Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

In the matter of the amendment of ARM 42.15.315, 42.15.401, and 42.15.403, relating to dependents credits and refunds

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

TO: All Concerned Persons

1. On November 18, 2010, at 2:00 p. 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 Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.

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., November 8, 2010, 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:

42.15.315 ORIGINAL AND AMENDED RETURNS (1) through (9) remain the same

(10) When an original return for tax years beginning on or after January 1, 2010, is filed after the extended due date, and the department does not issue the requested refund within 45 days of receiving the return, interest as allowed under 15-30-2609, MCA, is payable from the date the return was filed. For example, an original return for tax year 2010 requesting a refund is filed November 12, 2011, and the department does not issue the refund until January 30, 2012. Refund interest is payable from the date the return was filed (November 12, 2011) until the date the refund was issued (January 30, 2012).

(10) remains the same but is renumbered (11).

AUTH: 15-30-2620, MCA

IMP: 15-1-216, 15-30-2512, 15-30-2602, 15-30-2609, 15-30-2641, MCA

REASONABLE NECESSITY: The department is proposing to amend ARM 42.15.315 because the 2009 Legislature enacted SB 418 (Ch. 470, L. 2009), which affects the calculation of refund interest. The amendment explains that if an individual requesting a refund files their original return after the extended due date and the department fails to issue that refund timely (generally within 45 days), interest on that refund is calculated from the date the return was received.

42.15.401 DEFINITIONS The following definitions apply to rules found in this subchapter:

(1) remains the same

(2) "Dependent" has the same meaning as "dependent" for purposes of determining dependent exemptions for federal income tax purposes, except as follows:

(a) The list of individuals in 15-30-2115, MCA, for whom a Montana dependent exemption is allowed is broader than the list of eligible relatives for whom a federal dependent exemption is allowed. The list includes a cousin or other lineal descendant of the sister or brother of the mother or father of the taxpayer, if for the taxpayer's tax year the individual received institutional care because of physical or mental disability, and if, before receiving the institutional care, they lived with the taxpayer in the taxpayer's home as a member of the taxpayer's family.

(b) The list of individuals in 15-30-~~2114~~ 2115, MCA, for whom a Montana dependent exemption is allowed is narrower than the eligible list of individuals for whom a federal dependent exemption is allowed and excludes a child placed for adoption, a foster child, and any other person who is not related to the taxpayer as provided in 15-30-~~2114~~ 2115, MCA, unless:

(i) their gross income did not exceed the limits provided in this rule; and

(ii) they lived with the taxpayer in the taxpayer's home as a member of the taxpayer's family for the entire tax year.

(c) A federal dependent exemption may be claimed for a person under a multiple support agreement exception even if the taxpayer does not provide over half of their total support. Because Montana does not provide a multiple support agreement exception, a dependent exemption is not allowed for any person who does not receive over half of their total support from the taxpayer. See the definition of "support," however, for special rules for determining the support of a child of divorced or separated parents.

(3) and (4) remain the same.

AUTH: 15-30-2620, MCA

IMP: 15-30-2114, 15-30-2115, 15-61-201, MCA

Reasonable Necessity: The department is proposing to amend ARM 42.15.401 to correct an incorrect statute reference in (2)(b) and add that statute to the implementing citations for the rule.

42.15.403 EXEMPTIONS FOR DEPENDENTS (1) Except as provided in (2), a taxpayer is allowed a dependent exemption for each dependent who receives over half of his or her total support from the taxpayer.

(2) A dependent exemption is not allowed for an individual described in (1):

(a) who, during the calendar year, has gross income of ~~$800 or~~ more than the exemption amount allowed under 15-30-2114, MCA; unless the individual is the taxpayer's ~~child and either:~~

~~(i) has not attained the age of 19 at the close of the calendar year in which the tax year of the taxpayer begins; or~~

(ii) is, during each of five calendar months during the calendar year in which the tax year of the taxpayer begins, a fulltime student at an educational institution or is pursuing a fulltime course of institutional on-farm training under the supervision of an accredited agent of an educational institution or of a state or political subdivision of the state "qualifying child" as defined in section 152 of the IRC;

(b) who makes a joint return with their spouse for the same tax year or for a tax year that begins in the calendar year in which the tax year of the taxpayer begins; or

(3) Except as provided in (6), in lieu of the dependent exemption described in (1), a taxpayer is allowed a dependent disabled child exemption as provided in this section and (4), (5), (6), ~~and~~ (7), and (8) equal in amount to twice the dependent exemption. The exemption is allowed for a child who receives over half of his or her support from the taxpayer if:

(a) the taxpayer's home is the dependent disabled child's principal place of abode;

(b) the dependent child has a permanent disability constituting 50% or more of the body as a whole; and

(4) remains the same.

(5) The dependent disabled child exemption may be claimed for a qualifying disabled child of any age and may be claimed for a qualifying disabled child who is 18 or older and has gross income ~~of $800 or more~~ equal to or more than the exemption amount allowed under 15-30-2114, MCA.

(6) through (8) remain the same

AUTH: 15-30-2620, MCA

IMP: 15-30-2114, 15-30-2152, 15-30-2641, MCA

Reasonable Necessity: The department is proposing to amend ARM 42.15.403 because the 2009 Legislature enacted SB 418 (Ch. 470, L. 2009), which incorporated the definition of "qualifying child" located in section 152 of the Internal Revenue Code into 15-30-2114, MCA, to describe the children of a taxpayer who may be claimed as dependents even if they have more income than is allowed for other dependents.

The rule supports the requirements of 15-30-2114, MCA, so that statute is being added as an implementing citation.

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 November 29, 2010.

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 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.

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, apply and have been fulfilled. The primary bill sponsor Senator Branae for SB 418 (2009), was contacted on October 13, 2010, by electronic mail.

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

CLEO ANDERSON DAN R. BUCKS

Rule Reviewer Director of Revenue

Certified to Secretary of State October 18, 2010