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 42.4.104, 42.4.2602, 42.4.2801, 42.4.2802, 42.4.2803, 42.4.2905, 42.4.3103, and 42.4.4107 pertaining to the revision of the names corporation license tax and corporation income tax

)

)

)

)

)

)
)

NOTICE OF PROPOSED AMENDMENT

NO PUBLIC HEARING CONTEMPLATED

TO: All Concerned Persons

1. On September 8, 2014, the Department of Revenue proposes to amend the above-stated rules.

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, please advise the department of the nature of the accommodation needed, no later than 5 p.m. on August 18, 2014. Please contact Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected].

3. GENERAL STATEMENT OF REASONABLE NECESSITY. The department proposes amending the rules in this notice to properly implement Senate Bill 361, L. 2013, which changed the name of the "corporation license tax" to the "corporate income tax" and the name of the "corporation income tax" to the "alternative corporate income tax." This general statement of reasonable necessity applies to the following proposed actions and will be supplemented as appropriate for any additional proposed rule change.

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

42.4.104 ENERGY GENERATING SYSTEMS (1) through (2)(c) remain the same.

(d) if the energy generating system is a geothermal system described in (2)(c), that is installed by a builder constructing a new residence to heat or cool the dwelling, a credit against the builder's individual or ~~corporation license~~ corporate income tax liability, as applicable, equal to a portion of the installation costs of the system, not to exceed $1,500, as provided in 15-32-115, MCA;

(e) through (9) remain the same.

AUTH: 15-1-201, 15-32-105, 15-32-203, MCA

IMP: 15-6-224, 15-6-225, 15-32-102, 15-32-105, 15-32-115, 15-32-201, 15-32-202, MCA

42.4.2602 ADDITIONAL DEDUCTION FOR PURCHASE OF RECYCLED MATERIAL (1) Businesses, including corporations, individuals, and partnerships, may take an additional 10% percent deduction of the expenses related to the purchase of recycled products used within Montana in their business if the recycled products purchased contain recycled material at a level consistent with industry standards and/or standards established by the Federal Environmental Protection Agency when such standards exist. The department may request the assistance of the Montana Department of Environmental Quality to determine if the product qualifies as a recycled product. Due to continuing technological advances in the recycling industry, the standards will be subject to constant change. The industry standards to be used will be those in effect at the time the product was purchased.

(2) remains the same.

(3) For a corporation paying ~~income/license~~ the corporate income tax/alternative corporate income tax, the deduction is an adjustment to federal taxable income for ~~corporation income/license~~ the corporate income tax/alternative corporate income tax.

(4) and (5) remain the same.

AUTH: 15-32-609, 15-32-611, MCA

IMP: 15-32-603, 15-32-609, 15-32-610, MCA

REASONABLE NECESSITY: The department further proposes amending ARM 42.4.2602(2) to change % to percent in the language text, in keeping with current department ARM formatting practices.

42.4.2801 DEFINITIONS The following definitions apply to this subchapter:

(1) and (2) remain the same.

AUTH: 15-1-201, ~~15-31-150~~ 15-31-501, MCA

IMP: 15-31-132, MCA

REASONABLE NECESSITY: The department proposes amending ARM 42.4.2801 to correct a number transposition in a statute citation.

42.4.2802 HEALTH INSURANCE FOR UNINSURED ~~MONTANAN'S~~ MONTANANS CREDIT (1) Montana law provides two different tax credits for health insurance purchased by employers for employees. A program administered by the commissioner of insurance, and referred to as the Insure Montana Credit, provides incentives, including a refundable tax credit provided in 15-30-2368 and 33-22-2006, MCA, for eligible, prequalified small employers. The rules related to that program are located in ARM Title 6, chapter 6, subchapter 52. No tax form is required to claim the preauthorized, refundable credit. Rather, the prequalified employers claim it as a line item on their individual income or ~~corporation license~~ corporate income tax return or, if they are taxed as an S corporation or partnership, they report it as a line item on their information returns and the pass-through entity owners claim their part as a line item on their individual income tax or ~~corporation license~~ corporate income tax returns, including a copy of the certificate issued by the Montana State Auditor's Office, verifying the amount of the credit.

(2) The rules in this subchapter apply to a second credit, referred to as the Health Insurance for Uninsured Montanans Credit, provided in 15-30-2367 and 15-31-132, MCA. The credit under 15-30-2367, MCA, against individual income tax, and 15-31-132, MCA, against ~~corporation license~~ corporate income tax, is subject to specific conditions and limitations listed in 15-31-132, MCA. It is not refundable, and any unused credit amount may not be carried over to another tax year. An employer ~~can not~~ cannot claim both the small ~~employers~~ employer credit provided in Title 33, chapter 22 and the Title 15, chapter 30 and 31, MCA tax credit.

(3) through (10) remain the same.

AUTH: 15-31-501, MCA

IMP: 15-30-2367, 15-30-2368, 15-31-132, 33-1-207, MCA

REASONABLE NECESSITY: The department further proposes amending ARM 42.4.2802 to make a grammatical correction in the rule title and in (2).

42.4.2803 DETERMINING NUMBER OF EMPLOYEES (1) remains the same.

AUTH: 15-1-201, ~~15-31-150~~ 15-31-501, MCA

IMP: 15-30-2367, 15-31-132, 33-1-207, MCA

REASONABLE NECESSITY: The department proposes amending ARM 42.4.2803 to correct a number transposition in a statute citation.

42.4.2905 CLAIMING THE HISTORIC PRESERVATION CREDIT

(1) Except as provided in (2) and (3), federal Form 3468, the federal form used in claiming the federal rehabilitation credit, must be attached to the applicable Montana tax returns. S corporations and entities taxable as partnerships must attach the form to their information returns and the owners of the pass-through entities must also attach a copy to their individual income or ~~corporation license~~ corporate income tax returns.

(2) and (3) remain the same.

AUTH: 15-30-2620, MCA

IMP: 15-30-2342, 15-31-151, MCA

42.4.3103 CREDIT FOR CONTRACTOR'S GROSS RECEIPTS TAX - ~~CORPORATION LICENSE~~ CORPORATE INCOME TAX (1) A direct credit against the tax is allowed for "public contractor's gross receipts tax" paid pursuant to the provisions of 15-50-205 and 15-50-206, MCA. The credit is allowed with respect to the corporation's Montana ~~corporation license~~ corporate income tax liability determined for the taxable period within which the net income from contracts subject to the gross receipts tax is reported. If the corporation reports its income from contracts on a percentage of completion basis, the credit must be allocated accordingly.

(2) The amount of credit allowable is the net public contractor's gross receipts tax (after personal property tax credit) actually imposed against and paid by the corporation but not in excess of its Montana ~~corporation license~~ corporate income tax liability. The credit is allowed without regard to the fact that the public contractor's gross receipts tax is an allowable deduction in determining net income subject to the Montana ~~corporation license~~ corporate income tax.

(3) and (4) remain the same.

AUTH: 15-31-501, MCA

IMP: 15-50-207, MCA

42.4.4107 COMMERCIAL USE AND OTHER REQUIREMENTS FOR COMMERCIAL AND NET METERING SYSTEMS ELIGIBLE FOR THE INCOME TAX CREDIT (1) The credit against individual income and ~~corporation license~~ corporate income taxes provided in 15-32-402, MCA, is limited to 35 percent of the eligible costs for investments in depreciable commercial systems and net metering systems. Property placed in service for personal use does not qualify for this credit, but may qualify for the alternative energy system credit provided in 15-32-201, MCA, and ARM 42.4.104.

(2) and (3) remain the same.

AUTH: 15-30-2620, 15-31-501, 15-32-407, MCA

IMP: 15-32-402, 15-32-404, 15-32-406, MCA

5. Concerned persons may submit their data, views, or arguments concerning the proposed action in writing to: Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected] and must be received no later than September 5, 2014.

6. If persons who are directly affected by the proposed action wish to express their data, views, or arguments orally or in writing at a public hearing, they must make written request for a hearing and submit this request along with any written comments to Laurie Logan at the above address no later than 5:00 p.m., September 5, 2014.

7. If the agency receives requests for a public hearing on the proposed action from either 10 percent or 25, whichever is less, of the persons directly affected by the proposed action; from the appropriate administrative rule review committee of the Legislature; from a governmental subdivision or agency; or from an association having not less than 25 members who will be directly affected, a hearing will be held at a later date. Notice of the hearing will be published in the Montana Administrative Register. Ten percent of those directly affected has been determined to be 1,600 persons based on approximately 16,000 corporate income tax payers.

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 notice 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 5 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.

9. An electronic copy of this notice is available on the department's web site at revenue.mt.gov. Select the Administrative Rules link under the Other Resources section located in the body of the homepage, and open the Proposal Notices section within. 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.

10. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary sponsor of Senate Bill 361, L. 2013, Senator Bruce Tutvedt, was notified by regular mail on February 4, 2014, and subsequently notified by regular mail on July 9, 2014.

11. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will not significantly and directly impact small businesses.

/s/ Laurie Logan /s/ Mike Kadas

LAURIE LOGAN MIKE KADAS

Rule Reviewer Director of Revenue

Certified to the Secretary of State July 28, 2014.