2003 Montana Legislature

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SENATE BILL NO. 461

INTRODUCED BY STORY, BRUEGGEMAN, STONINGTON


AN ACT TO MITIGATE THE EFFECTS OF THE PERIODIC PROPERTY TAX REVALUATION CYCLE THAT BEGINS IN 2003; DECREASING THE CLASS FOUR PROPERTY TAX RATE FROM 3.46 PERCENT TO 3.01 PERCENT OVER A 6-YEAR PERIOD; PROVIDING RATE ADJUSTMENTS TO CLASS FOUR PROPERTY TAX RATES FOR CERTAIN RESIDENCES WITH EXTRAORDINARY INCREASES IN MARKET VALUE; ESTABLISHING NEW CLASS FOUR PROPERTY TAX EXEMPTION RATES FOR RESIDENTIAL PROPERTY AND COMMERCIAL AND INDUSTRIAL PROPERTY THAT ADJUST THE EXEMPT PERCENTAGE OF VALUE OVER 6 YEARS; PROVIDING AN EXTENSION OF 2003 ADMINISTRATIVE DEADLINES RELATING TO PROPERTY TAXATION; PROVIDING FOR AN INTERIM PROPERTY TAX REAPPRAISAL STUDY COMMITTEE AND A TAX REFORM STUDY COMMITTEE; PROVIDING AN APPROPRIATION; AMENDING SECTIONS 15-6-134, 15-6-201, AND 15-7-111, MCA; AND PROVIDING EFFECTIVE DATES, APPLICABILITY DATES, AND A TERMINATION DATE.

 

AN ACT TO MITIGATE THE EFFECTS OF THE PERIODIC PROPERTY TAX REVALUATION CYCLE THAT BEGINS IN 2003; DECREASING THE CLASS FOUR PROPERTY TAX RATE FROM 3.46 PERCENT TO 3.01 PERCENT OVER A 6-YEAR PERIOD; PROVIDING RATE ADJUSTMENTS TO CLASS FOUR PROPERTY TAX RATES FOR CERTAIN RESIDENCES WITH EXTRAORDINARY INCREASES IN MARKET VALUE; ESTABLISHING NEW CLASS FOUR PROPERTY TAX EXEMPTION RATES FOR RESIDENTIAL PROPERTY AND COMMERCIAL AND INDUSTRIAL PROPERTY THAT ADJUST THE EXEMPT PERCENTAGE OF VALUE OVER 6 YEARS; PROVIDING AN EXTENSION OF 2003 ADMINISTRATIVE DEADLINES RELATING TO PROPERTY TAXATION; PROVIDING FOR AN INTERIM PROPERTY TAX REAPPRAISAL STUDY COMMITTEE AND A TAX REFORM STUDY COMMITTEE; PROVIDING AN APPROPRIATION; AMENDING SECTIONS 15-6-134, 15-6-201, AND 15-7-111, MCA; AND PROVIDING EFFECTIVE DATES, APPLICABILITY DATES, AND A TERMINATION DATE.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

 

     Section 1.  Extended property tax assistance -- phasein. (1) For the purpose of mitigating extraordinary market value increases during the revaluation cycle that ended December 31, 2002, the rate of taxation of class four residential dwellings and appurtenant land not to exceed 5 acres otherwise set in 15-6-134(2)(a) is adjusted in this section for properties with extraordinary increases in market value with owners that meet income requirements.

     (2) An annual application on a form provided by the department is required to receive a tax rate adjustment under this section. The application must be signed under oath. A tax rate adjustment may be granted only for the current tax year and may not be granted for a previous year.

     (3) A rate adjustment may not be granted for:

     (a) any property that was sold or for which the ownership was changed after December 31, 2002, unless the change in ownership is between husband and wife or parent and child with only nominal actual consideration or the change is pursuant to a divorce decree;

     (b) the value of new construction, including remodeling, on the property occurring after December 31, 2002, that is greater than 25% of the market value of the improvements; or

     (c) a land use change occurring after December 31, 2002, that increases the market value of the land by more than 25%.

     (4) For the purposes of determining the adjustment in the class four property tax rate in this section, the following provisions apply:

     (a) The change in taxable value before reappraisal is the 2002 tax year value adjusted for any new construction or destruction that occurred in the 2002 tax year. The taxable value before reappraisal for the 2003 tax year and subsequent years is the same as the 2002 tax year value if no new construction, destruction, land splits, land use changes, land reclassifications, land productivity changes, improvement grade changes, or other changes are made to the property during 2002 or subsequent tax years.

     (b) The percentage increase in taxable value is measured as the percentage change in taxable value before reappraisal to the taxable value after reappraisal. The taxable value before reappraisal is calculated by multiplying the value before reappraisal in 2003 times 0.69 times 0.0346. The taxable value after reappraisal is calculated by multiplying the 2003 market value after reappraisal times 0.66 times 0.0301.

     (c) The dollar increase in tax liability is measured as the change in tax liability before reappraisal to the tax liability after reappraisal. The tax liability before reappraisal is calculated by multiplying the value before reappraisal in 2003 times 0.69 times 0.0346 times the tax year 2002 mill levy applied to the property. The tax liability after reappraisal is calculated by multiplying the 2003 market value after reappraisal times 0.66 times 0.0301 times the tax year 2002 mill levy applied to the property. The tax year 2002 mill levy is the total of all mills applied to the property for fiscal year 2003.

     (d) Total household income is the sum of the income of all members of the household and all other persons who are owners of the property. Income, as used in this section, includes income from all sources, including net business income and otherwise tax-exempt income of all types but not including social security income paid directly to a nursing home. Net business income is gross income less ordinary expenses but before deducting depreciation or depletion allowance, or both. For an entity, as defined in subsection (8), income also includes the income of any natural person or entity that is a trustee of or controls 25% or more of the entity. A household is an association of persons who live in the same dwelling, sharing its furnishings, facilities, accommodations, and expenses. For single-family rental dwellings, total household income does not include the income of the tenant.

     (e) The phase-in value is the valuation change made pursuant to 15-7-111(3) since the last reappraisal.

     (5) (a) If total household income is $25,000 or less, the percentage increase in taxable value is greater than 24%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate as follows:

     (i) For tax year 2003, the tax rate is 0.03598 times the value before reappraisal divided by the 2003 phase-in value.

     (ii) For tax year 2004, the tax rate is 0.03759 times the value before reappraisal divided by the 2004 phase-in value.

     (iii) For tax year 2005, the tax rate is 0.03932 times the value before reappraisal divided by the 2005 phase-in value.

     (iv) For tax year 2006, the tax rate is 0.04109 times the value before reappraisal divided by the 2006 phase-in value.

     (v) For tax year 2007, the tax rate is 0.04289 times the value before reappraisal divided by the 2007 phase-in value.

     (vi) For tax year 2008 and after, the tax rate is 0.04485 times the value before reappraisal divided by the 2008 phase-in value.

     (b) If total household income is greater than $25,000 but less than or equal to $50,000, the percentage increase in taxable value is greater than 30%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate as follows:

     (i) For tax year 2003, the tax rate is 0.03633 times the value before reappraisal divided by the 2003 phase-in value.

     (ii) For tax year 2004, the tax rate is 0.03828 times the value before reappraisal divided by the 2004 phase-in value.

     (iii) For tax year 2005, the tax rate is 0.04038 times the value before reappraisal divided by the 2005 phase-in value.

     (iv) For tax year 2006, the tax rate is 0.04251 times the value before reappraisal divided by the 2006 phase-in value.

     (v) For tax year 2007, the tax rate is 0.04467 times the value before reappraisal divided by the 2007 phase-in value.

     (vi) For tax year 2008 and after, the tax rate is 0.04702 times the value before reappraisal divided by the 2008 phase-in value.

     (c) If total household income is greater than $50,000 but less than or equal to $75,000, the percentage increase in taxable value is greater than 36%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate as follows:

     (i) For tax year 2003, the tax rate is 0.03668 times the value before reappraisal divided by the 2003 phase-in value.

     (ii) For tax year 2004, the tax rate is 0.03898 times the value before reappraisal divided by the 2004 phase-in value.

     (iii) For tax year 2005, the tax rate is 0.04143 times the value before reappraisal divided by the 2005 phase-in value.

     (iv) For tax year 2006, the tax rate is 0.04392 times the value before reappraisal divided by the 2006 phase-in value.

     (v) For tax year 2007, the tax rate is 0.04646 times the value before reappraisal divided by the 2007 phase-in value.

     (vi) For tax year 2008 and after, the tax rate is 0.04919 times the value before reappraisal divided by the 2008 phase-in value.

     (d) The adjusted tax rate computed under this subsection (5) must be rounded to the nearest 1/100 of 1%.     

     (6) A person who applies for a tax rate adjustment under this section shall provide the department with documentation of total household income and other information that the department considers necessary to determine the person's eligibility for the tax rate adjustment. Documents provided to the department to determine eligibility for a tax rate adjustment are subject to the confidentiality provisions in 15-30-303.

     (7) A person who applies for a tax rate adjustment and submits a false or fraudulent application for a tax rate adjustment is guilty of false swearing under 45-7-202.

     (8) For the purposes of this section, "entity" means:

     (a) a corporation, fiduciary, or pass-through entity, as those terms are defined in 15-30-101; and

     (b) an association, joint-stock company, syndicate, trust or estate, or any other nonnatural person.

 

     Section 2.  Extended property tax assistance -- phasein. (1) For the purpose of mitigating extraordinary market value increases during revaluation cycles that begin after December 31, 2008, the rate of taxation of class four residential dwellings and appurtenant land not to exceed 5 acres otherwise set in 15-6-134(2)(a) is adjusted in this section for properties with extraordinary increases in market value with owners that meet income requirements.

     (2) An annual application on a form provided by the department is required to receive a tax rate adjustment under this section. The application must be signed under oath. A tax rate adjustment may be granted only for the current tax year and may not be granted for a previous year.

     (3) A rate adjustment may not be granted for:

     (a) any property that was sold or for which the ownership was changed after December 31 of the last year of the previous revaluation cycle, unless the change in ownership is between husband and wife or parent and child with only nominal actual consideration or the change is pursuant to a divorce decree;

     (b) the value of new construction, including remodeling, on the property occurring after December 31 of the last year of the previous revaluation cycle that is greater than 25% of the market value of the improvements; or

     (c) a land use change occurring after December 31 of the last year of the previous revaluation cycle that increases the market value of the land by more than 25%.

     (4) For the purposes of determining the adjustment in the class four property tax rate in this section, the following provisions apply for revaluation cycles beginning after December 31, 2008:

     (a) (i) The percentage increase in taxable value is measured as the percentage change in taxable value before reappraisal to the taxable value after reappraisal. The taxable value before reappraisal is calculated by multiplying the value before reappraisal times the result of 1.00 minus the homestead exemption before reappraisal times the tax rate before reappraisal. The taxable value after reappraisal is calculated by multiplying the market value after reappraisal times the result of 1.00 minus the homestead exemption after reappraisal times the tax rate after reappraisal.

     (ii) The tax rate before reappraisal is the tax rate that was in effect during the last year of the previous reappraisal cycle.

     (iii) The tax rate after reappraisal is the tax rate that will be in effect during the last year of the current reappraisal cycle.

     (iv) The homestead exemption before reappraisal is the homestead exemption that was in effect during the last year of the previous reappraisal cycle.

     (v) The homestead exemption after reappraisal is the homestead exemption that will be in effect during the last year of the current reappraisal cycle.

     (b) The dollar increase in tax liability is measured as the percentage change in tax liability before reappraisal to the tax liability after reappraisal. The tax liability before reappraisal is calculated by multiplying the value before reappraisal times the result of 1.00 minus the homestead exemption before reappraisal times the tax rate before reappraisal times the mill levy applied to the property before reappraisal. The tax liability after reappraisal is calculated by multiplying the market value after reappraisal times the result of 1.00 minus the homestead exemption after reappraisal times the tax rate after reappraisal times the mill levy applied to the property before reappraisal. The mill levy applied to property before reappraisal is the total of all mills applied to the property in the last year of the previous reappraisal cycle.

     (c) Total household income is the sum of the income of all members of the household and all other persons who are owners of the property. Income, as used in this section, includes income from all sources, including net business income and otherwise tax-exempt income of all types but not including social security income paid directly to a nursing home. Net business income is gross income less ordinary expenses but before deducting depreciation or depletion allowance, or both. For an entity, as defined in subsection (8), income also includes the income of any natural person or entity that is a trustee of or controls 25% or more of the entity. A household is an association of persons who live in the same dwelling, sharing its furnishings, facilities, accommodations, and expenses. For single-family rental dwellings, total household income does not include the income of the tenant.

     (d) The phase-in value is the valuation change made pursuant to 15-7-111(3) since the last reappraisal.

     (5) (a) If total household income is $25,000 or less, the percentage increase in taxable value is greater than 24%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate. The adjusted tax rate must be calculated such that the total increase in taxable value over the reappraisal cycle is 24% and such that the change in taxable value is phased in over the reappraisal cycle in equal increments.

     (b) If total household income is greater than $25,000 but less than or equal to $50,000, the percentage increase in taxable value is greater than 30%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate. The adjusted tax rate must be calculated such that the total increase in taxable value over the reappraisal cycle is 30% and such that the change in taxable value is phased in over the reappraisal cycle in equal increments.

     (c) If total household income is greater than $50,000 but less than or equal to $75,000, the percentage increase in taxable value is greater than 30%, and the dollar increase in taxable liability is $250 or greater, then the property qualifies for an adjusted tax rate. The adjusted tax rate will be calculated such that the total increase in taxable value over the reappraisal cycle is 36% and such that the change in taxable value is phased in over the reappraisal cycle in equal increments.

     (d) The adjusted tax rate computed under this subsection (5) must be rounded to the nearest 1/100 of 1%.

     (6) A person who applies for a tax rate adjustment under this section shall provide the department with documentation of total household income and other information that the department considers necessary to determine the person's eligibility for the tax rate adjustment. Documents provided to the department to determine eligibility for a tax rate adjustment are subject to the confidentiality provisions in 15-30-303.

     (7) A person who applies for a tax rate adjustment and submits a false or fraudulent application for a tax rate adjustment is guilty of false swearing under 45-7-202.

     (8) For the purposes of this section, "entity" means:

     (a) a corporation, fiduciary, or pass-through entity, as those terms are defined in 15-30-101; and

     (b) an association, joint-stock company, syndicate, trust or estate, or any other nonnatural person.

 

     Section 3.  Section 15-6-134, MCA, is amended to read:

     "15-6-134.  Class four property -- description -- taxable percentage. (1) Class four property includes:

     (a)  subject to 15-6-201(1)(z) and (1)(aa) and (1)(aa) and subsections (1)(f) and (1)(g) of this section, all land, except that specifically included in another class;

     (b)  subject to 15-6-201(1)(z) and (1)(aa) and (1)(aa) and subsections (1)(f) and (1)(g) of this section, all improvements, including trailers, manufactured homes, or mobile homes used as a residence, except those specifically included in another class;

     (c)  the first $100,000 or less of the taxable market value of any improvement on real property, including trailers, manufactured homes, or mobile homes, and appurtenant land not exceeding 5 acres owned or under contract for deed and actually occupied for at least 7 months a year as the primary residential dwelling of any person whose total income from all sources, including net business income and otherwise tax-exempt income of all types but not including social security income paid directly to a nursing home, is not more than $15,000 for a single person or $20,000 for a married couple or a head of household, as adjusted according to subsection (2)(b)(ii). For the purposes of this subsection (1)(c), net business income is gross income less ordinary operating expenses but before deducting depreciation or depletion allowance, or both but before deducting depreciation or depletion allowance, or both.

     (d)  all golf courses, including land and improvements actually and necessarily used for that purpose, that consist of at least nine holes and not less than 700 lineal yards;

     (e)  subject to 15-6-201(1)(z), all improvements on land that is eligible for valuation, assessment, and taxation as agricultural land under 15-7-202, including 1 acre of real property beneath improvements on land described in 15-6-133(1)(c). The 1 acre must be valued at market value.

     (f)  (i) single-family residences, including trailers, manufactured homes, or mobile homes;

     (ii) rental multifamily dwelling units;

     (iii) appurtenant improvements to the residences or dwelling units, including the parcels of land upon which the residences and dwelling units are located and any leasehold improvements; and

     (iv) vacant residential lots; and

     (g)  (i) commercial buildings and the parcels of land upon which they are situated; and

     (ii) vacant commercial lots.

     (2)  Class four property is taxed as follows:

     (a)  (i) Except as provided in 15-24-1402, 15-24-1501, and 15-24-1502, and subsection (2)(a)(ii) of this section, property described in subsections (1)(a), (1)(b), (1)(e), (1)(f), and (1)(g) of this section is taxed at:

     (i) 3.794% 3.40% of its taxable market value in tax year 1999 2003;

     (ii) 3.3% of its taxable market value in tax year 2004;

     (iii) 3.22% of its taxable market value in tax year 2005;

     (iv) 3.14% of its taxable market value in tax year 2006;

     (v) 3.07% of its taxable market value in tax year 2007; and

     (vi) 3.01% of its taxable market value in tax years after 2007.

     (ii) The taxable percentage rate in subsection (2)(a)(i) must be adjusted downward by subtracting 0.0835 percentage points each year until the tax rate is equal to or less than 3.46%.

     (b)  (i) Property qualifying under the property tax assistance program in subsection (1)(c) is taxed at the rate provided in subsection (2)(a)(ii) of its taxable market value multiplied by a percentage figure based on income and determined from the following table:

Income         & #160;                          0;            &# 160;     Income                  0;            &# 160;                          0;            &# 160;            Percentage

Single Person            ;             60;            & #160;     Married Couple           0;            &# 160;                          0;            &# 160;         Multiplier

     Head of Household      

$0 - $ 6,000     $0 -&# 160;$8,000          & #160;                          0;            &# 160;                          0;            &# 160;                          0;            &# 160;20%

6,001 - 9,200       0;            &# 160;                        8,00 1 - 14,000         60;            & #160;                          0;            &# 160;                    50%

9,201 - 15,000       60;            & #160;                      14,001 - 60;20,000          &# 160;                          0;            &# 160;                          0;   70%

     (ii) The income levels contained in the table in subsection (2)(b)(i) must be adjusted for inflation annually by the department. The adjustment to the income levels is determined by:

     (A)  multiplying the appropriate dollar amount from the table in subsection (2)(b)(i) by the ratio of the PCE for the second quarter of the year prior to the year of application to the PCE for the second quarter of 1995; and

     (B)  rounding the product thus obtained to the nearest whole dollar amount.

     (iii) "PCE" means the implicit price deflator for personal consumption expenditures as published quarterly in the Survey of Current Business by the bureau of economic analysis of the U.S. department of commerce.

     (c)  Property described in subsection (1)(d) is taxed at one-half the taxable percentage rate established in subsection (2)(a)(i).

     (3)  Within the meaning of comparable property, as defined in 15-1-101, property assessed as commercial property is comparable only to other property assessed as commercial property and property assessed as other than commercial property is comparable only to other property assessed as other than commercial property."

 

     Section 4.  Section 15-6-201, MCA, is amended to read:

     "15-6-201.  (Temporary) Exempt categories. (1) The following categories of property are exempt from taxation:

     (a)  except as provided in 15-24-1203, the property of:

     (i)  the United States, except:

     (A)  if congress passes legislation that allows the state to tax property owned by the federal government or an agency created by congress; or

     (B)  as provided in 15-24-1103;

     (ii) the state, counties, cities, towns, and school districts;

     (iii) irrigation districts organized under the laws of Montana and not operating for profit;

     (iv) municipal corporations;

     (v)  public libraries; and

     (vi) rural fire districts and other entities providing fire protection under Title 7, chapter 33;

     (b)  buildings, with land that they occupy and furnishings in the buildings, that are owned by a church and used for actual religious worship or for residences of the clergy, together with adjacent land reasonably necessary for convenient use of the buildings;

     (c)  property used exclusively for agricultural and horticultural societies, for educational purposes, and for nonprofit health care facilities, as defined in 50-5-101, licensed by the department of public health and human services and organized under Title 35, chapter 2 or 3. A health care facility that is not licensed by the department of public health and human services and organized under Title 35, chapter 2 or 3, is not exempt.

     (d)  property that is:

     (i)  owned and held by an association or corporation organized under Title 35, chapter 2, 3, 20, or 21;

     (ii) devoted exclusively to use in connection with a cemetery or cemeteries for which a permanent care and improvement fund has been established as provided for in Title 35, chapter 20, part 3; and

     (iii) not maintained and operated for private or corporate profit;

     (e)  subject to subsection (2), property that is owned or property that is leased from a federal, state, or local governmental entity by institutions of purely public charity if the property is directly used for purely public charitable purposes;

     (f)  evidence of debt secured by mortgages of record upon real or personal property in the state of Montana;

     (g)  public museums, art galleries, zoos, and observatories that are not used or held for private or corporate profit;

     (h)  all household goods and furniture, including but not limited to clocks, musical instruments, sewing machines, and wearing apparel of members of the family, used by the owner for personal and domestic purposes or for furnishing or equipping the family residence;

     (i)  truck canopy covers or toppers and campers;

     (j)  a bicycle, as defined in 61-1-123, used by the owner for personal transportation purposes;

     (k)  motor homes;

     (l)  all watercraft;

     (m)  motor vehicles, land, fixtures, buildings, and improvements owned by a cooperative association or nonprofit corporation organized to furnish potable water to its members or customers for uses other than the irrigation of agricultural land;

     (n)  the right of entry that is a property right reserved in land or received by mesne conveyance (exclusive of leasehold interests), devise, or succession to enter land with a surface title that is held by another to explore, prospect, or dig for oil, gas, coal, or minerals;

     (o)  (i) property that is owned and used by a corporation or association organized and operated exclusively for the care of persons with developmental disabilities, persons with mental illness, or persons with physical or mental impairments that constitute or result in substantial impediments to employment and that is not operated for gain or profit; and

     (ii) property that is owned and used by an organization owning and operating facilities that are for the care of the retired, aged, or chronically ill and that are not operated for gain or profit;

     (p)  all farm buildings with a market value of less than $500 and all agricultural implements and machinery with a market value of less than $100;

     (q)  property owned by a nonprofit corporation that is organized to provide facilities primarily for training and practice for or competition in international sports and athletic events and that is not held or used for private or corporate gain or profit. For purposes of this subsection (1)(q), "nonprofit corporation" means an organization that is exempt from taxation under section 501(c) of the Internal Revenue Code and incorporated and admitted under the Montana Nonprofit Corporation Act.

     (r)  (i) the first $15,000 or less of market value of tools owned by the taxpayer that are customarily hand-held and that are used to:

     (A)  construct, repair, and maintain improvements to real property; or

     (B)  repair and maintain machinery, equipment, appliances, or other personal property;

     (ii) space vehicles and all machinery, fixtures, equipment, and tools used in the design, manufacture, launch, repair, and maintenance of space vehicles that are owned by businesses engaged in manufacturing and launching space vehicles in the state or that are owned by a contractor or subcontractor of that business and that are directly used for space vehicle design, manufacture, launch, repair, and maintenance;

     (s)  harness, saddlery, and other tack equipment;

     (t)  a title plant owned by a title insurer or a title insurance producer, as those terms are defined in 33-25-105;

     (u)  timber as defined in 15-44-102;

     (v)  all trailers as defined in 61-1-111, semitrailers as defined in 61-1-112, pole trailers as defined in 61-1-114, and travel trailers as defined in 61-1-131;

     (w)  all vehicles registered under 61-3-456;

     (x)  (i) buses, trucks having a manufacturer's rated capacity of more than 1 ton, and truck tractors, including buses, trucks, and truck tractors apportioned under Title 61, chapter 3, part 7; and

     (ii) personal property that is attached to a bus, truck, or truck tractor that is exempt under subsection (1)(x)(i);

     (y)  motorcycles and quadricycles;

     (z)  the following following percentage of the market value of residential residential property as described in 15-6-134(1)(e) and (1)(f) 15-6-134(1)(e) and (1)(f):

     (i) 23% for tax year 2000;

     (ii) 27.5% for tax year 2001; and

     (iii) 31% for tax year 2002 and succeeding tax years;

     (aa) the following percentage of the market value of commercial property as described in 15-6-134(1)(g):

     (i)  9% for tax year 2000;

     (ii) 11% for tax year 2001; and

     (iii) 13% for tax year 2002 and succeeding tax years;:

     (i) 31% for tax year 2003;

     (ii) 31.4% for tax year 2004;

     (iii) 32% for tax year 2005;

     (iv) 32.6% for tax year 2006;

     (v) 33.2% for tax year 2007;

     (vi) 34% for tax year 2008 and succeeding tax years;

     (aa) the following percentage of the market value of commercial property as described in 15-6-134(1)(g):

     (i) 13% for tax year 2003;

     (ii) 13.3% for tax year 2004;

     (iii) 13.8% for tax year 2005;

     (iv) 14.2% for tax year 2006;

     (v) 14.6% for tax year 2007;

     (vi) 15% for tax year 2008 and succeeding tax years;

     (bb)(bb) personal property used by an industrial dairy or an industrial milk processor and dairy livestock used by an industrial dairy;

     (cc)(cc) items of personal property intended for rent or lease in the ordinary course of business if each item of personal property satisfies all of the following:

     (i)  the acquired cost of the personal property is less than $15,000;

     (ii) the personal property is owned by a business whose primary business income is from rental or lease of personal property to individuals and no one customer of the business accounts for more than 10% of the total rentals or leases during a calendar year; and

     (iii) the lease of the personal property is generally on an hourly, daily, or weekly basis;

     (dd)(dd) all manufacturing machinery, fixtures, equipment, and tools used for the production of ethanol from grain during the course of the construction of an ethanol manufacturing facility and for 10 years after completion of construction of the manufacturing facility; and

     (ee)(ee) light vehicles as defined in 61-1-139.

     (2)  (a) For the purposes of subsection (1)(e):

     (i)  the term "institutions of purely public charity" includes any organization that meets the following requirements:

     (A)  The organization offers its charitable goods or services to persons without regard to race, religion, creed, or gender and qualifies as a tax-exempt organization under the provisions of section 501(c)(3), Internal Revenue Code, as amended.

     (B)  The organization accomplishes its activities through absolute gratuity or grants. However, the organization may solicit or raise funds by the sale of merchandise, memberships, or tickets to public performances or entertainment or by other similar types of fundraising activities.

     (ii) agricultural property owned by a purely public charity is not exempt if the agricultural property is used by the charity to produce unrelated business taxable income as that term is defined in section 512 of the Internal Revenue Code, 26 U.S.C. 512. A public charity claiming an exemption for agricultural property shall file annually with the department a copy of its federal tax return reporting any unrelated business taxable income received by the charity during the tax year, together with a statement indicating whether the exempt property was used to generate any unrelated business taxable income.

     (b)  For the purposes of subsection (1)(g), the term "public museums, art galleries, zoos, and observatories" means governmental entities or nonprofit organizations whose principal purpose is to hold property for public display or for use as a museum, art gallery, zoo, or observatory. The exempt property includes all real and personal property reasonably necessary for use in connection with the public display or observatory use. Unless the property is leased for a profit to a governmental entity or nonprofit organization by an individual or for-profit organization, real and personal property owned by other persons is exempt if it is:

     (i)  actually used by the governmental entity or nonprofit organization as a part of its public display;

     (ii) held for future display; or

     (iii) used to house or store a public display.

     (3)  For the purposes of subsection (1)(bb) (1)(bb):

     (a)  "industrial dairy" means a large-scale dairy operation with 1,000 or more milking cows and includes the dairy livestock and integral machinery and equipment that the dairy uses to produce milk and milk products solely for export from the state, either directly by the dairy or after the milk or milk product has been further processed by an industrial milk processor. After export, any unprocessed milk must be further processed into other dairy products.

     (b)  "industrial milk processor" means a facility and integral machinery used solely to process milk into milk products for export from the state.

     (4)  The following portions of the appraised value of a capital investment in a recognized nonfossil form of energy generation or low emission wood or biomass combustion devices, as defined in 15-32-102, are exempt from taxation for a period of 10 years following installation of the property:

     (a)  $20,000 in the case of a single-family residential dwelling;

     (b)  $100,000 in the case of a multifamily residential dwelling or a nonresidential structure.

     15-6-201.  (Effective on occurrence of contingency) Exempt categories. (1) The following categories of property are exempt from taxation:

     (a)  except as provided in 15-24-1203, the property of:

     (i)  the United States, except:

     (A)  if congress passes legislation that allows the state to tax property owned by the federal government or an agency created by congress; or

     (B)  as provided in 15-24-1103;

     (ii) the state, counties, cities, towns, and school districts;

     (iii) irrigation districts organized under the laws of Montana and not operating for profit;

     (iv) municipal corporations;

     (v)  public libraries; and

     (vi) rural fire districts and other entities providing fire protection under Title 7, chapter 33;

     (b)  buildings, with land that they occupy and furnishings in the buildings, that are owned by a church and used for actual religious worship or for residences of the clergy, together with adjacent land reasonably necessary for convenient use of the buildings;

     (c)  property used exclusively for agricultural and horticultural societies, for educational purposes, and for nonprofit health care facilities, as defined in 50-5-101, licensed by the department of public health and human services and organized under Title 35, chapter 2 or 3. A health care facility that is not licensed by the department of public health and human services and organized under Title 35, chapter 2 or 3, is not exempt.

     (d)  property that is:

     (i)  owned and held by an association or corporation organized under Title 35, chapter 2, 3, 20, or 21;

     (ii) devoted exclusively to use in connection with a cemetery or cemeteries for which a permanent care and improvement fund has been established as provided for in Title 35, chapter 20, part 3; and

     (iii) not maintained and operated for private or corporate profit;

     (e)  subject to subsection (2), property that is owned or property that is leased from a federal, state, or local governmental entity by institutions of purely public charity if the property is directly used for purely public charitable purposes;

     (f)  evidence of debt secured by mortgages of record upon real or personal property in the state of Montana;

     (g)  public museums, art galleries, zoos, and observatories that are not used or held for private or corporate profit;

     (h)  all household goods and furniture, including but not limited to clocks, musical instruments, sewing machines, and wearing apparel of members of the family, used by the owner for personal and domestic purposes or for furnishing or equipping the family residence;

     (i)  truck canopy covers or toppers and campers;

     (j)  a bicycle, as defined in 61-1-123, used by the owner for personal transportation purposes;

     (k)  motor homes;

     (l)  all watercraft;

     (m)  motor vehicles, land, fixtures, buildings, and improvements owned by a cooperative association or nonprofit corporation organized to furnish potable water to its members or customers for uses other than the irrigation of agricultural land;

     (n)  the right of entry that is a property right reserved in land or received by mesne conveyance (exclusive of leasehold interests), devise, or succession to enter land with a surface title that is held by another to explore, prospect, or dig for oil, gas, coal, or minerals;

     (o)  (i) property that is owned and used by a corporation or association organized and operated exclusively for the care of persons with developmental disabilities, persons with mental illness, or persons with physical or mental impairments that constitute or result in substantial impediments to employment and that is not operated for gain or profit; and

     (ii) property that is owned and used by an organization owning and operating facilities that are for the care of the retired, aged, or chronically ill and that are not operated for gain or profit;

     (p)  all farm buildings with a market value of less than $500 and all agricultural implements and machinery with a market value of less than $100;

     (q)  property owned by a nonprofit corporation that is organized to provide facilities primarily for training and practice for or competition in international sports and athletic events and that is not held or used for private or corporate gain or profit. For purposes of this subsection (1)(q), "nonprofit corporation" means an organization that is exempt from taxation under section 501(c) of the Internal Revenue Code and incorporated and admitted under the Montana Nonprofit Corporation Act.

     (r)  (i) the first $15,000 or less of market value of tools owned by the taxpayer that are customarily hand-held and that are used to:

     (A)  construct, repair, and maintain improvements to real property; or

     (B)  repair and maintain machinery, equipment, appliances, or other personal property;

     (ii) space vehicles and all machinery, fixtures, equipment, and tools used in the design, manufacture, launch, repair, and maintenance of space vehicles that are owned by businesses engaged in manufacturing and launching space vehicles in the state or that are owned by a contractor or subcontractor of that business and that are directly used for space vehicle design, manufacture, launch, repair, and maintenance;

     (s)  harness, saddlery, and other tack equipment;

     (t)  a title plant owned by a title insurer or a title insurance producer, as those terms are defined in 33-25-105;

     (u)  timber as defined in 15-44-102;

     (v)  all trailers as defined in 61-1-111, semitrailers as defined in 61-1-112, pole trailers as defined in 61-1-114, and travel trailers as defined in 61-1-131;

     (w)  all vehicles registered under 61-3-456;

     (x)  (i) buses, trucks having a manufacturer's rated capacity of more than 1 ton, and truck tractors, including buses, trucks, and truck tractors apportioned under Title 61, chapter 3, part 7; and

     (ii) personal property that is attached to a bus, truck, or truck tractor that is exempt under subsection (1)(x)(i);

     (y)  motorcycles and quadricycles;

     (z)  the following following percentage of the market value of residential residential property as described in 15-6-134(1)(e) and (1)(f) 15-6-134(1)(e) and (1)(f):

     (i)  23% for tax year 2000;

     (ii) 27.5% for tax year 2001; and

     (iii) 31% for tax year 2002 and succeeding tax years;

     (aa) the following percentage of the market value of commercial property as described in 15-6-134(1)(g):

     (i)  9% for tax year 2000;

     (ii) 11% for tax year 2001; and

     (iii) 13% for tax year 2002 and succeeding tax years;:

     (i) 31% for tax year 2003;

     (ii) 31.4% for tax year 2004;

     (iii) 32% for tax year 2005;

     (iv) 32.6% for tax year 2006;

     (v) 33.2% for tax year 2007;

     (vi) 34% for tax year 2008 and succeeding tax years;

     (aa) the following percentage of the market value of commercial property as described in 15-6-134(1)(g):

     (i) 13% for tax year 2003;

     (ii) 13.3% for tax year 2004;

     (iii) 13.8% for tax year 2005;

     (iv) 14.2% for tax year 2006;

     (v) 14.6% for tax year 2007;

     (vi) 15% for tax year 2008 and succeeding tax years;

     (bb)(bb) personal property used by an industrial dairy or an industrial milk processor and dairy livestock used by an industrial dairy;

     (cc)(cc) items of personal property intended for rent or lease in the ordinary course of business if each item of personal property satisfies all of the following:

     (i)  the acquired cost of the personal property is less than $15,000;

     (ii) the personal property is owned by a business whose primary business income is from rental or lease of personal property to individuals and no one customer of the business accounts for more than 10% of the total rentals or leases during a calendar year; and

     (iii) the lease of the personal property is generally on an hourly, daily, or weekly basis;

     (dd)(dd) all agricultural implements and equipment;

     (ee)(ee) all mining machinery, fixtures, equipment, tools, and supplies except those included in class five;

     (ff)(ff) all manufacturing machinery, fixtures, equipment, tools, and supplies except those included in class five;

     (gg)(gg) all goods and equipment that are intended for rent or lease, except goods and equipment that are specifically included and taxed in another class;

     (hh)(hh) special mobile equipment as defined in 61-1-104;

     (ii)(ii) furniture, fixtures, and equipment, except that specifically included in another class, used in commercial establishments as defined in this section;

     (jj)(jj) x-ray and medical and dental equipment;

     (kk)(kk) citizens' band radios and mobile telephones;

     (ll)(ll) radio and television broadcasting and transmitting equipment;

     (mm)(mm) cable television systems;

     (nn)(nn) coal and ore haulers;

     (oo)(oo) theater projectors and sound equipment; and

     (pp)(pp) light vehicles as defined in 61-1-139.

     (2)  (a) For the purposes of subsection (1)(e):

     (i)  the term "institutions of purely public charity" includes any organization that meets the following requirements:

     (A)  The organization offers its charitable goods or services to persons without regard to race, religion, creed, or gender and qualifies as a tax-exempt organization under the provisions of section 501(c)(3), Internal Revenue Code, as amended.

     (B)  The organization accomplishes its activities through absolute gratuity or grants. However, the organization may solicit or raise funds by the sale of merchandise, memberships, or tickets to public performances or entertainment or by other similar types of fundraising activities.

     (ii) agricultural property owned by a purely public charity is not exempt if the agricultural property is used by the charity to produce unrelated business taxable income as that term is defined in section 512 of the Internal Revenue Code, 26 U.S.C. 512. A public charity claiming an exemption for agricultural property shall file annually with the department a copy of its federal tax return reporting any unrelated business taxable income received by the charity during the tax year, together with a statement indicating whether the exempt property was used to generate any unrelated business taxable income.

     (b)  For the purposes of subsection (1)(g), the term "public museums, art galleries, zoos, and observatories" means governmental entities or nonprofit organizations whose principal purpose is to hold property for public display or for use as a museum, art gallery, zoo, or observatory. The exempt property includes all real and personal property reasonably necessary for use in connection with the public display or observatory use. Unless the property is leased for a profit to a governmental entity or nonprofit organization by an individual or for-profit organization, real and personal property owned by other persons is exempt if it is:

     (i)  actually used by the governmental entity or nonprofit organization as a part of its public display;

     (ii) held for future display; or

     (iii) used to house or store a public display.

     (3)  For the purposes of subsection (1)(bb)(1)(bb):

     (a)  "industrial dairy" means a large-scale dairy operation with 1,000 or more milking cows and includes the dairy livestock and integral machinery and equipment that the dairy uses to produce milk and milk products solely for export from the state, either directly by the dairy or after the milk or milk product has been further processed by an industrial milk processor. After export, any unprocessed milk must be further processed into other dairy products.

     (b)  "industrial milk processor" means a facility and integral machinery used solely to process milk into milk products for export from the state.

     (4)  The following portions of the appraised value of a capital investment in a recognized nonfossil form of energy generation or low emission wood or biomass combustion devices, as defined in 15-32-102, are exempt from taxation for a period of 10 years following installation of the property:

     (a)  $20,000 in the case of a single-family residential dwelling;

     (b)  $100,000 in the case of a multifamily residential dwelling or a nonresidential structure."

 

     Section 5.  Section 15-7-111, MCA, is amended to read:

     "15-7-111.  Periodic revaluation of certain taxable property. (1) The department shall administer and supervise a program for the revaluation of all taxable property within classes three, four, and ten. All other property must be revalued annually. The revaluation of class three, four, and ten property is complete on December 31, 1996. The amount of the change in valuation from the 1996 base year for each property in classes three, four, and ten must be phased in each year at the rate of 25% of the change in valuation from December 31, 1998, to the appropriate percentage of taxable market value for each class.

     (2)  The department shall value and phase in the value of newly constructed, remodeled, or reclassified property in a manner consistent with the valuation within the same class and the values established pursuant to subsection (1). The department shall adopt rules for determining the assessed valuation and phased-in value of new, remodeled, or reclassified property within the same class.

     (3)  Beginning January 1, 2001, the The department of revenue shall administer and supervise a program for the revaluation of all taxable property within classes three, four, and ten. A comprehensive written reappraisal plan must be promulgated by the department. The reappraisal plan adopted must provide that all class three, four, and ten property in each county is revalued by January 1, 2003 2008, effective for January 1, 2009, and each succeeding 6 years. The resulting valuation changes must be phased in for each year until the next reappraisal. If a percentage of change for each year is not established, then the percentage of phasein for each year is 16.66%. The department shall furnish a copy of the plan and all amendments to the plan to the board of county commissioners of each county."

 

     Section 6.  Extension of 2003 deadlines relating to property taxation. As a result of the change in the phasein of reappraisal for class three, four, and ten property enacted by the 58th legislature, it may not be possible to comply with certain statutory deadlines relating to appraisals, assessments, reimbursements, budgets, and collection of property taxes. The state appraisal and assessment process may be delayed, which in turn may cause delays for the tax appeal boards and local government taxing jurisdiction budgeting and collection processes. Therefore, for tax year 2003, all deadlines are extended as necessary and reasonable, except that the time limits allowed for filing an appeal remain the same as provided by law in order to allow for the orderly and efficient assessment and collection of taxes.

 

     Section 7.  Interim property tax reappraisal and tax reform study committees. (1) (a) There is an interim property tax reappraisal study committee created to study the effects of cyclical reappraisal and methods for mitigating the changes in taxable value caused by cyclical reappraisal.

     (b) The committee is composed of four senators, two from each political party, appointed by the committee on committees, and four representatives, two appointed by the speaker and two appointed by the minority leader.

     (2) (a) There is an interim tax reform study committee created to study tax reform that may include revising the existing tax structure and considering alternative forms of taxation. The members must include:

     (i) four senators, two from each political party, appointed by the committee on committees;

     (ii) four representatives, two appointed by the speaker and two appointed by the minority leader; and

     (iii) the following members appointed by the governor:

     (A) one representative of small business;

     (B) one representative of large industry;

     (C) one representative of agriculture; and

     (D) one representative of labor.

     (b) The members of the committee shall select a presiding officer and may appoint other officers as considered necessary.

     (c)  The committee shall adopt rules of procedure for conducting meetings.

     (d)  The purpose of the committee is to conduct a comprehensive examination of taxation in Montana. The committee shall:

     (i)  develop an inventory of taxes imposed at the state and local level, including but not limited to:

     (A)  the taxation of property;

     (B) the taxation of income;

     (C) excise and use taxes; and

     (D) taxation of natural resource production, including energy production and transmission;

     (ii) provide analyses that evaluate existing taxes in terms of:

     (A)  their adequacy, efficiency, burden or incidence, fairness, ability to be exported, and effect on economic behavior, including their effect on individual and business decisions; and

     (B) costs of administration and compliance;

     (iii) examine tax expenditures to assess the ongoing merit of each expenditure; and

     (iv) examine alternative methods of taxation from existing sources, as well as new sources of revenue, and evaluate the alternative methods and new sources according to the criteria described in subsection (2)(d)(ii).

     (e) The committee shall solicit the knowledge and advice of economists, tax policy experts, and representatives of taxpayer groups, local governments, small business organizations, large industry, agriculture, and economic and business development organizations.

     (3) The committees created in this section shall coordinate their work and shall report to each other after each meeting. The two committees shall meet together at least once every 6 months.

     (4) The committees shall submit written reports to the legislature not later than December 1, 2004, that must include recommendations and proposed legislation, if legislation is considered necessary, to mitigate the effects of cyclical reappraisal and to provide tax reform for Montana.

     (5) The committees are attached for administrative purposes only to the department of revenue to be staffed by the executive branch with the cooperation of the staff of the legislative branch.

     (6) (a) Nonlegislative members of the tax reform study committee must be reimbursed in accordance with 2-18-501 through 2-18-503 for actual and necessary expenses incurred in attending meetings or conducting committee business.

     (b) Legislators serving on the committees must be reimbursed and compensated as provided for in 5-2-302 for actual and necessary expenses incurred in attending meetings or conducting committee business.

     (7) The members of the committees created in this section must be appointed by July 1, 2003.

 

     Section 8.  Appropriation. (1) The committees created in [section 7] may receive gifts, grants, and donations. The money received must be used for fulfilling the duties of the committees, for reimbursing the expenses of committee members, or for providing staff for the committees. The money received must be placed in a special revenue fund account to the credit of the department of revenue.

     (2) In addition to any money received pursuant to subsection (1), there is appropriated $60,000 from the general fund to the committees created in [section 7] for the biennium for the operating expenses and personnel expenses of the committees.

 

     Section 9.  Codification instruction. [Sections 1 and 2] are intended to be codified as an integral part of Title 15, chapter 6, part 1, and the provisions of Title 15, chapter 6, part 1, apply to [sections 1 and 2].

 

     Section 10.  Coordination instruction. If Senate Bill No. 126 and [this act] are both passed and approved, then the amendments contained in 15-6-201(1)(z) and (1)(aa) in [section 2 of Senate Bill No. 126] are void.

 

     Section 11.  Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

 

     Section 12.  Effective dates. (1) Except as provided in subsections (2) and (3), [this act] is effective on passage and approval.

     (2) [Section 8] is effective July 1, 2003.

     (3) [Section 2] is effective January 1, 2009.

 

     Section 13.  Applicability. (1) [Sections 1 and 3 through 5] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2002.

     (2) [Section 2] applies to tax years beginning after December 31, 2008.

 

     Section 14.  Termination. [Section 1] terminates December 31, 2008.

- END -

 


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