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SENATE BILL NO. 111
INTRODUCED BY B. DEPRATU
BY REQUEST OF THE REVENUE OVERSIGHT COMMITTEE
AN ACT EXEMPTING INTANGIBLE PERSONAL PROPERTY FROM PROPERTY TAXATION; PHASING IN THE EXEMPTION FOR PROPERTY THAT IS CENTRALLY ASSESSED; REQUIRING RULEMAKING TO DETERMINE THE VALUATION METHODOLOGY FOR INTANGIBLE PERSONAL PROPERTY; REQUIRING REPORTS TO THE LEGISLATURE; AMENDING SECTIONS 15-1-101, 15-8-201, 15-8-404, 15-8-405, 15-8-406, 15-8-407, 15-23-101, 15-23-202, AND 15-23-303, MCA; REPEALING SECTION 15-8-403, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND APPLICABILITY DATES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Intangible personal property exemption. (1) Except as provided in subsection (3), intangible personal property is exempt from taxation.
(2) For the purposes of this section, "intangible personal property" means personal property that is not tangible personal property and that:
(a) has no intrinsic value but is the representative or evidence of value, including but not limited to certificates of stock, bonds, promissary notes, licenses, copyrights, patents, trademarks, contracts, software, and franchises; or
(b) lacks physical existence, including but not limited to goodwill.
(3) The exemption for intangible personal property that is centrally assessed, other than property under 15-23-101(4) and (5), must be phased in over 3 years beginning in tax year 2000. Ten percent of the intangible personal property is exempt for tax year 2000, and two-thirds of the intangible personal property is exempt for tax year 2001. Centrally assessed intangible personal property is fully exempt from taxation in tax year 2002 and thereafter.
(4) The department shall adopt administrative rules prior to valuation determinations for tax year 2000 that specify the valuation methodology for centrally assessed intangible personal property. To the extent that the unit value includes intangible personal property, that value must be removed from the unit value according to the provisions in subsection (3).
(5) The department must report intangible personal property annually to the revenue and taxation interim committee of the Montana legislature and to the Montana legislature meeting in the year 2001.
Section 2. Section 15-1-101, MCA, is amended to read:
"15-1-101. Definitions. (1) Except as otherwise specifically provided, when terms mentioned in this section are used in connection with taxation, they are defined in the following manner:
(a) The term "agricultural" refers to:
(i) the production of food, feed, and fiber commodities, livestock and poultry, bees, fruits and vegetables, and sod, ornamental, nursery, and horticultural crops that are raised, grown, or produced for commercial purposes; and
(ii) the raising of domestic animals and wildlife in domestication or a captive environment.
(b) The term "assessed value" means the value of property as defined in 15-8-111.
(c) The term "average wholesale value" means the value to a dealer prior to reconditioning and the profit margin shown in national appraisal guides and manuals or the valuation schedules of the department.
(d) (i) The term "commercial", when used to describe property, means property used or owned by a business, a trade, or a corporation as defined in 35-2-114 or used for the production of income, except property described in subsection (1)(d)(ii).
(ii) The following types of property are not commercial:
(A) agricultural lands;
(B) timberlands and forest lands;
(C) single-family residences and ancillary improvements and improvements necessary to the function of a bona fide farm, ranch, or stock operation;
(D) mobile homes and manufactured homes used exclusively as a residence except when held by a distributor or dealer as stock in trade;
(E) all property described in 15-6-135; and
(F) all property described in 15-6-136.
(e) The term "comparable property" means property that:
(i) has similar use, function, and utility;
(ii) is influenced by the same set of economic trends and physical, governmental, and social factors; and
(iii) has the potential of a similar highest and best use.
(f) The term "credit" means solvent debts, secured or unsecured, owing to a person.
(g) (i) "Department", except as provided in subsection (1)(g)(ii), means the department of revenue provided for in 2-15-1301.
(ii) In chapters 70 and 71, department means the department of transportation provided for in 2-15-2501.
(h) The terms "gas" and "natural gas" are synonymous and mean gas as defined in 82-1-111(2). The terms include all natural gases and all other fluid hydrocarbons, including methane gas or any other natural gas found in any coal formation.
(i) The term "improvements" includes all buildings, structures, fences, and improvements situated upon, erected upon, or affixed to land. When the department determines that the permanency of location of a mobile home, manufactured home, or housetrailer has been established, the mobile home, manufactured home, or housetrailer is presumed to be an improvement to real property. A mobile home, manufactured home, or housetrailer may be determined to be permanently located only when it is attached to a foundation that cannot feasibly be relocated and only when the wheels are removed.
(j) The term "leasehold improvements" means improvements to mobile homes and mobile homes located on land owned by another person. This property is assessed under the appropriate classification, and the taxes are due and payable in two payments as provided in 15-24-202. Delinquent taxes on leasehold improvements are a lien only on the leasehold improvements.
(k) The term "livestock" means cattle, sheep, swine, goats, horses, mules, asses, llamas, alpacas, bison, ostriches, rheas, emus, and domestic ungulates.
(l) The term "manufactured home" means a residential dwelling built in a factory in accordance with the United States department of housing and urban development code and the federal Manufactured Home Construction and Safety Standards. A manufactured home does not include a mobile home, as defined in 61-1-501 and in subsection (1)(m) of this section, a housetrailer, as defined in 61-1-501, or a mobile home or housetrailer constructed before the federal Manufactured Home Construction and Safety Standards went into effect on June 15, 1976.
(m) The term "mobile home" means forms of housing known as "trailers", "housetrailers", or "trailer coaches" exceeding 8 feet in width or 45 feet in length, designed to be moved from one place to another by an independent power connected to them, or any trailer, housetrailer, or trailer coach up to 8 feet in width or 45 feet in length used as a principal residence.
(n) The term "personal property" includes everything that is the subject of ownership but that is not included within the meaning of the terms "real estate" and "improvements" and "intangible personal property" as that term is defined in [section 1].
(o) The term "poultry" includes all chickens, turkeys, geese, ducks, and other birds raised in domestication to produce food or feathers.
(p) The term "property" includes money, credits, bonds, stocks, franchises, and all other matters and things, real, personal, and mixed, capable of private ownership. This definition may not be construed to authorize the taxation of the stocks of a company or corporation when the property of the company or corporation represented by the stocks is within the state and has been taxed.
(q) The term "real estate" includes:
(i) the possession of, claim to, ownership of, or right to the possession of land;
(ii) all mines, minerals, and quarries in and under the land subject to the provisions of 15-23-501 and Title 15, chapter 23, part 8;
(iii) all timber belonging to individuals or corporations growing or being on the lands of the United States; and
(iv) all rights and privileges appertaining to mines, minerals, quarries, and timber.
(r) "Recreational" means hunting, fishing, swimming, boating, waterskiing, camping, biking, hiking, and winter sports, including but not limited to skiing, skating, and snowmobiling.
(s) "Research and development firm" means an entity incorporated under the laws of this state or a foreign corporation authorized to do business in this state whose principal purpose is to engage in theoretical analysis, exploration, and experimentation and the extension of investigative findings and theories of a scientific and technical nature into practical application for experimental and demonstration purposes, including the experimental production and testing of models, devices, equipment, materials, and processes.
(t) The term "stock in trade" means any mobile home, manufactured home, or housetrailer that is listed by the dealer as inventory and that is offered for sale, is unoccupied, and is not located on a permanent foundation. Inventory does not have to be located at the business location of a dealer or a distributor.
(u) The term "taxable value" means the percentage of market or assessed value as provided for in Title 15, chapter 6, part 1.
(2) The phrase "municipal corporation" or "municipality" or "taxing unit" includes a county, city, incorporated town, township, school district, irrigation district, or drainage district or a person, persons, or organized body authorized by law to establish tax levies for the purpose of raising public revenue.
(3) The term "state board" or "board" when used without other qualification means the state tax appeal board."
Section 3. Section 15-8-201, MCA, is amended to read:
"15-8-201. General assessment day. (1) The department shall, between January 1 and the second Monday of July in each year, ascertain the names of all taxable inhabitants and assess all property subject to taxation in each county.
(2) The department shall assess property to:
(a) the person by whom it was owned or claimed or in whose possession or control it was at midnight of the preceding January 1; or
(b) except in the case of land splits, the new owner if the provisions of 15-7-304 have been met and the transfer certificate has been received and processed prior to determining the taxes that are due as provided in 15-10-305(2).
(3) The department shall also ascertain and assess all mobile homes arriving in the county after midnight of the preceding January 1.
(4) A mistake in the name of the owner or supposed owner of real property does not invalidate the assessment.
(5) The procedure provided by this section does not apply to:
(a) motor vehicles;
(b) motor homes, travel trailers, and campers;
(e) property defined in 61-1-104 as special mobile equipment that is subject to assessment for personal property taxes on the date that application is made for a special mobile equipment plate;
(f) mobile homes and manufactured homes held by a distributor or dealer as stock in trade; and
(g) property subject to the provisions of 15-16-203.
(6) Credits must be assessed as provided in 15-1-101(1)(f)."
Section 4. Section 15-8-404, MCA, is amended to read:
"15-8-404. Property of particular types of firms. (1) The personal property belonging to the business of a merchant
or of a manufacturer must be listed in the town or district where
his the business is carried on.
(2) The personal property of express, transportation, and stage companies must be listed and assessed in the county,
town, or district where
such the property is usually kept.
(3) The personal property
and franchises of gas and water companies must be listed and assessed in the county, town, or
district where the principal works are located. Gas and water mains and pipes laid in roads, streets, or alleys are personal
Section 5. Section 15-8-405, MCA, is amended to read:
"15-8-405. Street railroads, bridges, and ferries. Street railroads,
and bridges, and ferries and their franchises owned
by persons or corporations must be listed and assessed in the county, town, or district where such the property or any
portion thereof of the property is located ,. and the The track of the railroad and the bridge are personal property."
Section 6. Section 15-8-406, MCA, is amended to read:
"15-8-406. Assessment of public utilities in one county. Railroads operated or situated in one county; telegraph,
telephone, and electric light lines and similar properties situated in one county
and their franchises; and canals, ditches, and
flumes situated in one county and the franchises of the same must be listed and assessed in the county in which such the
property is located ,. and the The department of revenue must shall require the owner of such the property or his the owner's
agent or any officer of a corporation owning the same the property to make a verified statement containing a list of the
number of miles such on which the property is operated or situated in the county and the value thereof of the property."
Section 7. Section 15-8-407, MCA, is amended to read:
and other franchises. (1) The franchise, roadway, roadbed, rails, rolling stock, and all other
operating property of all railroads a railroad operated in more than one county or more than one state must be assessed by
the department of revenue as hereinafter provided in Title 15, chapter 23, part 2. (2) Other franchises, if granted by the authorities of a county or city, must be assessed in the county or city within which
they were granted; if granted by any other authority, they must be assessed in the county in which the corporations, firms, or
persons owning or holding them have their principal place of business."
Section 8. Section 15-23-101, MCA, is amended to read:
"15-23-101. Properties centrally assessed. The department
of revenue shall centrally assess each year:
franchise, roadway, roadbeds, rails, rolling stock, and all other operating property of railroads and railroad car
companies operating in more than one county in the state or more than one state;
(2) property owned by a corporation or other person operating a single and continuous property operated in more than
one county or more than one state, including telegraph, telephone, microwave, electric power or transmission lines; natural
gas or oil pipelines; canals, ditches, flumes, or like properties and including, if congress passes legislation that allows the
state to tax property owned by an agency created by congress to transmit or distribute electrical energy, property
constructed, owned, or operated by a public agency created by the congress to transmit or distribute electric energy
produced at privately owned generating facilities,
(not including rural electric cooperatives );
(3) all property of scheduled airlines;
(4) the net proceeds of mines;
(5) the gross proceeds of coal mines; and
(6) property described in subsections (1) and (2) that is subject to the provisions of Title 15, chapter 24, part 12."
Section 9. Section 15-23-202, MCA, is amended to read:
"15-23-202. Assessment -- how made. (1) The department
must shall assess the franchise, roadway, roadbed, rails,
rolling stock, and all other operating properties of all railroads a railroad operated in more than one county or more than one
state. All rolling stock must be assessed in the name of the person owning, leasing, or using the same it. Assessment must
be made to the person owning or leasing or using the same rolling stock and must be made upon the entire railroad within
the state. The depots, stations, shops, and buildings erected upon the space covered by the right-of-way and all other
property owned or leased by such a person , except as above provided, shall must be assessed by the department.
(2) In determining the taxable value of railroad property, the department shall determine the percentage rate "R" provided for in 15-6-145 in order to achieve compliance with the requirements of the federal Railroad Revitalization and Regulatory Reform Act of 1976, as amended."
Section 10. Section 15-23-303, MCA, is amended to read:
"15-23-303. Assessment of property -- apportionment to counties. The department
must shall assess all the
properties property described in 15-23-301, but franchises granted by the United States must may not be assessed. The
value of such properties property for assessment purposes shall must be determined upon such factors as that the
department considers proper."
Section 11. Repealer. Section 15-8-403, MCA, is repealed.
Section 12. Codification instruction. [Section 1] is intended to be codified as an integral part of Title 15, chapter 6, part 2, and the provisions of Title 15, chapter 6, part 2, apply to [section 1].
Section 13. Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].
Section 14. Effective date -- applicability. [This act] is effective on passage and approval and [sections 1 through 7 and 11 through 13] apply to property tax years beginning after December 31, 1999. [Sections 8, 9, and 10] apply to property tax years beginning after December 31, 2002.
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