2009 Montana Legislature

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HOUSE BILL NO. 651

INTRODUCED BY J. COHENOUR

A BILL FOR AN ACT ENTITLED: "AN ACT GENERALLY REVISING LAWS RELATED TO TAXATION; REQUIRING DISCLOSURE OF REPORTABLE TRANSACTIONS; PROVIDING A PENALTY FOR FAILING TO REPORT A REPORTABLE TRANSACTION; PROVIDING A PENALTY FOR A LISTED TRANSACTION UNDERSTATEMENT; PROVIDING A PENALTY FOR PROMOTING ABUSIVE TAX SHELTERS; PROVIDING A PENALTY FOR A SUBSTANTIAL UNDERSTATEMENT OF TAX; PROVIDING A PENALTY FOR FAILING TO PROVIDE INFORMATION; PROVIDING A PENALTY FOR FILING A FRAUDULENT RETURN; PROVIDING FOR VOLUNTARY COMPLIANCE PROGRAMS; CLARIFYING THE INTEREST RATE ON CORPORATION LICENSE TAX REFUNDS; EXTENDING THE TIME WITHIN WHICH CERTAIN DEFICIENCIES MAY BE ASSESSED; REQUIRING CORPORATIONS TO FURNISH OTHER STATE RETURNS AND ADJUSTMENTS; REQUIRING CORPORATIONS TO FILE INFORMATION ABOUT STATE TAX RETURN ITEMS AND FILING POSITIONS TAKEN IN OTHER STATES; REQUIRING CERTAIN TAXPAYERS THAT PROTEST TAXES ASSESSED ON CERTAIN CENTRALLY ASSESSED PROPERTY TO SUPPORT THEIR ASSERTED PROTEST VALUE WITH A WRITTEN APPRAISAL; PROHIBITING THE USE OF CONTINGENCY FEE APPRAISALS IN PROPERTY TAX APPEALS; AMENDING SECTIONS 15-1-206, 15-1-216, 15-1-402, 15-2-301, 15-2-302, 15-30-145, AND 15-31-509, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE, RETROACTIVE APPLICABILITY DATES, AND APPLICABILITY DATES."

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

NEW SECTION. Section 1. Definitions. As used in [sections 1 through 5], the following definitions apply:

(1) "Listed transaction" means a listed transaction under section 6707A of the Internal Revenue Code, 26 U.S.C. 6707A.

(2) "Reportable transaction" means a transaction that:

(a) is a reportable transaction under section 6707A of the Internal Revenue Code, 26 U.S.C. 6707A; or

(b) is a listed transaction.

NEW SECTION. Section 2. Disclosures of reportable transactions -- rules. (1) (a) Any person who engages in a reportable transaction as a buyer or transferor shall report the transaction to the department.

(b) Any person who, as a result of a reportable transaction, acquires an interest in property, a present or future right to income, a present or future right to claim a loss, deduction, credit, exemption, or other tax benefit, or a present or future right to an adjustment to basis shall report the transaction to the department.

(c) Any person who is associated with a reportable transaction in an association that the department has identified as an association that requires reporting shall report the transaction to the department.

(2) A reportable transaction must be reported to the department in the time, form, and manner prescribed by the department.

(3) The department shall adopt rules for the administration of this section.

NEW SECTION. Section 3. Penalty for failure to report reportable transaction. (1) If a taxpayer fails to report a reportable transaction to the department as required by [section 2], there must be added to the tax liability of the taxpayer for the tax year a penalty as follows:

(a) individual taxpayers $5,000; or

(b) C. corporation taxpayers $25,000.

(2) If the reportable transaction is a listed transaction, in lieu of the penalty provided in subsection (1), the penalty is:

(a) individual taxpayers $50,000; or

(b) C. corporations $100,000.

NEW SECTION. Section 4. Listed transaction understatement penalty. (1) If a taxpayer has a listed transaction understatement for a tax year, there must be added to the tax liability of the taxpayer for the tax year a penalty equal to 60% of the amount of the understatement. The penalty is in addition to any other penalty.

(2) As used in this section, "listed transaction understatement" means the sum of:

(a) the amount determined by multiplying the highest rate of tax imposed on the taxpayer under 15-30-103 or, if the taxpayer is a C. corporation, under 15-31-121, by any net increase in taxable income that results from the difference between the proper tax treatment of a listed transaction and the treatment of the transaction on the return of the taxpayer; and

(b) the amount of any decrease in the aggregate amount of credits determined under Title 15 that results from the taxpayer's treatment of a listed transaction and the proper tax treatment of the transaction.

NEW SECTION. Section 5. Penalty for promoting abusive tax shelters. (1) The department shall impose a penalty on a person who promotes a tax shelter if:

(a) the person is or would be subject to a penalty for promoting an abusive tax shelter under section 6700 of the Internal Revenue Code, 26 U.S.C. 6700; and

(b) the tax shelter satisfies any of the following conditions:

(i) the tax shelter is organized in this state;

(ii) the tax shelter is doing business in this state;

(iii) the tax shelter derives income from sources in this state; or

(iv) at least one investor in the tax shelter is a Montana individual income taxpayer, a Montana corporation license taxpayer, or a member of a Montana unitary combined group.

(2) The amount of the penalty is 100% of the amount of gross income derived by the person in promoting the tax shelter.

(3) The penalty is in addition to any other penalty.

NEW SECTION. Section 6. Extended limitations -- listed transactions. If the department finds that a return reflects the use of a listed transaction, as defined in [section 1], and that use of the listed transaction results in a deficiency in tax paid, notice of that deficiency may be given at any time within 10 years after the return was filed.

NEW SECTION. Section 7. Furnishing copy of other state's return, report, and adjustment. (1) Every taxpayer shall, upon request of the department, furnish a copy of any income tax return or audit report made upon any audit or adjustment of the taxpayer's income tax return of another state.

(2) (a) The taxpayer shall report to the department any change in the taxpayer's taxable income that is subject to tax by this state or any change in the taxpayer's tax liability paid to or owing this state because:

(i) a competent authority has changed or corrected the amount of a taxpayer's taxable income, tax credit, or other amount taken into account in determining the taxpayer's tax liability as reported on an income tax return of another state for any tax year; or

(ii) the taxpayer:

(A) files an original or amended return that is accepted by the taxing authority of another state; or

(B) is assessed tax by the taxing authority of another state for the failure to file a return as required.

(b) In the case of a change or correction made by the taxing authority of another state, the report must either concede the accuracy of the determination or state why the taxpayer believes it to be erroneous.

(c) In the case of a taxpayer filing an original or amended return of another state that reports a change in the taxpayer's taxable income that is subject to tax by this state or that results in a change in the taxpayer's tax liability paid to or owing this state, the report required by this subsection must be an amended Montana return. The taxpayer shall file the amended return with the department within 90 days.

(3) For purposes of this section:

(a) a change or correction of a taxpayer's taxable income is considered to be made on the date of the audit report making the change or correction; and

(b) the date on which an original or amended return is accepted by the taxing authority of another state is the date the original or amended return is filed if the return is subsequently accepted by the other state's taxing authority.

(4) (a) If an authorized officer of another state's taxing authority makes a change or correction as provided in this section and, as a result of the change or correction, an assessment of tax or issuance of a refund is permitted under any provision of the applicable law of the other state or pursuant to an agreement between the taxpayer and the other state's taxing authority that extends the period in which an assessment of other state tax may be made, then notice of deficiency under 15-31-503 may be given within the later of the time provided in 15-31-509 or 2 years after the department is notified by the taxpayer or other tax official of the correction.

(b) A notice of deficiency given pursuant to this subsection (4) may assert any adjustment necessary to arrive at the correct amount of Montana taxable income and Montana tax liability for the tax year for which the other state's change or correction is made.

NEW SECTION. Section 8. Disclosure of inconsistent state tax filing positions. (1) (a) Subject to subsection (1)(b), a taxpayer that conducts business activity in this state and one or more other states or is a member of a combined reporting group that conducts business activity in this state and one or more other states shall, in the time, form, and manner required by subsection (2), disclose whether the taxpayer or a combined reporting group of which the taxpayer is a member has taken an inconsistent filing position.

(b) A taxpayer is subject to the provisions of this section for any tax year for which the taxpayer or a combined reporting group of which the taxpayer is a member:

(i) is required to file U.S. treasury, internal revenue service Schedule M-3 with a federal tax return;

(ii) is subject to allocation and apportionment under 15-31-301; and

(iii) has a Montana apportionment percentage, as shown on the Montana tax return, of less than 20%.

(2) (a) The disclosure required by subsection (1) must be filed, for any tax year to which this section applies, within 180 days after:

(i) the date the taxpayer or the consolidated return group of which the taxpayer is a member files the original federal income tax return; and

(ii) the date the taxpayer or the Montana unitary combined group of which the taxpayer is a member files an amended Montana corporation license tax return.

(b) The disclosure required by subsection (1) must be filed in the form and manner required by the department.

(3) As used in this section, the following definitions apply:

(a) "Business activity" means any activity conducted in a state that gives rise to:

(i) gross income;

(ii) an expense reflected in the taxpayer's federal income tax return or income tax return of any state; or

(iii) the use or availability for use of property in the state.

(b) "Combined reporting" means a method of determining business income and apportionment that takes into account the business income and apportionment factors of more than a single corporation and for purposes of this section includes a consolidated return.

(c) "Inconsistent filing position" means the reporting or reflecting of information on any return filed for corporation license tax purposes in a manner inconsistent with the manner in which the same or similar information was reported or reflected on any return filed by the same taxpayer, or by a member of a combined reporting group of which the same taxpayer is a member, in another state with respect to a tax on or measured by net income for the same tax year.

Section 9. Section 15-1-206, MCA, is amended to read:

"15-1-206. Waiver of penalties -- interest -- voluntary compliance program -- rules. (1) The department may, in its discretion, waive, for reasonable cause, any penalty assessed by the department.

(2) (a) The department may develop and administer voluntary compliance programs for taxes administered by the department under Titles 15 and 16.

(b) The department shall adopt rules to establish the requirements and procedures for each program. The rules must include a description of eligible participants, the tax years and penalties to which the program relates, and the penalties that may be waived.

(2)(3) Whenever the department waives a penalty provided for in this title, it also may, in its discretion, waive interest not to exceed $100 due upon the tax."

Section 10. Section 15-1-216, MCA, is amended to read:

"15-1-216. Uniform penalty and interest assessments for violation of tax provisions -- applicability -- exceptions -- uniform provision for interest on overpayments. (1) A person who fails to file a required tax return or other report with the department by the due date, including any extension of time, of the return or report must be assessed a late filing penalty of $50 or the amount of the tax due, whichever is less.

(2) (a) Except as provided in subsection (2)(b), a person who fails to pay a tax when due must be assessed a late payment penalty of 1.2% a month or fraction of a month on the unpaid tax. The penalty may not exceed 12% of the tax due.

(b) A person who fails to pay a tax when due under chapter 30, part 2, chapter 53, chapter 65, or chapter 68 must be assessed a late payment penalty of 1.5% a month or fraction of a month on the unpaid tax. The penalty may not exceed 15% of the tax due.

(c) A person who makes a substantial understatement of tax imposed under Title 15, chapter 30 or 31, must be assessed a substantial understatement penalty in an amount equal to 20% of the understatement. As used in this subsection (2)(c), "understatement" means the amount of the tax required to be shown on the return for the tax year minus the amount of tax imposed that is shown on the return. For purposes of this subsection (2)(c):

(i) there is a substantial understatement of tax imposed under Title 15, chapter 30, if the understatement is the greater of 10% of the amount of tax required to be shown on the return or $3,000; and

(ii) there is a substantial understatement of tax imposed under Title 15, chapter 31, if the understatement exceeds the lesser of:

(A) 10% of the amount of tax required to be shown on the return if the understatement is greater than $10,000; or

(B) $500,000.

(c)(d) The penalty imposed under subsection (2)(a), or (2)(b), or (2)(c) accrues on the unpaid tax from the original due date of the return regardless of whether the taxpayer has received an extension of time for filing a return.

(3) (a) A person who purposely or knowingly, as those terms are defined in 45-2-101, fails to file a return when due or fails to file a return within 60 days after receiving written notice from the department that a return must be filed is liable for an additional penalty of not less than $1,000 or more than $10,000. The department may bring an action in the name of the state to recover the penalty and any delinquent taxes.

(b) A person who refuses or neglects to furnish any information within 60 days after receiving written notice from the department that the information must be furnished is liable for a penalty for the refusal or neglect in an amount equal to the greater of $50 or 20% of any deficiency assessment made for any tax year to which the requested information relates. The department may bring an action in the name of the state to recover the penalty and any delinquent taxes.

(c) A person who files a fraudulent return is liable for a penalty of not more than $5,000. The department may bring an action in the name of the state to recover the penalty and any delinquent taxes.

(4) (a) Interest on taxes not paid when due must be assessed by the department. The department shall determine the interest rates established under subsection (4)(a)(i) for each calendar year by rule subject to the conditions of this subsection (4)(a). Interest rates on taxes not paid when due for a calendar year are as follows:

(i) For individual income taxes not paid when due, including delinquent taxes and deficiency assessments, the interest rate is equal to the underpayment rate for individual taxpayers established by the secretary of the United States department of the treasury pursuant to section 6621 of the Internal Revenue Code, 26 U.S.C. 6621, for the fourth quarter of the preceding year or 8%, whichever is greater.

(ii) For all taxes other than individual income taxes not paid when due, including delinquent taxes and deficiency assessments, the interest rate is 12%.

(b) Interest on delinquent taxes and on deficiency assessments is computed from the original due date of the return until the tax is paid. Interest accrues daily on the unpaid tax from the original due date of the return regardless of whether the taxpayer has received an extension of time for filing the return.

(5) (a) Except as provided in subsection (5)(b), this section applies to taxes, fees, and other assessments imposed under Titles 15 and 16 [and the former 85-2-276].

(b) This section does not apply to:

(i) property taxes; or

(ii) gasoline and vehicle fuel taxes collected by the department of transportation pursuant to Title 15, chapter 70.

(6) Any changes to interest rates apply to any current outstanding tax balance, regardless of the rate in effect at the time the tax accrued.

(7) Penalty and interest must be calculated and assessed commencing with the due date of the return.

(8) Deficiency assessments are due and payable 30 days from the date of the deficiency assessment.

(9) Interest allowed for the overpayment of taxes or fees is the same rate as is charged for unpaid or delinquent taxes. For the purposes of this subsection, interest charged for unpaid or delinquent taxes is the interest rate determined in subsection (4)(a)(i). (Bracketed language in subsection (5)(a) terminates June 30, 2020--sec. 18, Ch. 288, L. 2005.)"

Section 11. Section 15-1-402, MCA, is amended to read:

"15-1-402. Payment of property taxes or fees under protest. (1) (a) The person upon whom a property tax or fee is being imposed under this title may, before the property tax or fee becomes delinquent, pay under written protest that portion of the property tax or fee protested.

(b) The protested payment must:

(i) be made to the officer designated and authorized to collect it;

(ii) specify the grounds of protest; and

(iii) not exceed the difference between the payment for the immediately preceding tax year and the amount owing in the tax year protested unless a different amount results from the specified grounds of protest, which may include but are not limited to changes in assessment due to reappraisal under 15-7-111.

(c) If the protested property tax or fee is on property that is subject to central assessment pursuant to 15-23-101, the person shall:

(i) report to the department the grounds of the protest and the amount of the protested payment for each county in which a protested payment was made; and

(ii) if the aggregate statewide protested amount on valuation grounds exceeds $100,000, attach a qualified appraisal supporting the protested amount.

(d) By November 1 of each year, the department shall mail a notice stating the requirements of this subsection (1)(c) (1)(d) to owners of property subject to central assessment under 15-23-101(1) and (2) who have filed a timely appeal under 15-1-211.

(2) A person appealing a property tax or fee pursuant to chapter 2 or 15, including a person appealing a property tax or fee on property that is subject to central assessment pursuant to 15-23-101(1) or (2), shall pay the tax or fee under protest when due in order to receive a refund. If the tax or fee is not paid under protest when due, the appeal may continue but a tax or fee may not be refunded as a result of the appeal.

(3) If a protested property tax or fee is payable in installments, a subsequent installment portion considered unlawful by the state tax appeal board need not be paid and an action or suit need not be commenced to recover the subsequent installment. The determination of the action or suit commenced to recover the first installment portion paid under protest determines the right of the party paying the subsequent installment to have it or any part of it refunded to the party or the right of the taxing authority to collect a subsequent installment not paid by the taxpayer plus interest from the date the subsequent installment was due.

(4) (a) Except as provided in subsection (4)(b), all property taxes and fees paid under protest to a county or municipality must be deposited by the treasurer of the county or municipality to the credit of a special fund to be designated as a protest fund and must be retained in the protest fund until the final determination of any action or suit to recover the taxes and fees unless they are released at the request of the county, municipality, or other local taxing jurisdiction pursuant to subsection (5). This section does not prohibit the investment of the money of this fund in the state unified investment program or in any manner provided in Title 7, chapter 6. The provision creating the special protest fund does not apply to any payments made under protest directly to the state.

(b) (i) Property taxes that are levied by the state against property that is centrally assessed pursuant to 15-23-101 must be remitted by the county treasurer to the department.

(ii) The department shall deposit 50% of that portion of the funds levied for the university system pursuant to 15-10-107 in the state special revenue fund to the credit of the university system, and the other 50% of the funds levied pursuant to 15-10-107 must be deposited in a centrally assessed property tax state special revenue fund.

(iii) Fifty percent of the funds remaining after the deposit of university system funds must be deposited in the state general fund, and the other 50% must be deposited in a centrally assessed property tax state special revenue fund.

(5) (a) Except as provided in subsection (5)(b), the governing body of a taxing jurisdiction affected by the payment of taxes under protest in the second and subsequent years that a tax protest remains unresolved may demand that the treasurer of the county or municipality pay the requesting taxing jurisdiction all or a portion of the protest payments to which it is entitled, except the amount paid by the taxpayer in the first year of the protest. The decision in a previous year of a taxing jurisdiction to leave protested taxes in the protest fund does not preclude it from demanding in a subsequent year any or all of the payments to which it is entitled, except the first-year protest amount.

(b) The governing body of a taxing jurisdiction affected by the payment of taxes under protest on property that is centrally assessed pursuant to 15-23-101 in the first and subsequent years that a tax protest remains unresolved may demand that the treasurer of the county or municipality pay the requesting taxing jurisdiction all or a portion of the protest payments to which it is entitled. The decision in a previous year of a taxing jurisdiction to leave protested taxes of centrally assessed property in the protest fund does not preclude it from demanding in a subsequent year any or all of the payments to which it is entitled.

(6) (a) If action before the county tax appeal board, state tax appeal board, or district court is not commenced within the time specified or if the action is commenced and finally determined in favor of the department of revenue, county, municipality, or treasurer of the county or the municipality, the amount of the protested portions of the property tax or fee must be taken from the protest fund or the centrally assessed property tax state special revenue fund and deposited to the credit of the fund or funds to which the property tax belongs, less a pro rata deduction for the costs of administration of the protest fund and related expenses charged to the local government units.

(b) (i) If the action is finally determined adversely to the governmental entity levying the tax, then the treasurer of the municipality, county, or state entity levying the tax shall, upon receipt of a certified copy of the final judgment in the action and upon expiration of the time set forth for appeal of the final judgment, refund to the person in whose favor the judgment is rendered the amount of the protested portions of the property tax or fee that the person holding the judgment is entitled to recover, together with interest from the date of payment under protest.

(ii) The taxing jurisdiction shall pay interest at the rate of interest earned by the pooled investment fund provided for in 17-6-203 for the applicable period.

(c) If the amount retained in the protest fund is insufficient to pay all sums due the taxpayer, the treasurer shall apply the available amount first to tax repayment, then to interest owed, and lastly to costs.

(d) (i) If the protest action is decided adversely to a taxing jurisdiction and the amount retained in the protest fund is insufficient to refund the tax payments and costs to which the taxpayer is entitled and for which local government units are responsible, the treasurer shall bill and the taxing jurisdiction shall refund to the treasurer that portion of the taxpayer refund, including tax payments and costs, for which the taxing jurisdiction is proratably responsible. The treasurer is not responsible for the amount required to be refunded by the state treasurer as provided in subsection (6)(b).

(ii) For an adverse protest action against the state for centrally assessed property, the department shall refund from the centrally assessed property tax state special revenue fund the amount of protested taxes and from the state general fund the amount of interest as required in subsection (6)(b). The amount refunded for an adverse protested action from the centrally assessed property tax state special revenue fund may not exceed the amount of protested taxes or fees required to be deposited for that action pursuant to subsections (4)(b)(ii) and (4)(b)(iii) or, for taxes or fees protested prior to April 28, 2005, an equivalent amount of the money transferred to the fund pursuant to section 3, Chapter 536, Laws of 2005. If the amount available for the adverse protested action in the centrally assessed property tax state special revenue fund is insufficient to refund the tax payments to which the taxpayer is entitled and for which the state is responsible, the department shall pay the remainder of the refund proportionally from the state general fund and from money deposited in the state special revenue fund levied pursuant to 15-10-107.

(e) In satisfying the requirements of subsection (6)(d), the taxing jurisdiction, including the state, is allowed not more than 1 year from the beginning of the fiscal year following a final resolution of the protest. The taxpayer is entitled to interest on the unpaid balance at the rate referred to in subsection (6)(b) from the date of payment under protest until the date of final resolution of the protest and at the combined rate of the federal reserve discount rate quoted from the federal reserve bank in New York, New York, on the date of final resolution, plus 4 percentage points, from the date of final resolution of the protest until refund is made.

(7) A taxing jurisdiction, except the state, may satisfy the requirements of this section by use of funds from one or more of the following sources:

(a) imposition of a property tax to be collected by a special tax protest refund levy;

(b) the general fund or any other funds legally available to the governing body; and

(c) proceeds from the sale of bonds issued by a county, city, or school district for the purpose of deriving revenue for the repayment of tax protests lost by the taxing jurisdiction. The governing body of a county, city, or school district is authorized to issue the bonds pursuant to procedures established by law. The bonds may be issued without being submitted to an election. Property taxes may be levied to amortize the bonds.

(8) If the department revises an assessment that results in a refund of taxes of $5 or less, a refund is not owed.

(9) As used in this section, "qualified appraisal" means a written appraisal that complies with the uniform standards of professional appraisal practice of the appraisal standards board of the appraisal foundation, as defined in 37-54-102."

Section 12. Section 15-2-301, MCA, is amended to read:

"15-2-301. Appeal of county tax appeal board decisions. (1) The county tax appeal board shall mail a copy of its decision to the taxpayer and to the property assessment division of the department of revenue. If the appearance provisions of 15-15-103 have been complied with, a person or the department on behalf of the state or any municipal corporation aggrieved by the action of the county tax appeal board may appeal to the state board by filing with the state tax appeal board a notice of appeal within 30 calendar days after the receipt of the decision of the county board. The notice must specify the action complained of and the reasons assigned for the complaint. Notice of acceptance of an appeal must be given to the county tax appeal board by the state tax appeal board. The state board shall set the appeal for hearing either in its office in the capital or the county seat as the board considers advisable to facilitate the performance of its duties or to accommodate parties in interest. The board shall give to the appellant and to the respondent at least 15 calendar days' notice of the time and place of the hearing.

(2) At the time of giving notice of acceptance of an appeal, the state board may require the county board to certify to it the minutes of the proceedings resulting in the action and all testimony taken in connection with its proceedings. The state board may, in its discretion, determine the appeal on the record if all parties receive a copy of the transcript and are permitted to submit additional sworn statements, or the state board may hear further testimony. For the purpose of expediting its work, the state board may refer any appeal to one of its members or to a designated hearings officer. The board member or hearings officer may exercise all the powers of the board in conducting a hearing and shall, as soon as possible after the hearing, report the proceedings, together with a transcript or a tape recording of the hearing, to the board. The state board shall determine the appeal on the record.

(3) On all hearings at county seats throughout the state, the state board or the member or hearings officer designated to conduct a hearing may employ a competent person to electronically record the testimony received. The cost of electronically recording testimony may be paid out of the general appropriation for the board.

(4) (a) In connection with any appeal under this section, the state board:

(i) is not bound by common law and statutory rules of evidence or rules of discovery and but may not admit a contingent fee appraisal in evidence;

(ii) may affirm, reverse, or modify any decision. To the extent that this section is in conflict with the Montana Administrative Procedure Act, this section supersedes that act. The state tax appeal board;

(iii) may not amend or repeal any administrative rule of the department. The state tax appeal board; and

(iv) shall give an administrative rule full effect unless the board finds a rule arbitrary, capricious, or otherwise unlawful.

(b) To the extent that this section is in conflict with the Montana Administrative Procedure Act, this section supersedes that act.

(i) for which any part of the compensation for the appraisal is contingent on:

(A) the reporting of a predetermined result;

(B) a direction in assignment results that favors the cause of the client;

(D) the attainment of a stipulated result; or

(E) the occurrence of a subsequent event directly related to an appraiser's opinion and specific to the assignment's purpose; or

(ii) that was prepared at the direction of or provided to any person who is compensated by the taxpayer in whole or in part on a contingent fee basis.

(5) The decision of the state tax appeal board is final and binding upon all interested parties unless reversed or modified by judicial review. Proceedings for judicial review of a decision of the state tax appeal board under this section are subject to the provisions of 15-2-303 and the Montana Administrative Procedure Act to the extent that it does not conflict with 15-2-303.

(6) Sections 15-6-134 and 15-7-111 may not be construed to prevent the department from implementing an order to change the valuation of property."

Section 13. Section 15-2-302, MCA, is amended to read:

"15-2-302. Direct appeal from department decision to state tax appeal board -- hearing. (1) A person may appeal to the state tax appeal board a final decision of the department of revenue involving:

(a) property centrally assessed under chapter 23;

(b) classification of property as new industrial property;

(d) any other matter in which the appeal is provided by law.

(2) The appeal is made by filing a complaint with the board within 30 days following receipt of notice of the department's final decision. The complaint must set forth the grounds for relief and the nature of relief demanded. The board shall immediately transmit a copy of the complaint to the department.

(3) The department shall file with the board an answer within 30 days following filing of a complaint.

(4) (a) The Subject to subsection (4)(b), the board shall conduct the appeal in accordance with the contested case provisions of the Montana Administrative Procedure Act.

(b) The board may not admit a contingent fee appraisal in evidence. As used in this subsection (4)(b), contingent fee appraisal has the meaning provided in 15-2-301.

Section 14. Section 15-30-145, MCA, is amended to read:

"15-30-145. Revision of return by department -- statute of limitations -- examination of records and persons. (1) If, in the opinion of the department, any return of a taxpayer is in any essential respect incorrect, it may revise the return.

(2) If a taxpayer does not file a return as required under this chapter, the department may, at any time, audit the taxpayer or estimate the taxable income of the taxpayer from any information in its possession and, based upon the audit or estimate, assess the taxpayer for the taxes, penalties, and interest due the state.

(3) Except as provided in subsections (2) and (4), the amount of tax due under any return may be determined by the department within 5 years after the return was filed, regardless of whether the return was filed on or after the last day prescribed for filing. For the purposes of 15-30-147 and this section, a tax return due under this chapter and filed before the last day prescribed by law or rule is considered to be filed on the last day prescribed for filing.

(4) (a) If a taxpayer, with intent to evade the tax, purposely or knowingly files a false or fraudulent return that violates a provision of this chapter, the amount of tax due may be determined at any time after the return is filed and the tax may be collected at any time after it becomes due.

(b) If the department finds that a return or report reflects the use of a listed transaction, as defined in [section 1], and that use of the listed transaction results in a deficiency in tax paid, notice of that deficiency may be given at any time within 10 years after the return is filed.

(5) The department, for the purpose of ascertaining the correctness of any return or for the purpose of making an estimate of taxable income of any person where information has been obtained, may also examine or cause to have examined by any agent or representative designated by it for that purpose any books, papers, or records of memoranda bearing upon the matters required to be included in the return and may require the attendance of the person rendering the return or any officer or employee of the person or the attendance of any person having knowledge in the premises and may take testimony and require proof material for its information, with power to administer oaths to the person or persons."

Section 15. Section 15-31-509, MCA, is amended to read:

"15-31-509. Periods of limitation. (1) Except as otherwise provided in 15-31-544, [section 6, section 7], and this section, a deficiency may not be assessed or collected with respect to the year for which a return is filed unless the notice of additional tax proposed to be assessed is mailed within 3 5 years from the date that the return was filed. For the purposes of this section, a return filed before the last day prescribed for filing is considered as filed on the last day. When, before the expiration of the period prescribed for assessment of the tax, the taxpayer consents in writing to an assessment after the time, the tax may be assessed at any time prior to the expiration of the period agreed upon. The limitations prescribed for giving notice of a proposed assessment of additional tax may not apply when:

(a) the taxpayer has by written agreement suspended the federal statute of limitations for collection of federal tax if the suspension of the limitation set forth in this section lasts:

(i) only as long as the suspension of the federal statute of limitation; or

(ii) until 1 year after the federal changes have become final or an amended federal return is filed as a result of the suspension of the federal statute, whichever is the latest in time; or

(b) a taxpayer has failed to file an amended Montana return, as required by 15-31-506, until 3 5 years after the federal changes become final or the amended federal return was filed, whichever the case may be.

(2) A refund or credit may not be allowed or paid with respect to the year for which a return is filed after 3 5 years from the last day prescribed for filing the return or after 1 year from the date of the overpayment, whichever period expires the later, unless before the expiration of the period the taxpayer files a claim for the refund or credit or the department has determined the existence of the overpayment and has approved the refund or credit. If the taxpayer has agreed in writing under the provisions of subsection (1) to extend the time within which the department may propose an additional assessment, the period within which a claim for refund or credit may be filed or a credit or refund allowed in the event a claim is not filed must automatically be extended.

(3) If a claim for refund or credit is based upon an overpayment attributable to a net loss carryback adjustment as provided in 15-31-119, in lieu of the 3-year period provided for in subsection (1), the period must be the period that ends with the expiration of the 15th day of the 41st month following the end of the tax year of the net loss that results in the carryback the overpayment may be refunded or credited within the period that expires on the 15th day of the 41st month following the close of the tax year of the net operating loss if that period expires later than 5 years from the due date of the return for the year to which the net operating loss is carried back.

(4) If the year of the net operating loss is open under either state or federal waivers, the year to which the loss is carried back will remain open for the purposes of the loss carryback and for 12 months following the expiration of the state or federal waiver, even though the claim would otherwise be barred under this section."

NEW SECTION. Section 16. Codification instruction. (1) [Sections 1 through 5] are intended to be codified as an integral part of Title 15, and the provisions of Title 15 apply to [sections 1 through 5].

(2) [Sections 6 and 7] are intended to be codified as an integral part of Title 15, chapter 31, part 5, and the provisions of Title 15, chapter 31, part 5, apply to [sections 6 and 7].

NEW SECTION. Section 17. Effective date. [This act] is effective on passage and approval.

NEW SECTION. Section 18. Retroactive applicability. (1) (a) Except as provided in subsection (1)(b), [sections 1, 4, and 5] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1998.

(b) The penalty imposed in [section 4] applies retroactively, within the meaning of 1-2-109, to listed transaction understatements discovered or reported after December 31, 2008.

(2) The penalties imposed in [sections 3 and 5] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2008.

(3) [Sections 6 and 14] apply retroactively, within the meaning of 1-2-109, to tax years for which the statute of limitations on assessment has not expired as of [the effective date of this act].

(4) [Sections 7, 8, and 11] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2008.

(5) (a) Except as provided in subsection (5)(b), [section 10] applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2008.

(b) The provisions of [section 10(9)] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2006.

(6) The provisions extending the periods from 3 to 5 years in [section 15] apply retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2005.

NEW SECTION. Section 19. Applicability. (1) [Section 9] applies after [the effective date of this act].

(2) The provisions of [sections 13 and 14] prohibiting the introduction of contingent fee appraisals as evidence apply to hearings held on or after [the effective date of this act].

- END -

Latest Version of HB 651 (HB0651.01)
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