ARM 42.19.206. DETERMINING EFFECTIVE TAX RATES (ETR) FOR QUALIFYING CLASS FOUR PROPERTY

(1) There is a graduated property tax rate reduction for class four property that also qualifies for the reduced tax rates provided in 15-6-134, MCA. For purposes of this rule, the term “qualifying property” or “property” will be used to describe this class four property. (2) To implement the reduced tax rates described in (1), the department will determine an ETR for each qualifying property. An ETR is determined by calculating the taxable value for each graduated tier of eligible market value and adding the respective taxable values from each tier to arrive at a total eligible taxable value; then dividing the total eligible taxable value by the total eligible market value of the qualifying property. (3) If a qualifying property is enrolled in the statutory property tax assistance program (PTAP), a PTAP ETR will be calculated for the portion of the property’s PTAP benefit by applying the respective rate reduction multiplier to the tiered tax rates first. Any portion of the property’s value not eligible to receive the PTAP benefit will have a separate ETR calculated without any rate reductions applied. (4) A qualifying property receiving a partial exemption under Montana law will have an ETR calculated for only the non-exempt portion of the property’s value. (5) A qualifying property receiving an abatement (such as a new or expanding industry (NEI) abatement) will have an ETR calculated for it as if it were fully taxable. Any reduction from the abatement will be applied to the overall ETR and used to determine the taxable value for the portion of value eligible to receive the abatement. (6) The department will compute all ETR percentages out to the third decimal place, but the final rate will be rounded to two decimal places to achieve consistency with all statutory and rule expressions of tax rates and historical practice. (a) If the third decimal place is fewer than five, the second decimal place will be kept; (b) If the third decimal place is equal to or greater than five, the second decimal place will round up. (7) A rounded ETR will be applied against the market value for each qualifying property to calculate the property’s taxable value. (8) The following are examples of the ETR calculation and rounding processes described in this rule: (a) A qualifying residential property has a market value of $750,000. A graduated tax rate of .76% applies to the first $378,000 of market value and a graduated tax rate of .9% applies to the remaining $372,000. Taxable Value = ($378,000 * 0.0076) = $2,873 Taxable Value = ($372,000 * 0.009) = $3,348 Total Taxable Value = $2,873 + $3,348 = $6,221 ETR = Total Taxable Value / Total Market Value ETR = $6,221 / $750,000 = .829% Rounded ETR = .83% (b) A qualifying commercial property has a market value of $3,000,000. A graduated tax rate of 1.5% applies to the first $2,274,000 of market value and a graduated tax rate of 1.9% applies to the remaining $726,000. Taxable Value = ($2,274,000 * 0.015) = $34,110 Taxable Value = ($726,000 * 0.019) = $13,794 Total Taxable Value = $34,110 + $13,794 = $47,904 ETR = Total Taxable Value / Total Market Value ETR = $47,904 / $3,000,000 = 1.596% Rounded ETR = 1.6% (c) A qualifying residential property receives the PTAP benefit at an 80% reduction and is valued at $618,000. The first $418,000 in value is eligible to receive the 80% reduction for PTAP. Taxable Value = (.76% * .2) = (.15% * $378,000) = $567 Taxable Value = (.9% * .2) = (.18% * $40,000) = $72 PTAP Taxable Value = 567 + 72 = 639 PTAP Effective Tax Rate = 639 / $418,000 = .152% Rounded Effective Tax Rate for PTAP Value = .15% Taxable Value = (.9% * $200,000) = $1,800 Effective Tax Rate for Non-PTAP Value = .9% (d) A qualifying commercial property has a market value of $4,000,000 and is receiving a partial nonprofit healthcare exemption on $1,000,000 of property value. The $1,000,000 in value that is exempt will be subtracted from the total value of $4,000,000, leaving $3,000,000 in taxable market value. A graduated tax rate of 1.5% applies to the first $2,274,000 of taxable market value and a graduated tax rate of 1.9% applies to the remaining $726,000. Taxable Value = ($2,274,000 * 0.015) = $34,110 Taxable Value = ($726,000 * 0.019) = $13,794 Total Taxable Value = $34,110 + $13,794 = $47,904 ETR = Total Taxable Value / Total Market Value ETR = $47,904 / $3,000,000 = 1.596% Rounded ETR = 1.6% (e) A qualifying commercial property has a market value of $3,000,000 and is receiving a 50% NEI abatement on $1,000,000 of market value. A graduated tax rate of 1.5% applies to the first $2,274,000 of market value and a graduated tax rate of 1.9% applies to the remaining $726,000 to calculate an overall ETR. The NEI abatement reduction is then applied to the overall ETR for the $1,000,000 in market value receiving the abatement. Taxable Value = ($2,274,000 * 0.015) = $34,110 Taxable Value = ($726,000 * 0.019) = $13,794 Total Taxable Value = $34,110 + $13,794 = $47,904 ETR = Total Taxable Value / Total Market Value ETR = $47,904 / $3,000,000 = 1.596% Rounded ETR = 1.6% NEI Abatement (1.6% * 50% = .8%) Abated Taxable Value = ($1,000,000 * .008) = $8,000 Non-Abated Taxable Value = ($2,000,000 * .016) = $32,000