BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of 42.25.501, 42.25.512, 42.25.513, 42.25.514, 42.25.1801, 42.25.1809, 42.25.1813, and the transfer of ARM 42.32.101, 42.32.102, 42.32.103, 42.32.104, 42.32.105, 42.32.106, and 42.32.107, relating to natural resource taxes

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND TRANSFER

 

TO:  All Concerned Persons

 

1.  On December 17, 2012, at 11 a.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, in Helena, Montana, to consider the amendment and transfer 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., December 3, 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:

 

42.25.501 DEFINITIONS  The following definitions apply to this subchapter:

(1) through (6) remain the same.

 

AUTH: 15-23-108, MCA

IMP:  Title 15, Ch. 23, part 7, 15-23-701, 15-23-702, 15-23-703, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.501 to make the rule conform to the Secretary of State's current ARM formatting preference to list the applicable individual implementing statutes in place of a general chapter and section reference.

 

42.25.512  IMPUTED VALUATION  (1) through (1)(b) remains the same.

(3)(2)  The department will maintain the confidentiality of all comparable contract data and will use contract data provided by the producer in question whenever possible.

 

AUTH:  15-23-108, MCA

IMP:  15-23-701, 15-23-702, 15-35-107, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.512 to correct a numbering error.

 

42.25.513  TAXABLE VALUATION  (1) remains the same.

(2)  In arriving at a taxable valuation the department will apply 45% for strip mines and 33-1/3% for underground mines to the contract sales price or imputed valuation.

 

AUTH:  15-23-108, MCA

IMP:  15-23-702, 15-23-703, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.513. 

The proposed amendment will strike all of (2), because it has been determined that the language, which previously provided counties with direction for nontax purposes, is no longer needed in rule.  The current statute, 15-23-703(2), MCA, provides the counties with the necessary direction for such nontax purposes.  Additionally, the department is adding this statute as an implementing citation since the language previously contained in the rule is now in that statute.

 

42.25.514  RIGHT TO AUDIT  (1) and (2) remain the same.

 

AUTH:  15-23-108, MCA

IMP:  Title 15, Ch. 23, part 7 15-23-701, 15-23-702, 15-23-703, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.514.  The proposed amendment will make the rule conform to the Secretary of State's current ARM formatting preference of listing the applicable individual implementing statutes, in place of a general chapter and section reference.

 

42.25.1801  DEFINITIONS  In addition to the definitions found in 15-36-303, MCA, the following definitions apply to terms used in this chapter:

(1) through (4) remain the same.

(5)  "Lease" means that particularly described tract of land contained in a contract in writing whereby a person having a legal estate interest in the land so described conveys a portion of his interest to another, in consideration of a certain rental or other recompense or consideration.  A lease may contain one or more wells.  One operator shall be named as the lease operator and shall be responsible for filing the oil and natural gas production tax return.

(6) through (13) remain the same.

 

AUTH:  15-36-322, MCA

IMP:  15-1-101, 15-36-301, 15-36-302, 15-36-303, 15-36-304, 15-36-305, 15-36-309, 15-36-310, 15-36-311, 15-36-312, 15-36-313, 15-36-314, 15-36-315, 15-36-319, 15-36-321, 15-36-326, 82-1-111, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.1801 to revise the wording in the definition of the term "lease."  The amendment will not change the meaning or application of the definition, but will make it more understandable and maintain consistency with the statute.

 

42.25.1809  TAX RATES  (1)  Table I reflects the tax rates effective on July 1, 2005 October 1, 2006, and includes the rates contained in 15-36-304, MCA, and ARM 36.22.1242 (Board of Oil and Gas).  The rate is subject to change by the Board of Oil and Gas.

 

                                             Table I - Effective 7/1/2005 10/1/2006

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest           Interest

(a)  Natural gas

(i)  Primary recovery production

(A)  First 12 months of production                              .76%            15.06%

(B)  Pre-1999 wells after first

12 months of production                                                       15.06%           15.06%

(C)  Post-1999 wells after first

12 months of production                                                        9.26%            15.06%

(ii)  Stripper wells (averaging < 60 MCF/day)

(A)  Pre-1999 wells                                                     11.26%           15.06%

(iii)  Horizontally completed well production

(A)  First 18 months of qualifying production           .76%            15.06%

(B)  After 18 months                                                   9.26%           15.06%

(b)  Oil

(i)  Primary recovery production

(A)  First 12 months of production                               .76%           15.06%

(B)  Pre-1999 wells after first

12 months of production                                                        12.76%          15.06%

(C)  Post-1999 wells after first

12 months of production                                                          9.26%          15.06%

(ii)  Stripper wells (averaging < 15 bbls/day)

(A)  Pre-1999 and post-1999 wells

first 1-10 bbls                                                                              5.76%          15.06%

(B)  Pre-1999 and post-1999 over

10 bbls                                                                                         9.26%          15.06%

(C)  Pre-1999 and post-1999

stripper well exemption                                                              .76%           15.06%

(D)  Pre-1999 and post-1999

stripper well bonus production                                               6.26%           15.06%

(iii)  Horizontally drilled

(A)  Pre-1999 and post-1999 wells

first 18 months                                                                            .76%           15.06%

(B)  Pre-1999 wells after 18 months                        12.76%           15.06%

(C) Post-1999 wells after 18 months                        9.26%            15.06%

(iv)  Incremental production

(A)  New or expanded secondary

recovery production                                                                 8.76%            15.06%

(B)  New or expanded tertiary

production                                                                                 6.06%            15.06%

(v)  Horizontally recompleted wells

(A)  Pre-1999 and post-1999 wells

first 18 months                                                                         5.76%            15.06%

(B)  Pre-1999 wells after 18 months                        12.76%           15.06%

(C)  Post-1999 wells after 18 months                        9.26%           15.06%

                                   

Table II - Effective 7/1/2001

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest           Interest

            (a)  Natural gas

            (i)  Primary recovery production

            (A)  First 12 months of production                              .76%           15.06%

            (B)  Pre-1999 wells after first

12 months of production                                                       15.06%           15.06%

            (C)  Post-1999 wells after first

12 months of production                                                         9.26%           15.06%

            (ii)  Stripper wells (averaging < 60 MCF/day)

            (A)  Pre-1999 wells                                                     11.26%           15.06%

            (iii)  Horizontally completed well production

            (A)  First 18 months of qualifying

production                                                                                    .76%           15.06%

            (B)  After 18 months                                                      9.26%           15.06%

            (b)  Oil

            (i)  Primary recovery production   

            (A)  First 12 months of production                              .76%            15.06%

            (B)  Pre-1999 wells after first

12 months of production                                                       12.76%           15.06%

            (C)  Post-1999 wells after first

12 months of production                                                        9.26%            15.06%

            (ii)  Stripper wells (averaging < 15 bbls/day)

            (A)  Pre-1999 and post-1999 wells

first 1-10 bbls                                                                            5.76%            15.06%

            (B)  Pre-1999 and post-1999 over

10 bbls                                                                                       9.26%            15.06%

            (C)  Pre-1999 and post-1999

stripper well exemption                                                             .76%            15.06%

            (iii)  Horizontally drilled

            (A)  Pre-1999 and post-1999 wells

first 18 months                                                                           .76%            15.06%

            (B)  Pre-1999 wells after 18 months                       12.76%            15.06%

            (C)  Post-1999 wells after 18 months                       9.26%            15.06%

            (iv)  Incremental production

            (A)  New or expanded secondary

recovery production                                                                 8.76%            15.06%

            (B)  New or expanded tertiary

production                                                                                 6.06%            15.06%

            (v)  Horizontally recompleted wells

            (A)  Pre-1999 and post-1999 wells

first 18 months                                                                         5.76%            15.06%

            (B)  Pre-1999 wells after 18 months                       12.76%            15.06%

            (C)  Post-1999 wells after 18 months                       9.26%            15.06%

 

(2)  Table II reflects the tax rates effective on July 1, 2001, and includes the rates contained in 15-36-304, MCA, and ARM 36.22.1242 (Board of Oil and Gas).  The rate is subject to change by the Board of Oil and Gas.

 

                                    Table III - Effective 1/1/2000

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest           Interest

            (a)  Natural gas

            (i)  Primary recovery production

            (A)  First 12 months of production                            .8%             15.1%

            (B)  Pre-1999 wells after first

12 months of production                                                       15.1%             15.1%

            (C)  Post-1999 wells after first

12 months of production                                                         9.3%             15.1%

            (ii)  Stripper wells (averaging

< 60 MCF/day)

            (A)  Pre-1999 wells                                                     11.3%             15.1%

            (iii)  Horizontally completed

well production

            (A)  First 18 months of qualifying

production                                                                                  .8%             15.1%

            (B)  After 18 months                                                      9.3%            15.1%

            (b)  Oil

            (i)  Primary recovery production   

            (A)  First 12 months of production                              .8%             15.1%

            (B)  Pre-1999 wells after first

12 months of production                                                        12.8%            15.1%

            (C)  Post-1999 wells after first

12 months of production                                                          9.3%            15.1%

            (ii)  Stripper wells (averaging

< 15 bbls/day)

            (A)  Pre-1999 and post-1999 wells

first 1-10 bbls                                                                              5.8%            15.1%

            (B)  Pre-1999 and post-1999 over

10 bbls                                                                                         9.3%            15.1%

            (C)  Pre-1999 and post-1999

stripper well exemption                                                               .8%            15.1%

 

                                    Table III - Effective 1/1/2000

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest            Interest

 

            (iii)  Horizontally drilled

            (A)  Pre-1999 and post-1999 wells

first 18 months                                                                            .8%             15.1%

            (B)  Pre-1999 wells after 18 months                        12.8%             15.1%

            (C)  Post-1999 wells after 18

months                                                                                       9.3%             15.1%

            (iv)  Incremental production

            (A)  New or expanded secondary

recovery production                                                                  8.8%             15.1%

            (B)  New or expanded tertiary

production                                                                                  6.1%             15.1%

            (v)  Horizontally recompleted wells

            (A)  Pre-1999 and post-1999 wells

first 18 months                                                                          5.8%             15.1%

            (B)  Pre-1999 wells after 18 months                        12.8%             15.1%

            (C)  Post-1999 wells after 18 months                        9.3%             15.1%

 

            (3)  Table III reflects the tax rates effective on January 1, 2000, and includes the rates contained in 15-36-304, MCA, and ARM 36.22.1242 (Board of Oil and Gas).  The rate set under 82-11-131, MCA, is at the maximum allowable rate of .3 percent of value.  The rate is subject to change by the Board of Oil and Gas.

 

            Table IV - Effective 7/1/1999 through 12/31/1999

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest            Interest

            (a)  Natural gas

            (i)  Pre-1985 wells                                                       18.85%           15.1%

            (ii)  Post-1985 wells (qualifying

production)

(A)  First 12 months                                                         .8%            15.1%

            (B)  After first 12 months, but less

than first 25 months                                                                     12.8%           15.1%

            (C)  After first 24 months                                                15.45%           15.1%

            (iii)  Stripper wells (averaging

< 60 MCF/day)

            (A)  Pre-1985 and post-1985 wells                               11.3%            15.1%

            (iv)  Post 1999 wells

            (A)  First 12 months of qualifying

production                                                                                     .8%            15.1%

            (B)  After 12 months                                                         9.3%            15.1%

            (v)  Horizontally completed well

production

            (A)  First 18 months of qualifying

production                                                                                     .8%            15.1%

(B)  After 18 months                                                         9.3%             15.1%

(b)  Oil

(i)  Primary recovery production   

(A)  Pre-1985 wells                                                      14.2%            17.2%

            (ii)  Stripper wells (averaging

< 15 bbls/day)

            (A)  Pre-1985 and post-1985 wells

first 1-10 bbls                                                                              5.8%            15.1%

            (B)  Pre-1985 and post-1985 over

10 bbls                                                                                         9.3%            15.1%

            (C)  Pre-1985 and post-1985

stripper well exemption                                                               .8%            15.1%

            (iii)  Horizontally drilled

            (A)  Post-1985 wells

            (I)  First 18 months                                                           .8%            15.1%

            (II)  After 18 months, but less

than first 25 months                                                                     7.8%            12.8%

            (III)  After 24 months                                                     12.8%            12.8%

(B)  Post-1999 wells

(I)  First 18 months                                                           .8%            15.1%

(II)  After 18 months                                                       9.3%            15.1%

 

                                Table IV - Effective 7/1/1999 through 12/31/1999

 

                                                                                                  Working         Nonworking

Type of Production                                                    Interest           Interest

(iv)  Incremental production

(A)  New or expanded secondary

recovery production

(I)  Pre-1985 wells                                                        8.8%              16.3%

(II)  Post-1985 wells                                                     8.8%              10.8%

(III)  Post-1999 wells                                                    8.8%              15.1%

            (B)  New or expanded tertiary

production

(I)  Pre-1985 wells                                                        6.1%              15.3%

(II)  Post-1985 wells                                                     6.1%               9.8%

(III)  Post-1999 wells                                                    6.1%              15.1%

            (v)  Horizontally recompleted wells

            (A)  First 18 months of qualifying

production

(I)  Post-1985 wells                                                      5.8%               5.8%

            (II)  Post-1999 wells                                                     5.8%              15.1%

            (B)  After 18 months

(I)  Post-1985 wells                                                     12.8%             12.8%

(II)  Post-1999 wells                                                     9.3%              15.1%

 

(4)(2)  Table IV reflects the tax rates effective on July 1, 1999, through December 31, 1999, and includes the rates contained in 15-36-304, MCA, and ARM 36.22.1242 (Board of Oil and Gas).  The rate of tax set under 82-11-131, MCA, is at the maximum allowable rate of .3 percent of value.  The rate is subject to change by the Board of Oil and Gas. 

 

AUTH:  15-36-322, MCA

IMP:  15-36-304, 82-11-131, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.1809 to update and remove outdated language that no longer applies.

 

42.25.1813  APPLICABILITY  (1) through (3) remain the same.

 

AUTH:  15-36-322, MCA

IMP:  15-1-501, 15-36-324 15-36-331, 15-36-332, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to amend ARM 42.25.1813 to remove and replace repealed implementing statutes with current applicable statutes.

 

4.  The rules proposed to be transferred provide as follows:

 

42.32.101  DEFINITIONS  which can be found on page 42-3205 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-103, 15-38-105, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.101.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.102  APPLICABILITY  which can be found on page 42-3205 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-105, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.102.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.103  COMPUTATION OF TAX  which can be found on page 42-3205 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-105, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.103.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.104  RESPONSIBILITY FOR FILING FORMS AND PAYING TAX

which can be found on page 42-3205 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-104, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.104.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.105  SUPPLEMENTAL INFORMATION  which can be found on page 42-3206 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-105, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.105.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.106  MINIMUM TAX AND ANNUAL EXEMPTION  which can be found on page 42-3206 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-104, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.106.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

42.32.107  COMPUTATION OF GROSS VALUE  which can be found on page 42-3206 of the Administrative Rules of Montana.

 

AUTH:  15-1-201, MCA

IMP:  15-38-104, 15-38-105, MCA

 

REASONABLE NECESSITY:  In accordance with 2-4-314, MCA, the department conducted a biennial review of all its administrative rules.  As a result of that review, the department is proposing to transfer ARM 42.32.107.  The proposed transfer will place all rules relative to natural resource taxes in a single location within Chapter 25.

 

5.  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 January 4, 2013.

 

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

 

7.  An electronic copy of this notice is available on the department's web site at www.revenue.mt.gov.  Locate "Laws and Rules" in the left hand column, select the "Rules" link and 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.  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.

 

8.  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.  A written request may be mailed or delivered to the person in number 5 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.

 

9.  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 November 13, 2012