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| Montana Administrative Register Notice 42-2-864 | No. 1 01/12/2012 | |
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BEFORE THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA
TO: All Concerned Persons 1. On February 6, 2012, at 11:00 a.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the amendment of the above-stated rules. Individuals planning to attend the hearing shall enter the building through the east doors of the 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, contact the Department of Revenue no later than 5:00 p.m. January 27, 2012, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail [email protected]. 3. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined: 42.21.113 LEASED AND RENTAL EQUIPMENT (1) Leased or rental equipment that is leased or rented on an hourly, daily, weekly, semimonthly, or monthly basis, but is not exempt under 15-6-219(5) or 15-6-202(4), MCA, will be valued in the following manner: (a) For equipment that has an acquired cost of $0 to $500, the department shall use a four-year trended depreciation schedule. The trended schedule will be the same as ARM 42.21.155, category 1.
(b) For equipment that has an acquired cost of $501 to $1,500, the department shall use a five-year trended depreciation schedule. The trended schedule will be the same as ARM 42.21.155, category 2.
(c) For equipment that has an acquired cost of $1,501 to $5,000, the department shall use a ten-year trended depreciation schedule. The trended schedule will be the same as ARM 42.21.155, category 8.
(d) For equipment that has an acquired cost of $5,001 to $15,000, the department shall use the trended depreciation schedule for heavy equipment. The schedule will be the same as ARM 42.21.131.
(e) For rental video tapes and digital video disks the following schedule will be used:
(2) through (4) remain the same. (5) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, 15-23-108, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.113 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.123 FARM MACHINERY AND EQUIPMENT (1) through (7) remain the same. (8) The trended depreciation schedule referred to in (2) through (6) is listed below and shall be used for tax year
(9) remains the same. (10) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.123 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.131 HEAVY EQUIPMENT (1) through (4) remain the same. (5) The trended depreciation schedule referred to in (2), (3), and (4) is listed below and shall be used for tax year HEAVY EQUIPMENT TRENDED DEPRECIATION SCHEDULE
(6) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, 15-23-108, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.131 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.137 SEISMOGRAPH UNITS AND ALLIED EQUIPMENT (1) remains the same. (2) The department shall prepare a five-year trended depreciation schedule for seismograph units and a five-year trended depreciation schedule for all other allied seismograph equipment. Trend factors and depreciation factors published by "Marshall and Swift Publication Company" will be used to develop the trended depreciation schedules. The trend factors shall be the most recent available from the "Chemical Industry Cost Indexes" listed in the above publication. The "% good" for seismograph units and other allied seismograph equipment less than one year old shall be 100 percent and the "% good" for equipment (3) remains the same. (4) The trended depreciation schedules referred to in (1) through (3) are listed below and shall be used for tax year SEISMOGRAPH UNIT
SEISMOGRAPH ALLIED EQUIPMENT
(5) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 Reasonable necessity: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.137 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. The language in ARM 42.21.137(2) is being amended to bring this rule into conformity with the other rules governing personal property valuation. The department discovered that historically we have listed our final category for equipment more than five years old at a "% good" of 5%. This category is not based upon the Marshall and Swift publication guides. The department deems this category an unsustainable practice under the equalization standards described in 15-9-101(1), MCA. The department is proposing to correct this depreciation formula error prospectively, not retroactively. This approach is proposed both to comply with 15-9-101(1), MCA, and to recognize that existing taxpayers owning property acquired in 2005 or earlier have relied upon the prior mistaken depreciation formula for the "% good of 5%" category. The "% good of 5%" category, which previously would have been updated to cover an additional year, is proposed to be retained only for property already attaining this level, namely property acquired in 2005 or earlier years. For example, in the past, the department would have been proposing in this notice that the "% good of 5%" category would have been updated to 2006 or earlier. It is proposed that from this point forward, the "% good" category for seismographic equipment will decline to the lowest level provided in the Marshall and Swift tables for whatever year that lowest level is specified through such property acquired in 2006. Thus, next year, assuming the lowest Marshall and Swift % good level for seismographic equipment is still 20 percent, that level will apply to property acquired in 2006 and 2007. In the following year, that lowest Marshall and Swift level would apply to property acquired in 2006 through 2008 and so forth for subsequent years. In that manner, equalization with the values specified in the Marshall and Swift publication guides is accomplished for 2006 forward. The tax impact of this prospective change is judged to be minimal. For example, there are seven pieces of seismographic equipment acquired in 2006 that would otherwise have been placed in the "% good of 5%" category were it not for the department discovering this problem. The corrective proposed action of the department would result in a tax effect for the equipment acquired in 2006 of approximately $300 per piece of equipment, or about $2,100 for all seven items statewide. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.138 OIL AND GAS FIELD MACHINERY AND EQUIPMENT (1) and (2) remain the same. (3) The trended depreciation schedule referred to in (1) and (2) is listed below and shall be used for tax year OIL AND GAS FIELD PRODUCTION EQUIPMENT TRENDED DEPRECIATION SCHEDULE
(4) and (5) remain the same. (6) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-213, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.138 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.139 WORK-OVER AND SERVICE RIGS (1) through (4) remain the same. (5) The trended depreciation schedule referred to in (2) and (4) is listed below and shall be used for tax year SERVICE AND WORKOVER RIG TRENDED DEPRECIATION SCHEDULE
(6) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.139 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property, and, therefore, should not be cited here. 42.21.140 OIL DRILLING RIGS (1) remains the same. (2) The department shall prepare a ten-year trended depreciation schedule for oil drilling rigs. The trended depreciation schedule shall be derived from depreciation factors published by Marshall and Swift Publication Company. The "% good" for all drill rigs less than one year old shall be 100 percent. The trended depreciation schedule for tax year
(3) remains the same. (4) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.140 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.151 TELEVISION CABLE SYSTEMS (1) through (3) remain the same. (4) The trended depreciation schedules referred to in (2) and (3) are listed below and shall be in effect for tax year TABLE 1: FIVE-YEAR "DISHES"
TABLE 2: TEN-YEAR "TOWERS"
(5) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.151 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.153 SKI LIFT EQUIPMENT (1) and (2) remain the same. (3) The depreciation schedules shall be determined by the life expectancy of the equipment and will normally compensate for the loss in value due to ordinary wear and tear, offset by reasonable maintenance, and ordinary functional obsolescence due to the technological changes during the life expectancy period. DEPRECIATION TABLE FOR SKI LIFT EQUIPMENT
(a) The taxpayer must initially list with the department: (i) all equipment by year of installation; and (ii) installed costs of that equipment. (b) Each year thereafter, the taxpayer must list with the department: (i) all additions or deletions from the previous year's list, with installed cost. (4) This methodology is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.153 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.21.155 DEPRECIATION SCHEDULES (1) remains the same. (2) The trended depreciation schedules for tax year CATEGORY 1
CATEGORY 2
CATEGORY 3
CATEGORY 4
CATEGORY 5
CATEGORY 6
CATEGORY 7
CATEGORY 8
(3) This rule is effective for tax years beginning after December 31, AUTH: 15-1-201, MCA IMP: 15-6-135, 15-6-138, 15-6-207, 15-6-219, 15-24-921 REASONABLE NECESSITY: The department determines the market value of personal property by using the trended depreciation tables found in these rules. The department is proposing to amend ARM 42.21.155 to update these trended depreciation schedules. The annual update to these trend tables provides the taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. These updates also clearly identify for the taxpayer how the department values and depreciates property over time. Additionally, the department is proposing to delete three implementing statutes from this rule because they are specific to the livestock per capita fees, not personal property and, therefore, should not be cited here. 42.22.1311 INDUSTRIAL MACHINERY AND EQUIPMENT TREND FACTORS (1) and (2) remain the same. (3) Tables 1 through 32 represent the yearly trend factors for each of the categories.
AUTH: 15-1-201, MCA REASONABLE NECESSITY: The department is proposing to amend ARM 42.22.1311 to demonstrate through the trend tables how the department arrives at market value as required by 15-8-111, MCA. Annually, the department updates these schedules to inform taxpayers of the current percentages used by the department when valuing and taxing their property. To determine the market value of industrial property, the department historically uses and adopts the concept of trending and depreciation. The method by which trended depreciation schedules are derived is described in the existing rule, and that method is being changed. As stated in the reasonable necessity to ARM 42.21.113, the department is proposing to amend ARM 42.22.1311 to also comply with the First Judicial District Court order in 1986, which required the department to publish these trend tables annually. 4. 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: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail [email protected] and must be received no later than February 10, 2012. 5. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing. 6. An electronic copy of this notice is available on the department's web site at www.revenue.mt.gov. Locate "Legal Resources" in the left hand column, select the "Rules" link and 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. 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. 7. 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 notices regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the person in 4 above or faxed to the office at (406) 444-4375, or may be made by completing a request form at any rules hearing held by the Department of Revenue. 8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply. /s/ Cleo Anderson /s/ Dan R. Bucks CLEO ANDERSON DAN R. BUCKS Rule Reviewer Director of Revenue Certified to Secretary of State on January 3, 2012
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A directory of state agencies is available online at http://www.mt.gov/govt/agencylisting.asp.
For questions about the organization of the ARM or this web site, contact [email protected].
