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| Montana Administrative Register Notice 42-2-883 | No. 19 10/11/2012 | |
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BEFORE THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA
TO: All Concerned Persons
1. On November 14, 2012, at 1:30 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 p.m., October 26, 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 15-6-202(4) or 15-6-219(5) (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 trended depreciation schedule will be used:
(2) For all other leased property that is not rented on an hourly, daily, weekly,semimonthly, or monthly basis, the valuation procedures shall be the same as other like personal property. (3) When a special mobile permit (SM plate), as defined in 61-4-101(66), MCA, is purchased for lease or rental equipment, the equipment will be classified and valued the same as other SM equipment in class eight. (4) All leased and rental property not exempt under 15-6-202(4) or 15-6-219(5) (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, 15-6-202, 15-6-207, 15-6-219, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.113, to update the trended depreciation schedules in the rule. The department further proposes to amend the rule to correct the numerical order of the statutes referenced in (1) and (4), and to update the implementing citations to include 15-6-202, MCA.
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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.123, to update the trended depreciation schedule in the rule.
42.21.131 HEAVY EQUIPMENT (1) remains the same. (2) For all heavy equipment which cannot be valued under (1), the department shall try to ascertain the original FOB (free on board value) through old heavy equipment valuation guidebooks. If an original FOB cannot be ascertained, the department may use trending to determine the FOB. The FOB or "trended" FOB will be used in conjunction with the depreciation schedule in (5) to arrive at a value which approximates wholesale value. The trend factors are calculated using the most recent Contractor's Equipment factors available in the Marshall & Swift Valuation Service (3) and (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
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.131, to update the trended depreciation schedule in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
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 (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
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.137, to update the trended depreciation schedules in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.21.138 OIL AND GAS FIELD MACHINERY AND EQUIPMENT (1) remains the same. (2) The department shall prepare a 15-year trended depreciation schedule for oil and gas field machinery and equipment. Trend factors and depreciation factors published (3) The trended depreciation schedule referred to in (1) and (2) is listed below and shall be used for tax year
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.138, to update the trended depreciation schedule in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.21.139 WORK-OVER AND SERVICE RIGS (1) remains the same. (2) The department shall prepare a ten-year trended depreciation schedule for work-over and service rigs. The trended depreciation schedule shall be derived from depreciation factors published (3) and (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
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.139, to update the trended depreciation schedule in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
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
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.140, to update the trended depreciation schedule in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.21.151 TELEVISION CABLE SYSTEMS (1) remains the same. (2) The average market value for the dishes and towers will be determined by using a five-year trended depreciation schedule on dishes and ten-year trended depreciation schedule on towers. Both the trend factors and the depreciation tables will be derived from the Marshall & Swift Valuation Service Guide, as published by the Marshall and Swift Publication Company, 915 Wilshire Boulevard, 8th Floor, P.O. Box 26307, Los Angeles, California 90026-0307. The trend factors shall be the most recent available from the "Average of all Indexes" listed in the above publication. (3) remains the same. (4) The trended depreciation schedules referred to in (2) and (3) are listed below and shall be in effect for tax year
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.2.151, to update the trended depreciation schedules in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.21.153 SKI LIFT EQUIPMENT (1) remains the same. (2) The "average of all" industry trend factors as indicated by the Marshall & Swift Valuation Service Guide shall be used. (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.
(a) through (b)(i) remain the same. (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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.153, to update the trended depreciation schedule in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (2), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.21.155 DEPRECIATION SCHEDULES (1) Trended depreciation schedules of four, five, and ten years have been established for each category of property. The number of years corresponds to the useful life of the property taking into account physical obsolescence. The trended depreciation schedules reflect the remaining life of the property over the term of years assigned with a 5 percent to 20 percent residual. The five- and ten-year depreciation schedules "% good" numbers were extracted from the (2) The trended depreciation schedules for tax year
CATEGORY 1
(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, MCA
REASONABLE NECESSITY: The department determines the market value of personal property by using the guides and valuation manuals listed in its rules and then applying the trended depreciation schedules as published in its rules. Personal property is valued annually, and because the trend tables used to value personal property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trended depreciation schedules provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.21.155, to update the trended depreciation schedules in the rule. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (1), in order to provide consistency throughout the trended depreciation rules in Title 42.
42.22.1307 TREND FACTORS (1) The trending factors for all property other than land or improvements to land shall be published annually by the department. These factors will be taken from the Marshall & Swift Valuation Service Guide except in those instances when the taxpayer can demonstrate to the department that another source of information will provide a more reliable indication of replacement/reproduction cost and thus the resulting "market value" for the industry as a whole.
AUTH: 15-1-201, MCA IMP: 15-8-111, MCA
REASONABLE NECESSITY: The department proposes to amend ARM 42.22.1307 to revise the title of the appraisal guide being referenced, in order to provide consistency throughout the trended depreciation rules in Title 42.
42.22.1308 DEPRECIATION SCHEDULES (1) Depreciation schedules for all property, other than land or improvements to land, shall be published annually by the department. These depreciation schedules will be an expanded version of the depreciation schedule provided by the Marshall & Swift Valuation Service Guide. These depreciation rates will normally compensate for the loss in value due to ordinary wear and tear, offset by reasonable maintenance, and ordinary functional obsolescence due to technological changes within the process during the life expectancy period.
AUTH: 15-1-201, MCA IMP: 15-8-111, MCA
REASONABLE NECESSITY: The department proposes to amend ARM 42.22.1308 to revise the title of the appraisal guide being referenced, in order to provide consistency throughout the trended depreciation rules in Title 42.
42.22.1311 INDUSTRIAL MACHINERY AND EQUIPMENT TREND FACTORS (1) The trend factors will be used to value industrial machinery and equipment for ad valorem tax purposes pursuant to ARM 42.22.1306. The department uses annual cost indexes from the Marshall & Swift Valuation Service Guide. The current index is divided by the annual index for each year to arrive at a trending factor. Each major industry has its own trend table. Where no index existed in the Marshall & Swift Valuation Service Guide for a particular industry, that industry was grouped with other industries using similar equipment. The department will utilize the machinery and equipment trend factors that are set forth in the following tables: (2) Life expectancies for industrial machinery and equipment are shown in the trend table below.
(a) through (cj) 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 determines the market value of industrial machinery and equipment by using the guides and valuation manuals listed in its rules and then applying the trend factor tables published in its rules. The machinery and equipment is valued annually, and because the trend tables used to value the property change from year to year, the department must provide taxpayers with notice of those changes and does so through the rulemaking process. The annual update to the trend tables provides taxpayers with the current depreciation percentage for each of the personal property classifications for the upcoming year. The updates also clearly identify for the taxpayer how the department values and depreciates property over time. Therefore, the department proposes to amend ARM 42.22.1311, to update the trend factors table in the rule. Additionally, while the table contents have been updated annually, it was discovered in a recent biennial review of the department's rules that the year in the title of the table still showed 2006. The table title is being amended to update the year from 2006 to 2013 at this time and will be revised accordingly each year along with future updates to the contents of the table. The department further proposes to amend the rule to revise the title of the appraisal guide being referenced in (1), to provide consistency throughout the trended depreciation rules in Title 42.
42.22.1312 INDUSTRIAL MACHINERY AND EQUIPMENT DEPRECIATION SCHEDULE (1) remains the same. (2) The department will utilize the depreciation schedules set forth above as reflected in the following example: EXAMPLE The Trending/Depreciation Procedure
In order to use the economic age-life method to value machinery and equipment, several steps must be followed. 1. Determine the economic life of the subject industry. 2. Acquire a set of reasonable trends for that economic life. 3. Acquire the original installed cost (direct and indirect) for the subject equipment. 4. Apply the appropriate trend factor to the original installed cost to determine replacement cost new (RCN). 5. Depreciate the RCN on the basis of age to arrive at sound value.
Example:
Industry - Sawmill Economic life - 10 years
Case I II Equipment - Motor Original Installed Cost $ 200 $ 100 Year Installed
Case I Case II
Cost $ 200 Cost $ 100 x Trend RCN $ x % Good Sound Value $
*The trending factor is applied only to the last year of the economic life. Although the equipment is more than 20 years old, it is trended by the 10th year trend.
AUTH: 15-1-201, MCA IMP: 15-6-138, 15-6-156, 15-8-111, MCA
REASONABLE NECESSITY: The department proposes to amend ARM 42.22.1312 to update the example with more current trending and depreciation schedule data.
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 21, 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. Select the "Legal Resources" link in the left hand column, and click on the "Rules" link within to view the options under the "Current Rule Actions – Published Notices" 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. While the department also strives to keep its web site accessible at all times, in some instances it may be temporarily unavailable 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 notice 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 October 1, 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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].
