705 and 42.20.725. The department believes two primary rules that address forest land classification requirements and valuation provide improved rule organization and brevity of content. The department proposes to repeal ARM 42.20.710, 42.20.715, 42.20.720, 42.20.730, 42.20.735, and 42.20.750 based on the transfer of rule content.
The department also proposes to amend definitions in ARM 42.20.701 and amend ARM 42.20.740 and ARM 42.20.745 to remove unnecessary redundancies to statute; outdated definitions and terminology; and to update current department practices. Based on the department's proposed amendments, it will be necessary to renumber rule sections.
The department further proposes to repeal ARM 42.20.171 to eliminate unnecessary redundancies to statute and redundancies found in the department's primary internal resource, the Agricultural Land Classification and Valuation Manual and Forest Land Classification and Valuation Manual (Manual). The Manual, which is adopted and incorporated by reference in ARM 42.18.121, is updated each valuation cycle.
Lastly, the department also proposes to repeal ARM 42.20.505 to eliminate unnecessary redundancies found in 15-7-102, MCA.
While this general statement of reasonable necessity covers the basis for the following proposed rulemaking, it is supplemented below, where necessary, to explain rule-specific changes.
4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:
42.20.701 DEFINITIONS The following definitions apply to this subchapter:
(1) "Associated forest land management use" means the primary use of a structure is to support the health, maintenance, growth, or harvest of the forest on the subject property.
(2) "Capable of producing timber that can be harvested in commercial quantity" means:
(a) forest land that can produce 100 board feet or more of lumber per acre per year in live softwood trees as measured using the Scribner Log Rule, at the culmination of the mean annual increment for fully stocked, natural stands; and
(b) is at least 10 percent stocked with softwood timber of any size on an area at least 120 feet in width; or
(c) has been converted from another use and exhibits a minimum stocking rate of 300 seedlings and/or saplings per acre (12-foot average spacing); or
(d) does not meet the stocking requirement specified in (b) or (c), but has had the trees removed by man through timber harvest or by fires and other natural disasters, and has been, or will be, naturally or artificially regenerated within ten years.
(3) (1) "Board foot" means a block measurement of wood equivalent to one inch thick by 12 inches long by 12 inches wide.
(4) (2) "Contiguous parcels of land" means separately described parcels of land under one ownership that physically touch one another or would have touched one another were the acreages not separated by:
(a) through (c) remain the same.
(d) federal or state land that is leased from the federal or state government by
the taxpayer an owner whose land is physically touching the federal or state land.
(5) (3) "Cubic foot" means a block measurement of wood equivalent to 12 inches thick by 12 inches long by 12 inches wide. There are approximately three to five board feet of finished lumber in one cubic foot of wood. The midpoint of this board foot to cubic foot conversion range is approximately four. The precise ratio varies with tree diameter, form, taper, and defect. In the forest land productivity model developed by the University of Montana – College of Forestry and Conservation, authorized under 15-44-103, MCA, the conversion factor is one cubic foot will equal four board feet.
(6) "Culmination of mean annual increment" means the point of maximum mean annual volumetric yield production in a tree or stand of trees. This point is also referred to as the biological rotation age.
(7) (4) "Diameter at breast height ( dbh DBH)" means the average stem trunk diameter, measured outside of the bark, at a point 4.5 feet above the ground on the uphill side of the tree.
(8) "Forest site productivity class" means the range of timber production potential of a site expressed in terms of board foot volume growth per acre per year at the culmination of mean annual increment in fully stocked natural stands.
(9) "Fully stocked" means the highest degree in which a stand could fully utilize the site's capacity to grow trees.
(10) (5) "Hardwood species" means a taxonomic group of species commonly referred to as broadleaf trees. Examples of hardwood species that are native to Montana are alder, Rocky Mountain maple, birch, aspen, and cottonwood. Native hardwood species are generally considered to be noneconomical to process into lumber products in Montana and are not classified as commercial timber species for the purpose of this rule.
(11) (6) "Land use" means the type of service or utilization of the land which directly relates to its classification, in accordance with 15-7-103, MCA.
(12) (7) "Mean annual increment (MAI)" is a measurement of the average yearly annual increase in growth produced in a tree or a natural stand of trees. This increment MAI can be calculated by dividing total tree or natural stand growth by the total age. Mean annual growth changes during different growth phases of a tree or stand of trees. MAI typically increases during the tree or stand's juvenile developmental stage, attains a maximum growth increment at a point in the stand's middle development, then decreases as the tree or stand becomes more mature.
(13) (8) "Natural stands" means fully stocked, even-aged groups of softwood stands of trees which are naturally regenerate d. Further, "fully stocked" means the highest degree in which a natural stand of trees could fully utilize the site's capacity to grow trees.
(9) "Noncommercial forest land" means forest land stocked with trees that are not economical to harvest due to quality and quantity of the wood.
(14) "Noncontiguous parcels of land" means parcels of land under one ownership that are physically separated from one another by land in a different ownership other than:
(a) deeded roads and highways;
(b) rivers and streams;
(c) railroad lines; or
(d) federal or state land that is leased from the federal or state government by the taxpayer whose land is physically touching the federal or state land.
(15) (10) "Nonforest land" means land that is at least 120 feet in width and at least five acres in size, which does not meet the requirements of ARM 42.20.705. Nonforest land can include rivers and streams, roads, highways, power line s easements, railroads, and noncommercial tree species. Nonforest land is classified as agricultural land, nonqualified agricultural land, residential land, commercial land, or industrial land.
(11) "Nonproductive forest land" means forest land that produces less than 100 board feet per acre annually.
(16) remains the same but is renumbered (12).
(17) "Owner" means that the applicant and owner of record are the same individual, corporation, or partnership.
(18) remains the same but is renumbered (13).
(19) (14) "Producing timber" means growing trees, including trees removed through harvest, clear-cut, or by natural disaster , such as fire.
(20) (15) "Residence" means all conventionally constructed homes, as well as all mobile homes and manufactured housing, that may serve as living quarters for one or more individuals or a family, regardless of actual occupancy. The occupancy of the residence shall be irrelevant.
(21) through (23) remain the same but are renumbered (16) through (18).
(24) (19) "Stocked or stocking" means a measurement of the crown coverage or degree to which an area is effectively covered with living trees.
(25) (20) "Timber" means softwood species that can be economically processed into lumber. Whitebark pine, limber pine, and Rocky Mountain juniper are generally considered to be noneconomical to process into lumber products in Montana and are not classified as commercial softwood species for the purpose of this rule these rules.
(26) (21) "Under one ownership" means one party owns when two or more parcels of land when the title is in the are titled under party's an owner's identical name or names or when an owner has obtained department recognition of parcels under one ownership through the affidavit process described in ARM 42.20.705. ; the party has received title in the parcels by a transferring instrument such as a deed, contract for deed, or judgment; and the party has the present right to possess and use the parcels.
(27) "Uninterrupted forest land" means forest land that meets the requirements of ARM 42.20.705 and is unbroken by nonforest land.
(28) "Volume" is expressed in net board feet as measured by the Scribner Log Rule.
AUTH: 15-44-105, MCA
IMP: 15-1-101, 15-44-101, 15-44-102, 15-44-103, 15-44-106, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided above, the department proposes transferring current (1) to ARM 42.20.725(8) because the definition only applies to one topic in 15-44-106, MCA, and currently applies to one rule; and current (2) to ARM 42.20.705 because it contains forest land requirements in addition to the definition and ARM 42.20.705 is a more appropriate location.
The department proposes striking the word "taxpayer" in proposed (2)(d) and replacing with "owner" to better identify that the leasing party of government land must be the same owner of the adjacent property for the parcels to be considered contiguous for forest land valuation purposes.
The department proposes clarifying amendments to proposed (3) and (4) to remove extraneous information not pertinent to the definition. Proposed (3) includes a cross-reference for the statutory authority of the described productivity model. In proposed (4), the department seeks to improve the definition. The phrase "on the uphill side of the tree" is a necessary addition to clarify how DBH is determined.
The department proposes to amend the definition of "hardwood species" in proposed (5) by simplifying verbiage for improved clarity. The department also proposes to amend the definition in proposed (6), which is necessary to tie the definition to statute and to clarify that the department is not attempting to define plain language.
In proposed (7), the department proposes improvements to language use and striking the last two sentences as the information is not essential to the definition of MAI and the text is provided in the Manual.
The department proposes striking the definition in current (8) because the department discontinued using timber classes or grades of productivity in forest land valuation in 2008, and also proposes transferring the definition in current (9) to proposed (8) because 'fully stocked' is integral to the term and loses necessary attribution if maintained as a separate definition.
The department proposes adding a definition as proposed (9) for noncommercial forest land as the term is referenced in proposed (4) of ARM 42.20.705.
The department proposes striking the definition of noncontiguous parcels of land in current (14), as the definition is the direct opposite of contiguous parcels of land defined in proposed (3) and offers no measurable benefit from its continued use.
The department proposes adding nonforest land type examples from ARM 42.20.705(4) to the definition in proposed (10) for consistency of content.
In proposed (11), the department seeks to add a definition for nonproductive forest land as the term is proposed in ARM 42.20.705(4) and convert the statutory cubic feet productivity measurement to the more commonly referred board foot equivalent.
The department proposes to strike the definition of "owner" in current (17) due to redundancy of the term, which is found elsewhere in Title 15, MCA, and in the rule chapter.
In proposed (14), the department proposes to amend specific natural disaster event references so the rule includes all natural disasters that may impact forest land.
The department proposes including the words "or stocking" to the definition in proposed (19) because stocked and stocking are used interchangeably throughout the subchapter. "Crown coverage" is also proposed for inclusion to improve explanation of how stocking may be measured.
The department proposes amending the definition in proposed (21) to improve rule text and to reflect the proposed affidavit process for department acknowledgment of ownership of parcels in ARM 42.20.705(5).
Finally, the department proposes the removal of current (27) and (28). Section (27) is a term that was adopted but not used within the subchapter and is no longer necessary. Section (28) is unnecessary as the text is found in the definition of the Scribner Log Rule which will not be amended but renumbered from (21) to (16).
42.20.705 FOREST LAND
ASSESSMENT CLASSIFICATION (1) The department will assess land as forest lands according to the following basic determinations.
(a) Forest lands are:
(i) (1) The department classifies contiguous forest ed land of 15 acres or more, that is at least 120 feet in width in the same under one ownership and which is capable of producing timber that can be harvested in commercial quantity with: ; and
(ii) land that is producing timber or land in which the trees have been removed by man through harvest, including clear-cuts, or by natural disaster, including, but not limited to fire.
(a) an annual productive capacity of 100 board feet or more of lumber per acre in live softwood trees, measured using the Scribner Log Rule, at the culmination of the MAI for fully stocked natural stands;
(b) softwood timber stocked at 10 percent or greater on an area of at least 120 feet in width; or
(c) a minimum stocking rate of 300 saplings per acre with 12-foot average spacing.
(2) Land that does not meet the stocking requirements in (1)(b) or (1)(c) because of timber harvest, clear-cuts, or by natural disaster, but will have trees regenerated within ten years, is classified as forest land.
(2) (3) Land that was Cclassified as forest land that is in a prior year and is now reduced to less than 15 acres for a public use as the result of a land acquisition through eminent domain, as set forth in 70-30-102, MCA, maintains its forest land classification unless the forest land :
(a) has been further divided ; or
(b) is devoted to a residential, commercial, or industrial use as provided in 15-6-143, MCA.
(3) Taxpayers must notify the department in writing of their eligibility for forest land classification for the current tax year on or before the first Monday in June, or within 30 days after the date on the assessment notice.
(4) Forest land classification is not available for
Nnonforest land, is land used for agricultural, nonqualifying agricultural, industrial, commercial, or residential purposes nonproductive forest land, noncommercial forest land, or land:
(a) incapable of yielding wood products due to adverse site conditions;
(b) withdrawn from timber use by statute, ordinance, covenant, court order, or administrative order;
(c) producing commercially marketable cultivated Christmas trees; or
(d) producing fruit trees or ornamental trees, including trees used as shade trees and windbreaks.
(5) A person who owns two or more contiguous parcels of land deeded in non-identical names may file an affidavit with the department attesting to the parcels as being under one ownership.
AUTH: 15-44-105, MCA
IMP: 15-6-143, 15-44-101, 15-44-102, 15-44-103, 15-44-104, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity, the department proposes amending ARM 42.20.705 to provide improved organization of information and requirements throughout the rule. The department proposes revising the catchphrase to reflect the proposed rule amendments.
The department proposes transferring content from ARM 42.20.701(2)(a) through (2)(c) to proposed (1) and (2) of this rule. The amendments are necessary because forest land classification requirements are better suited in this rule than in definitions.
Text in current (1)(a)(ii) and ARM 42.20.701(2)(d) is proposed for consolidation into proposed (3) to lessen redundancy and improve text organization. In proposed (3), the department proposes to further describe classification requirements for forest land affected by eminent domain and contain a cross-reference to 15-6-143, MCA. Also, proposed (3) is restructured as one sentence.
The department proposes striking current (3) to remove redundant text regarding requests for informal classification and appraisal review (Form AB-26) that is provided in 15-7-102, MCA.
In proposed (4), the department seeks to remove references to types of
non-forest land as it is proposed for transfer to ARM 42.20.701(11) for improved organization. The department proposes consolidating the most relevant provisions from ARM 42.20.710 and ARM 42.20.735(2) and inserting them into proposed (4) and (5), respectively, with the goal of placing similar content into one rule.
The department is also updating the implementing citations to correspond with the consolidation of text from ARM 42.20.735 proposed for repeal.
42.20.725 FOREST LAND VALUATION
FORMULA (1) Noncommercial forest land and nonforest land shall not be eligible for valuation as forest land. Standing and down timber on forest land shall not be separately valued and assessed. The department determines productivity value of forest land by dividing the state into four regional forest valuation zones (zone) designed to recognize unique marketing areas, timber types, growth rates, access, and other pertinent factors affecting value. The counties contained within each zone are:
(a) Zone 1 - Northwest: Flathead, Lake, Lincoln, and Sanders counties;
(b) Zone 2 - Southwest: Deer Lodge, Granite, Mineral, Missoula, Powell, Ravalli, and Silver Bow counties;
(c) Zone 3 - Central: Beaverhead, Broadwater, Cascade, Chouteau, Fergus, Gallatin, Glacier, Golden Valley, Hill, Jefferson, Judith Basin, Lewis and Clark, Liberty, Madison, Meagher, Park, Pondera, Sweet Grass, Teton, Toole, and Wheatland counties; and
(d) Zone 4 - Eastern: Big Horn, Blaine, Carbon, Carter, Custer, Daniels, Dawson, Fallon, Garfield, McCone, Musselshell, Petroleum, Phillips, Powder River, Prairie, Richland, Roosevelt, Rosebud, Sheridan, Stillwater, Treasure, Valley, Wibaux, and Yellowstone counties.
(2) The valuation of forest land
shall be as is provided in 15-44-101 through 15-44-105, MCA. Each zone's productivity value is calculated using the statutory formula provided in 15-44-103, MCA. However, the department applies the formula per industry standard as I/R=V. The department calculates each forest valuation zone's net income per acre (I) by:
(a) multiplying the potential forest productivity, expressed in board feet per acre, by the average per acre stumpage value for the specific forest zone; and
(b) adding the zone-specific per acre agricultural net income provided in (3); and
(c) subtracting zone-specific per unit cost of the forest product provided in (4).
(3) The valuation of forest land shall be based on the average of income and expenses for the most recent ten-year period ending in the calendar year immediately preceding the year published by the department in ARM 42.18.124 and the capitalization rate identified in (5)(c)(i).
(4) Income and expense data is expressed in real dollars using Gross Domestic Price (GDP) indices. Real dollars are brought forward to the closest quarterly calendar date published by the department in ARM 42.18.124.
(5) The department shall determine the forest potential productivity value for each forest valuation zone using the formula V=I/R, where:
(a) V is the per-acre forest potential productivity value of the forest land;
(b) I is the per-acre net income of forest lands in each valuation zone and is determined by the department using the formula, I = (M x SV) + NAI - C, where:
(i) I is the per-acre net income;
(ii) M is the per-acre mean annual net wood production expressed in board feet per acre;
(iii) SV is the per-acre stumpage value;
(iv) NAI is the per-acre agricultural related income; and
(v) C is the per-unit cost of the forest product and agricultural product produced, if any; and
(c) R is the capitalization rate.
(i) For the appraisal cycle beginning after December 31, 2014, and concluding on December 31, 2020, the capitalization rate used is 8 percent.
(6) Net income (I) shall include stumpage value derived from the harvest of timber on state timber sales.
(7) The mean annual net wood production (M) shall be determined in board feet using the Scribner Log Rule.
(a) MAI is the weighted mean volumetric average of each forest productivity site in each forest valuation zone.
(8) Agricultural related income is the average net income for grazing livestock on forest lands in each forest valuation zone. Agricultural related income shall be determined by using the formula AI = GF x AUM x GC where:
(a) AI is the per-acre agricultural related income;
(b) GF is the average per-acre grazing fee on private land;
(c) AUM is the average per-acre animal unit months on forest land; and
(d) GC is the percentage reflecting grazing costs used by the department to value agricultural grazing land.
(9) The effective tax rate shall be calculated by dividing the total estimated tax due on private forest lands by the total forest value of those lands.
(3) The department calculates the agricultural-related net income of a zone by:
(a) multiplying the average per acre grazing fee on private land by the
zone-specific average grazing productivity of forest land expressed in animal unit months (AUM) per acre; and
(b) deducting the landowner's grazing expenses of 25 percent from the gross income per acre value.
(4) The department assigns a potential productivity which is a weighted mean of volume produced, expressed in board feet per acre, to each forest acre based on the culmination of MAI measured by the Scribner Log Rule.
(5) The department calculates the per unit cost of forest product produced over the base period provided in 15-44-103, MCA, and determined by:
(a) averaging the actual expenditures for reforestation, fire assessment, slash disposal, timber stand improvement, timber harvest, and forest practices of the Department of Natural Resources and Conservation (DNRC) in each zone over the base period;
(b) adding the average fire assessment fees charged by the DNRC over the base period; and
(c) adding the average severance tax paid by landowners for harvested timber over the base period.
(6) The department uses the capitalization rate of eight percent as set in 15-44-103, MCA, to convert the net income to a forest land productive value.
(7) The department classifies one-acre of land beneath any residence located on forest land as a forest home-site. The value of the one-acre site will be determined using the sales comparison approach to value.
(8) Land under structures which are associated with forest land management are classified and valued as forest land.
(a) For the purpose of this rule, "associated with forest land management" means the primary use of a structure that supports the health, maintenance, growth, or harvest of the forest land on the property.
(b) If a residence and structures associated with forest land management share the same area, the department will value the one-acre site using the sales comparison approach to value.
AUTH: 15-1-201, 15-44-105, MCA
IMP: 15-6-134, 15-7-103, 15-8-111,15-44-101, 15-44-102, 15-44-103, 15-44-104, 15-44-106, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity, the department proposes amending ARM 42.20.725 by transferring all of the relevant forest land valuation concepts from ARM 42.20.715, 42.20.720, 42.20.730, and 42.20.750 into this rule for efficiency and improved reference location. The department proposes to amend the rule's catchphrase to reflect the proposed rule content.
The department proposes transferring the first sentence in (1) to proposed ARM 42.20.705(4) because the text pertains to land types not eligible for forest land classification and does not belong in the proposed forest land valuation rule. The department also proposes striking the second sentence in (1) because the text is obsolete since the department discontinued taxing timber in 1994.
The department proposes transferring forest land zones information from ARM 42.20.720 to proposed (1) as the department's intent is to place all forest land valuation information in a single rule for efficiency and ease of reference. Proposed (1)(a) through (d) contain zone changes for the 2021-2026 valuation cycle from the prior cycle based on market data and forest growth characteristics determined by the University of Montana.
In proposed (2), the department proposes transferring the statutory cross reference which pertains to the forest land productivity valuation of each forest valuation zone from ARM 42.20.745(1). The department also proposes restating the valuation formula in a format that reflects how the department and the valuation industry practically read and apply the formula.
The department proposes revising the text in current (5) through (8) and relocating it to proposed (2), (3), (4), (5), and (6) for improved organization and description of the forest land value calculation process. In proposed (2)(a) through (2)(c), the department proposes revising the formula terms from current (5)(a) and (5)(b) to describe forest valuation zone's net income per acre calculations more concisely. In proposed (3), the department proposes revising and relocating text from current (8) for improved clarity. In proposed (4), the department is transferring text from ARM 42.20.715, and consolidating it with the current (7) for improved organization. In proposed (5), the department is transferring text from ARM 42.20.730 for efficiency. The department also proposes revising current (5)(c) and (5)(c)(i) and moving the relevant content to proposed (6) for improved location of the capitalization rate. The department further proposes striking the appraisal cycle reference in current (5)(c)(i) because it is provided in 15-44-103, MCA.
The department proposes striking current (3) to eliminate redundancies with text provided in 15-44-103(5) and (6), MCA. The cross-reference to ARM 42.18.124 is obsolete as the rule was repealed in January 2019.
The department also proposes striking current (4) because the reference is unnecessary as the typical market condition (time) adjustment valuation step does not need to be identified in rule.
The department further proposes to transfer text from ARM 42.20.750(1) and (2) to proposed (7) and (8), respectively, with the intention to place all forest land valuation information together in a single rule.
Based on the department's proposed amendments for this rule, it will be necessary for the department to renumber the rule sections.
In accordance with 2-4-305, MCA, the department is also updating the implementing citations with 15-6-134, 15-7-103, and 15-8-111, MCA, to correspond with the relocation of text from ARM 42.20.750. Section 15-44-106, MCA, is also being included as an implementing citation which has been inadvertently omitted from ARM 42.20.750.
42.20.740 NATURAL DISASTER REDUCTION - GENERAL PRINCIPLES
(1) Forest lands
upon which, after December 31, 1993, trees are destroyed by fire, disease, insect infestation, or other natural disaster shall be with trees destroyed by natural disaster are eligible for a 50 percent reduction in assessed value for 20 tax years beginning the first full tax year following the natural disaster. The affected forest land must have been classified as forest land under 15-6-143, MCA, and had ten percent or greater stocking prior to the natural disaster, and less than ten percent stocking of live trees after the natural disaster.
(2) The property owner
of record as of January 1 of the first full tax year for which the reduction in value is sought, or that owner's agent, must submit the natural disaster reduction request to the local department office in the county where the property is located on a Request for Informal Classification and Appraisal Review, Form AB-26 , within 30 days from the date on the classification and appraisal notice in the first year of the six-year valuation cycle or by June 1 of any subsequent year of the valuation cycle for eligibility to begin in that subsequent year.
(a) A Form AB-26 submitted in the year the natural disaster occurred or during the first full year following the natural disaster, and the reduction is approved, the property owner will receive the 50 percent reduction in assessed value for 20 years.
(b) A Form AB-26 submitted in any subsequent year after the first full year following the natural disaster, and the reduction is approved, the property owner will receive the 50 percent reduction for the year the Form AB-26 was submitted and the remaining years of the 20-year reduction period.
(3) The following information must be included on the Form AB-26:
applicant's property owner's name, current mailing address, and phone number;
(b) through (g) remain the same.
(4) Forest land shall be eligible for a 50 percent reduction in assessed value provided:
(a) the forest land affected is 15 contiguous acres or larger in size and under one ownership;
(b) the forest land affected contained at least 10 percent stocking of live trees prior to the natural disaster; and
(c) the forest land affected contains 10 percent stocking or less of live trees after the occurrence of the natural disaster.
(5) A reduction to the assessed value in the first year is applicable to all years in the reduction period, as provided for in (1). A reduction in assessed value for an appeal filed in years after the first year applies to the year in which the appeal is timely filed and the remaining years in the reduction period.
(6) The department shall review the Form AB-26 and may conduct a field evaluation. The department will approve or deny the request and notify the property owner of its determination in writing.
AUTH: 15-1-201, 15-44-105, MCA
IMP: 15-7-102, 15-44-101, 15-44-102, 15-44-103, 15-44-104, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity, the department proposes amending ARM 42.20.740 by striking the date reference in (1) because sufficient time has elapsed so that the initial triggering date of natural disaster loss is now immaterial. The department also proposes striking specific natural disasters references and replacing it with "trees destroyed by natural disaster" to provide for any type of natural disaster. The department proposes relocating and revising text from (4) to (1) regarding the forest land eligibility requirements; and also proposes correcting the stocking percent rate text in current (4)(c) to correspond with the statutory requirement provided in 15-44-104, MCA. The changes are necessary to improve organization and clarity of the rule requirements.
In (2), the department proposes revising Form AB-26 text to eliminate unnecessary redundancies to what is already provided in 15-7-102(3)(f), MCA. The department also proposes relocating and revising text from (5) to (2) for improved organization of content.
Finally, the department proposes striking (6) as the section is unnecessary for this rule. The Form AB-26 submission process is not specific to applications for forest natural disaster reductions and is provided in 15-7-102, MCA.
Based on the department's proposed amendments, it will be necessary for the department to renumber the rule sections.
42.20.745 FOREST LAND VALUE CHANGE PROCESS
(1) Forest land productivity values are calculated by using the formula defined in 15-44-103, MCA.
(a) For forest land with an increase in value as a result of the 2015 reappraisal, the department will apply the phase-in percentage as defined in 15-7-111, MCA, to the full reappraisal productivity values for forest land for the reappraisal cycle beginning January 1, 2015.
(b) For forest lands with a decrease in value as a result of the 2015 reappraisal, the lower value will be fully implemented immediately and will not be phased in.
(1) Forest land productivity value is subject to change as a result of reappraisal, a land use change, or through acreage changes incidental to updates from the Geographic Information System or fluctuations in agricultural land use due to typical farming practices. The department must phase in value increases as provided in 15-7-111, MCA.
(2) Before the department can apply any annual phase-in value, the department first determines the difference between the value before reappraisal (VBR) and the full reappraisal value.
(3) If the forest land's productivity value changes as a result of:
(a) reappraisal, the department will use the full reappraisal value from the previous reappraisal cycle as the VBR;
(b) a land use change, the VBR is calculated as if the new forest land acres had existed before reappraisal; or
(c) acreage changes due to department updates from the Geographic Information System, or due to incidental fluctuations in agricultural land use due to typical farming practices, the department will use the forest land value from the last year of the previous valuation cycle as the VBR.
(2) (4) The phase-in formula value calculations for each year of the reappraisal cycle is are as follows:
(a) Change in value = full reappraisal value - value before reappraisal (VBR);
(b) (a) Year 1 Pphase-in value (year 1) = value before reappraisal VBR + (change in value x .1666);
(c) (b) Year 2 Pphase-in value (year 2) = value before reappraisal VBR + (change in value x .3332);
(d) (c) Year 3 Pphase-in value (year 3) = value before reappraisal VBR + (change in value x .4998);
(e) (d) Year 4 Pphase-in value (year 4) = value before reappraisal VBR + (change in value x .6664);
(f) (e) Year 5 Pphase-in value (year 5) = value before reappraisal VBR + (change in value x .8330); and
(g) (f) Year 6 Pphase-in value (year 6) = value before reappraisal VBR + (change in value x 1.000).
(3) The following examples demonstrate how the phase-in formula calculates the per-acre assessed value for forest land:
(a) For tax year 2015:
(i) the 2014 full reappraisal value for forest land is $518.63 per-acre;
(ii) the full reappraisal value for the same forest land in 2020 is $553.51 per-acre; and
(iii) the change in value is $34.88 ($553.51 - $518.63).
(b) The 2015 phase-in value per-acre = $518.63 plus (34.88 x .1666) = $518.63 plus $5.81 or $524.44 per-acre.
(4) For value changes that are a result of newly classified forest lands or forest lands that have a decrease in acres due to a land use change, the VBR is calculated. A calculated VBR is the value of the new forest land acres as if the forest land acres had existed before reappraisal. The department phases in the difference between the calculated VBR and the value of the new forest land acres in the current cycle, at the rate of 16.66 percent for each year of the revaluation cycle.
(5) For forest lands that have a decrease or increase in acres due to land use changes that are the result of department updates from the Geographic Information System, or due to incidental fluctuations in agricultural land use due to typical farming practices, the department will use the 2014 value of the current land use as the VBR.
(5) For forest land that deceases in value due to reappraisal, the lower value will be fully implemented immediately and will not be phased in.
AUTH: 15-1-201, 15-44-105, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity, the department first proposes to amend ARM 42.20.745's catchphrase and insert "value change process" as the proposed rule amendments would include processes for increases and decreases in forest land value.
In (1), the department proposes transferring the first sentence and
cross-reference to 15-44-103, MCA to proposed ARM 42.20.725(2) since the text pertains to forestland valuation formula. The department also proposes new (1) to incorporate an improved description of the circumstances when forest land productivity value changes. The department proposes striking the specific date and year reference in current (1)(a), so the rule does not need to be amended for subsequent valuation cycles. The text in current (1)(b) is relocated to proposed (5) for better flow of the rule content.
The department proposes transferring language from current (2)(a) to new (2) for better organization of the phase-in process text as the calculation described in new (2) has to occur before the phase-in value can be determined. In proposed (3), the department proposes to describe the initial determination of phase-in value and how the department takes the land change circumstances in proposed (1) into account for its determination of VBR. The department believes these sections clarify the necessity for the phase-in of value changes; and are more concise and better organized than in the existing rule sections.
In proposed (4), the department proposes restating phase-in calculation example text for each year of the reappraisal cycle to make it easier for the public to understand.
Lastly, the department proposes striking (4) and (5) because the substance of the text has been clarified and reorganized under proposed (1), (2), (3), and (5).
5. The department proposes to repeal the following rules:
42.20.171 LAND CLASSIFICATION DETERMINATION DATE FOR CLASS THREE, FOUR, AND TEN PROPERTY
AUTH: 15-1-201, MCA
IMP: 15-6-133, 15-7-103, 15-7-201, 15-7-202, 15-7-203, 15-7-206, 15-7-207, 15-7-208, 15-7-209, 15-7-210, 15-7-212, MCA
42.20.505 CLASSIFICATION AND APPRAISAL NOTICES AND VALUATION REVIEWS FOR FOREST LAND PROPERTY
AUTH: 15-1-201, 15-7-111, MCA
IMP: 15-7-102, 15-7-111, MCA, and Sec. 11, Ch. 463, L. 1997
42.20.710 EXCEPTIONS TO FOREST LAND ASSESSMENT
AUTH: 15-44-105, MCA
IMP: 15-44-101, 15-44-102, 15-44-103, MCA
42.20.715 FOREST SITE PRODUCTIVITY
AUTH: 15-44-105, MCA
IMP: 15-44-101, 15-44-102, MCA
42.20.720 FOREST LAND VALUATION ZONES
AUTH: 15-1-201, 15-44-105, MCA
IMP: 15-44-101, 15-44-102, 15-44-103, 15-44-104, MCA
42.20.730 FOREST COSTS
AUTH: 15-1-201, 15-44-105, MCA
IMP: 15-44-101, 15-44-102, 15-44-103, 15-44-104, MCA
42.20.735 FOREST LAND ELIGIBILITY - OWNERSHIP
AUTH: 15-1-201, 15-44-105, MCA
IMP: 15-44-101, 15-44-102, 15-44-103, 15-44-104, MCA
42.20.750 VALUATION OF ONE ACRE BENEATH IMPROVEMENTS ON FOREST LAND
AUTH: 15-44-105, MCA
IMP: 15-6-134, 15-7-103, 15-7-201, 15-7-202, 15-8-111, MCA
REASONABLE NECESSITY: In addition to the general statement of reasonable necessity, the department proposes repealing ARM 42.20.750 because certain portions of the rule's content have been transferred to ARM 42.20.725 for improved organization and other section contents are contained in the Manual and would be redundant if maintained in the rule. Section (3) language was not transferred to another rule as the language is obsolete. In prior years, the department collected water and septic system data to add value to one-acre sites; however, the department no longer collects this data or adds water and septic system values to one-acre sites as provided in 15-7-103(7), MCA.
6. 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: Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail email@example.com and must be received no later than 5:00 p.m., September 8, 2020.
7. Todd Olson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.
8. 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 notice regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in number 6 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.
9. An electronic copy of this notice is available on the department's web site at www.mtrevenue.gov, or through the Secretary of State's web site at sosmt.gov/ARM/register.
10. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.
11. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment and repeal of the above-referenced rules will not significantly and directly impact small businesses.
/s/ Todd Olson /s/ Gene Walborn
Todd Olson Gene Walborn
Rule Reviewer Director of Revenue
Certified to the Secretary of State July 28, 2020.