BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.21.154, 42.21.155, 42.21.158, and 42.22.1311, and repeal of ARM 42.21.113, 42.21.123, 42.21.131, 42.21.132, 42.21.137, 42.21.138, 42.21.139, 42.21.140, 42.21.151, 42.21.153, 42.21.156, and 42.21.157 pertaining to trended depreciation schedules for valuing personal property

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AMENDED NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND REPEAL

 

TO: All Concerned Persons

 

1. On December 7, 2018, the Department of Revenue (department) published MAR Notice No. 42-2-999 pertaining to the public hearing on the proposed amendment and repeal of the above-stated rules at page 2369 of the 2018 Montana Administrative Register, Issue Number 23. The department held the required public hearing on December 28, 2018. No proponents, opponents, or other interested persons were present; no comments or testimony were received.

 

2. Upon additional review of the proposed trended depreciation schedules in ARM 42.21.155, the department is revising the proposed wholesale factor column values in the farm machinery and equipment and heavy equipment tables in (4)(g) and (4)(h) from 80% to 60%, which also changes the calculations for the proposed wholesale trended % good column values in both tables. These changes are necessary to more closely reflect average wholesale value.  The department also desires to remove a superfluous word in the text of (4).

The department also amends subsection references contained in ARM 42.21.158(6), (11), and (12). The subsections' internal reference renumbering was inadvertently omitted from the original proposal notice.

All other rule amendments and repeals contained in the original MAR notice described in #1 above remain as proposed.

 

3.  The Department of Revenue will make reasonable accommodations for persons with disabilities who 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 January 30, 2019. 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 [email protected].

 

4. The department proposes to amend the following rules with the following changes from the original proposal, new matter underlined, deleted matter interlined:

 

42.21.155 CATEGORIES FOR PERSONAL PROPERTY; TRENDED DEPRECIATION SCHEDULES; TREND FACTOR CALCULATION (1) through (3) remain as proposed.

(4) The trended depreciation schedules for the categories of personal property equipment are as follows:

(a) through (f) remain as proposed.

(g) Farm Machinery and Equipment - a twenty-year depreciation and a residual percentage will be applied to farm machinery and equipment. An 80 A 60 percent wholesale factor is applied. The trend factors are calculated from the average of all category of the Marshall & Swift Guide.

 

Farm Machinery and Equipment

 

(h) Heavy Equipment - a twenty-year depreciation and a residual percentage will be applied to heavy equipment.  An 80 A 60 percent wholesale factor is applied. The trend factors are calculated from the contractor's equipment category of the Marshall & Swift Guide. 

 

Heavy Equipment

 

(5) remains as proposed.

 

AUTH: 15-1-201, 15-23-108, MCA

IMP: 15-6-135, 15-6-138, 15-6-202, 15-6-207, 15-6-213, 15-6-219, 15-8-111, MCA

 

The statement of reasonable necessity is being amended as follows, new matter underlined, deleted matter interlined:

 

REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, it is necessary for the department to amend ARM 42.21.155 to place similar content regarding the depreciation schedules for all personal property categories into a single rule for efficiency and ease of reference. The eight personal property categories, their respective depreciation schedules, and references to trend factor schedules have historically been provided in ARM 42.21.123, 42.21.131, 42.21.137, 42.21.138, 42.21.139, 42.21.140, 42.21.151, 42.21.153, 42.21.156, and 42.21.157, which are proposed for repeal.

The department proposes updating the catchphrase to include the words "trended" and "categories for personal property" and "trend factor calculation" to clarify the types of schedules referenced in the rule, to specify the categories of property to which the rule pertains, and to provide the methodology of the department's trend factor calculation.

The department proposes revising language in (1) for clarity and brevity, which reflect current rule writing styles and preferences. The department proposes moving, and revising to comply with the Montana Administrative Procedure Act, the reference language to the Marshall & Swift Valuation Service Guide in (1) to proposed (3) and striking obsolete depreciation language in (1) given the relocation and reorganization of the trended depreciation schedules in this rule.

The department proposes replacing outdated trended depreciation schedule information and rule cross-references in (2) to reflect the schedules in proposed (4). The department proposes to transfer from ARM 42.21.157, and revise for clarity, the explanation of how the department calculates trend factors. The department proposes the repeal of ARM 42.21.157. This consolidation of the two rules' most pertinent provisions into one is necessary to provide a more direct and cohesive reference for trended depreciation schedules and their underlying components. The department further proposes transferring equipment category description language for each proposed trended depreciation schedule provided in proposed (4). The proposed equipment categories transferred and revised from other rules in Chapter 21, Subchapter 1, which are proposed for repeal, are as follows:

Computerized equipment language, with a four-year depreciation schedule, in proposed (4)(a) is a combination of lease and rental equipment language in ARM 42.21.113(1)(a) and related equipment language in ARM 42.21.156(2).

Office and commercial equipment language, with a five-year depreciation schedule, in proposed (4)(b) is a combination of lease and rental equipment language in ARM 42.21.113(b), local cable tv "five-year dishes" language from ARM 42.21.151(4), and related equipment language in ARM 42.21.156(3) through (7).

Furniture, fixtures, and miscellaneous equipment provisions, with a ten-year depreciation schedule, in proposed (4)(c) was combined with leased and rental equipment from ARM 42.21.113(1)(c), local cable tv "ten-year towers" from ARM 42.21.151(2), ski lift equipment from ARM 42.21.153, and current categories 7 and 8 from (2) of this rule.

Seismograph units and allied equipment, with a five-year depreciation schedule, in proposed (4)(d) was moved from ARM 42.21.137(1) and revised to eliminate the unnecessary mention of units and equipment less than one year old or acquired in 2005 or before. The department deemed the prior practice, which is not based on or justifiable through use of the Marshall & Swift Guide, unsustainable under the equalization standards described in 15-9-101(1), MCA, and proposes to correct it as a part of the transfer and consolidation of depreciation schedules into ARM 42.21.155.

Oil drilling, workover, and service rigs, with a ten-year depreciation schedule, in proposed (4)(e) were combined with work-over and service rigs rule text from ARM 42.21.139 and oil drilling rigs rule text from ARM 42.21.140. The text was revised to eliminate the unnecessary mention of units and equipment less than one year old for the same reasons described for seismograph units and allied equipment.

Oil and gas field machinery and equipment, with a fifteen-year depreciation schedule, in proposed (4)(f) was moved from ARM 42.21.138(2).

Farm machinery and equipment, with a twenty-year depreciation schedule in proposed (4)(g), was moved from ARM 42.21.123. 

Heavy equipment, with a twenty-year depreciation schedule in proposed (4)(h), was moved from ARM 42.21.131.

Further, in proposed (4)(g) and (h), the department proposes using the Marshall & Swift Guide for calculating the trended schedules for farm machinery and equipment and heavy equipment, which is consistent for the valuation of other personal property described in the subchapter. The department also proposes to implement an 80% a 60% wholesale factor into those calculations to "approximate wholesale value." This reflects a substantial update in the method the department uses to develop the farm machinery and equipment and heavy equipment depreciation schedules, which consisted of a manual system of valuation by department staff that was unnecessarily burdensome, time-consuming, and problematic because of limited availability of valuation data, which can have a significant impact on the outcome of a valuation and may not result in a truly appropriate assessed value. The department believes that changing the way farm machinery and equipment and heavy equipment depreciation are calculated will provide taxpayers with a stable, consistent, and predictable trended depreciation schedule from year to year.

The department further proposes renumbering and updating the year reference in proposed (5) which is necessary to advance the applicability of the rule and reflect renumbering through the proposed amendments.

The department further proposes adding 15-23-108, MCA, as rulemaking authority as it pertains to some centrally assessed personal property. The revision of the rule's implementing citations is necessary to correspond with the relocation of rule text to this rule from the rules proposed for repeal and comply with 2-4-304, MCA.

 

42.21.158 PERSONAL PROPERTY REPORTING REQUIREMENTS

(1) through (5) remain as proposed.

(6) For purposes of applying (2) (4) and (3) (5):

(a) through (10) remain as proposed.

(11) Personal property owners whose aggregate class eight market value is $100,000 or less, as defined in (2) (4), will have no further reporting obligation, except:

(a) and (b) remain as proposed.

(12) New businesses are not required to submit a personal property statement/reporting form if the entity's business equipment is valued at $100,000 or less, unless requested by the department in accordance with (9) (11).

(13) and (14) remain as proposed.

 

AUTH: 15-1-201, 15-9-101, MCA

IMP: 15-1-121, 15-1-123, 15-1-303, 15-6-138, 15-6-201,15-6-202, 15-6-203, 15-6-206, 15-6-213, 15-6-215, 15-6-217, 15-6-218, 15-6-219, 15-6-220, 15-6-225, 15-6-228, 15-8-104, 15-8-301, 15-8-303, 15-8-309, 15-9-101, 15-24-3001, MCA

 

The statement of reasonable necessity is being amended as follows, new matter underlined, deleted matter interlined:

 

REASONABLE NECESSITY: In addition to the general statement of reasonable necessity provided at the beginning of this notice, it is necessary for the department to amend ARM 42.21.158 by adding clarifying language in proposed (2) and (3) for the benefit of taxpayers who are required to report their personal property or business equipment and to clarify the reporting process.

The department also proposes revising the language in proposed (9) and (10) to clarify that reporting forms submitted electronically or by mail must have an electronic date stamp or postmark no later than March 1.

Based on the department's proposed amendments, it will be necessary for the department to renumber the remaining rule sections and renumber internal section cross-references.

The department further proposes adding 15-1-123, MCA, as an implementing citation as it pertains to class eight personal property. The revision of the rule's implementing citations is necessary to comply with 2-4-304, MCA.

 

5. No additional public hearing will be held to consider this amended proposal notice.

 

6.  Concerned persons may submit their data, views, or arguments, either orally or in writing. 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 protected] and must be received no later than February 4, 2019.

 

 

 

/s/ Todd Olson                                              /s/ Gene Walborn                                        

Todd Olson                                                   Gene Walborn

Rule Reviewer                                              Director of Revenue

 

Certified to the Secretary of State January 15, 2019.