Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

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In the matter of the proposed amendment of ARM 42.4.2701 and 42.4.2704 relating to qualified endowment

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

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TO: All Concerned Persons

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1. On December 13, 2007, at 1:30 p.m., a public hearing will be held in the 4 East (Fourth Floor) 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 Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.

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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., December 5, 2007, 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) 444-3696; or e-mail [email protected].

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3. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

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42.4.2701 DEFINITIONS The following definitions apply to this subchapter:

(1) through (4) remain the same.

(5) A "permanent irrevocable fund" is a fund which receives or will receive the charitable gift portion of a planned gift or a direct charitable contribution, and holds the charitable gift or contribution on behalf of a tax-exempt organization under 26 USC 501(C)(3), for the life of the organization. The present value of the fund at the time that the donor makes a planned gift or an outright contribution to the fund is not expendable by the tax-exempt organization on a current basis under the terms of the applicable gift document or other governing documents. For the purpose of the qualified endowment credit, the fund must be used primarily for the benefit of Montana communities and citizens.

(6) remains the same but is renumbered (5).

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AUTH: 15-30-305, 15-31-501, MCA

IMP: 15-30-165, 15-30-166, 15-30-167, 15-31-161, 15-31-162, MCA

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REASONABLE NECESSITY: The department is proposing to amend ARM 42.4.2701 to remove the definition of "permanent irrevocable fund" because that term is now defined in statute.

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42.4.2704 TAX CREDIT AND DEDUCTION LIMITATIONS (1) The credit allowed the corporation, partnership, limited liability company, estate, trust, or individual tax liability for a contribution of a planned gift is the percentage, as shown in the following table, of the present value of the allowable contribution as defined in ARM 42.4.2701. The credit allowed against the corporation, partnership, limited liability company, estate, or trust for a direct contribution is equal to 20% of the charitable contribution. The maximum credit that may be claimed in one year is $10,000 per donor. A contribution made in a previous tax year cannot be used for a credit in any subsequent tax year.

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Planned Gifts by Individuals or Entities

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�� Present Value

Planned�� Percent�� Used to�� Maximum

Gift�� of Present��Calculate�� Credit

Date�� Value�� Maximum Credit�� Per Year

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1/1/97 - 12/31/01�� 50%�� $20,000�� $10,000

1/1/02 - 8/27/02�� 40%�� $25,000�� $10,000

8/28/02 - 6/30/03�� 30%�� $22,000�� $ 6,600

7/1/03 - 12/31/0713�� 40%��$25,000��$10,000

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(2) The credit allowed against the corporate, estate, trust, or individual tax liability for a charitable gift made by a corporation, small business corporation, estate, trust, partnership, or limited liability company directly to a qualified endowment is the percentage, as shown in the following table, of the allowable contribution as defined in ARM 42.4.2701.

Non-Planned Gifts by Eligible Entities

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�� Allowable

�� Contribution

Qualified�� Percent of��Used to��Maximum

Charitable�� Allowable��Calculate�� Credit

Gift Date�� Contribution�� Maximum Credit�� Per Year

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1/1/97 - 12/31/01�� 50%�� $20,000�� $10,000

1/1/02 - 8/27/02�� 20%�� $50,000��$10,000

8/28/02 - 6/30/03�� 13.3%��$49,624��$�� 6,600

7/1/03 - 12/31/0713�� 20%�� $50,000��$10,000

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(3) The balance of the allowable contributions not used in the credit calculation may be used as a deduction subject to the limitations and carryover provisions found in 15-30-121, MCA, or for corporations the limitations and carryover provisions found in 15-31-114, MCA.

(a) Examples of Allowable Deductions When a Planned Gift is Used for the Qualified Endowment Credit:

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Time�� Present�� Maximum�� Credit�� Allowable

Period�� Value��Credit�� Percentage�� Deduction

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1/1/97 - 12/31/01�� $50,000 -��($10,000 / .50) =�� $30,000

1/1/02 - 8/27/02�� $50,000 -�� ($10,000 / .40) =�� $25,000

8/28/02 - 6/30/03�� $50,000 -�� ($ 6,600 / .30) =��$28,000

7/1/03 - 12/31/0713�� $50,000 -��($10,000 / .40) =�� $25,000

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(b) Examples of Allowable Deductions When an Outright Gift is Used for the Qualified Endowment Credit:

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Time�� Market�� Maximum�� Credit�� Allowable

Period�� Value�� Credit�� Percentage��Deduction

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1/1/97 - 12/31/01��$50,000 -�� ($10,000 / .50) =�� $30,000

1/1/02 - 8/27/02��$50,000 -�� ($10,000 / .20) =�� $�� -0-

8/28/02 - 6/30/03�� $50,000 -�� ($ 6,600 / .133) =�� $� 376

7/1/03 - 12/31/0713�� $50,000 -�� ($10,000 / .20) =�� $� �-0-

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(4) through (9) remain the same.

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AUTH: 15-30-305, 15-31-501, MCA

IMP: 15-30-165, 15-30-166, 15-30-167, 15-31-161, 15-31-162, MCA

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REASONABLE NECESSITY: The department is proposing to amend ARM 42.4.2704 to show that this credit is now available through December 31, 2013, as enacted by the 60th Legislature in Senate Bill 150.

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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) 444-3696; or e-mail [email protected] and must be received no later than December 21, 2007.

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5. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

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6. An electronic copy of this Notice of Public Hearing 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 Notice of Public Hearing 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.

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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) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

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8. The bill sponsor notice requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor, Senator Kim Gillan, was notified on November 1, 2007, by electronic mail.

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

�� CLEO ANDERSON�� DAN R. BUCKS

�� Rule Reviewer�� Director of Revenue

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Certified to Secretary of State November 13, 2007