(1) A taxpayer having property in the state of Montana on January 1 of each tax year, must complete the statement as provided in 15-8-301, MCA by submitting a completed personal property reporting form.

(2) As determined by the department, if the aggregate market value of an individual's or business entity's class eight property is $20,000 or less, the individual's or business entity's class eight property is exempt from taxation. If the aggregate market value of an individual's or business entity's class eight property is greater than $20,000, the individual's or business entity's class eight property is subject to taxation. To ensure fair and accurate reporting of all taxable class eight property, the department may require all individuals or business entities to report all of their class eight property periodically, including exempt property. Beginning in tax year 2011, the department requires biennial reporting of all exempt class eight property.

(a) Starting in tax year 2012, the aggregate market value of class eight property owned by an individual or business entity will be taxed as follows:

(i) the first $2 million of taxable market value will be taxed at the rate of 2 percent; and,

(ii) all taxable market value in excess of $2 million will be taxed at the rate of 3 percent.

(b) If the conditions provided in 15-6-138, MCA, are met, the aggregate market value of class eight property owned by an individual or business entity, as provided in (2), will be taxed as follows:

(i) the first $3 million of taxable market value will be taxed at the rate of 1.5 percent; and,

(ii) all taxable market value in excess of $3 million will be taxed at the rate of 3 percent.

(c) The department will apply the operative tax rates identified in (a) or (b) to an individual's or business entity's class eight property by:

(i) determining the fraction obtained by dividing the appropriate threshold level, $2 million or $3 million, respectively, as identified in (a)(i) or (b)(i), by the individual's or business entity's total aggregated class eight taxable market value;

(ii) determining the portion of class eight property in each location that will receive the reduced tax rate, as identified in (a) or (b), by multiplying the fraction obtained in (c)(i), by the taxable market value of class eight property in each location owned by an individual or business entity;

(iii) multiplying the appropriate tax rate, identified in (a)(i) or (b)(i), by the fractional portion of the individual's or business entity's class eight property; and

(iv) applying the 3 percent rate, identified in (a)(ii) and (b)(ii), to the remaining fractional portion of the individual's or business entity's class eight property identified in (c)(ii).

(d) The following are examples of how the provisions of (2)(a), (b), and (c) apply:

(i) Example 1. On January 1, 2012, Taxpayer X owns class eight property with a total taxable market value of $5 million in four different locations throughout the state. The 2 percent rate for the first $2 million of aggregate taxable market value is applied to the property in each location as follows:

 

Location	Taxable market value	2% rate allocation	3% rate allocation
1	$ 500,000	2/5 x $500,000 = $200,000	3/5 x $500,000 = $300,000
2	$1,000,000	2/5 x $1,000,000 = $400,000	3/5 x $1,000,000 = $600,000
3	$1,500,000	2/5 x $1,500,000 = $600,000	3/5 x $1,500,000 = $900,000
4	$2,000,000	2/5 x $2,000,000 = $800,000	3/5 x $2,000,000 = $1,200,000
	$5,000,000

 

After adjustment for the tax rate difference, the taxable value at each location is determined by multiplying the amounts allocated to each location by the applicable tax rates and adding the results.

 

Location	2% taxable value	3% taxable value	Total taxable value
1	$200,000 x .02 = $4,000	$300,000 x .03 = $9,000	$13,000
2	$400,000 x .02 = $8,000	$600,000 x .03 = $18,000	$26,000
3	$600,000 x .02 = $12,000	$900,000 x .03 = $27,000	$39,000
4	$800,000 x .02 = $16,000	$1,200,000 x .03 = $36,000	$52,000

 

The mills for the levy district within which each property is located are applied to this total taxable value. Various government subdivisions have the authority to impose mills to raise taxes. They are sometimes collectively referred to as "taxing jurisdictions." The department creates a levy district for each distinct geographic area in the state where the same mills apply to all of the properties. For example, location 1 could be in a levy district that has mills imposed by the state, county, a high school district, and a mosquito district; location 2 could be in a levy district that has mills imposed by the state and county; location 3 could be in a levy district that has mills imposed by the state, county, a high school district, a grade school district, and a rural fire district; and location 4 could be in a levy district that has mills imposed by the state, county, city, and an urban transportation district.

(ii) Example 2. On January 1, 2012, Taxpayer Y owns class eight property with a total taxable market value of $2 million in four different locations throughout the state. No allocation of Taxpayer Y's property between the 2 percent and 3 percent tax rates is required. The property at each location is taxed at the 2 percent rate.

 

Location	Taxable market value	Total taxable value
1	$ 500,000	$ 500,000 x .02 = $10,000
2	$ 250,000	$ 250,000 x .02 = $ 5,000
3	$ 250,000	$ 250,000 x .02 = $ 5,000
4	$1,000,000	$1,000,000 x .02 = $20,000
	$2,000,000

 

The mills for the levy district within which each property is located are applied to this total taxable value.

(iii) Example 3. On January 1, 2012, Taxpayer Z owns class eight property with a total taxable market value of $19,000 in four different locations throughout the state. Because the class eight property of an individual or business entity that owns an aggregate of $20,000 or less in market value of class eight property is exempt from taxation, (2)(a), (b), and (c) do not apply to Taxpayer Z.

(iv) Example 4. Assume the same facts as in (i) Example 1, but with the added fact that one of the locations is within a tax increment financing district (TIFD). The calculations and results of Example 1 do not change: the total taxable value is determined the same way and the mills for the levy districts are applied the same way. The fact that there is a TIFD changes only how the taxes that are levied are distributed.

(3) The department will provide educational information on the class eight personal property exemption to all individual taxpayers or business entities the department is aware of that currently have class eight business personal property.

(4) The taxpayer's completed personal property statement as provided for in 15-8-301, MCA, must be returned to the department postmarked no later than February 15. If a taxpayer fails to return a completed personal property statement by February 15, the department will provide a written notice to the taxpayer advising the taxpayer of their obligation to return a completed personal property statement. The notice shall also advise the taxpayer that they are subject to penalty for refusing or neglecting to respond to the department's request for information under the provisions of 15-1-303 and 15-8-309, MCA, or any other applicable statute.

(5) Statements postmarked after March 15 will be assessed the penalty provided in (4) unless:

(a) the taxpayer provides evidence of their inability to comply with the timeframes set forth in (4) due to hospitalization, physical illness, infirmity, or mental illness; and

(b) evidence that this/these condition(s), while not necessarily continuous, existed at sufficient levels in the period of January 1 to March 15 to prevent timely filing of the reporting form.

(6) Industrial and commercial property taxpayers shall provide documentation of the installed costs of intangible personal property included on the taxpayer's accounting records.

(7) For purposes of determining the statewide aggregate taxable market value of class eight property of an individual or business entity, the class eight property of an individual or business entity includes all property the individual or business entity owns, claims, possesses, controls, or manages by himself, herself, or itself directly or indirectly through an affiliated entity or family member. As used in this rule, "affiliated entity" means:

(a) a member of a combined group of unitary corporations filing a Montana corporation license tax return;

(b) a member of an affiliated group of corporations filing a U.S. Consolidated Income Tax Return;

(c) any corporation if the individual or business entity directly or indirectly owns more than 50 percent of the stock value or voting power;

(d) any partnership if the individual or business entity directly or indirectly owns more than 50 percent of capital interests or profits interests in the partnership;

(e) a corporation and a partnership if the same persons own:

(i) more than 50 percent in value of the corporation's stock; and

(ii) more than 50 percent of the capital interest or the profits interest in the partnership;

(f) an S corporation and another S corporation, if the same persons own more than 50 percent in value of the outstanding stock of each corporation;

(g) an S corporation and a C corporation, if the same individuals own more than 50 percent in value of the outstanding stock of each corporation; and

(h) any trust, if the individual or business entity is the grantor or a beneficiary.

(8) For purposes of applying (6):

(a) stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust is considered as being owned proportionately by or for its shareholders, partners, or beneficiaries; and

(b) an individual is considered as owning the stock owned, directly or indirectly, by the individual's spouse or minor child.

(9) The department may assess at the 3 percent rate all of the class eight property of any individual or business entity that does not either:

(a) affirm on their personal property and business equipment reporting form that they have no affiliated entities; or

(b) identify their affiliated entities on their personal property and business equipment reporting form.

(10) For any tax year after 2012, the exemption from tax provided in (2) may be denied for the property of any person that does not either:

(a) affirm on their personal property and business equipment reporting form that they have no affiliated entities; or

(b) identify their affiliated entities on their personal property and business equipment reporting form as provided in (8).