Bill Summary – FastDemocracy

68th Legislature                                                                                                          SB 46.1
                                                        SENATE BILL NO. 46
                                                 INTRODUCED BY W. MCKAMEY
                                       BY REQUEST OF THE DEPARTMENT OF REVENUE
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   A BILL FOR AN ACT ENTITLED: “AN ACT REVISING PROPERTY TAX LAWS TO REMOVE NEW
   INDUSTRIAL PROPERTY FROM CLASS FIVE; AMENDING SECTIONS 15-6-135, 15-24-1401, AND 20-9-
   407, MCA; AND REPEALING SECTION 15-6-192, MCA.”
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   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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              Section 1. Section 15-6-135, MCA, is amended to read:
              "15-6-135.       Class five property -- description -- taxable percentage -- exemption. (1) Class five
   property includes:
              (a)         all property used and owned by cooperative rural electrical and cooperative rural telephone
   associations organized under the laws of Montana, except property owned by cooperative organizations
   described in 15-6-137(1)(a);
              (b)         air and water pollution control and carbon capture equipment as defined in this section;
              (c)      new industrial property as defined in this section;
              (d)(c)      any personal or real property used primarily in the production of ethanol-blended gasoline
   during construction and for the first 3 years of its operation;
              (e)(d)      all land and improvements and all personal property owned by a research and development
   firm, provided that the property is actively devoted to research and development;
              (f)(e)      machinery and equipment used in electrolytic reduction facilities; and
              (g)(f)      all property used and owned by persons, firms, corporations, or other organizations that are
   engaged in the business of furnishing telecommunications services exclusively to rural areas or to rural areas
   and cities and towns of 1,200 permanent residents or less.
              (2)         (a) "Air and water pollution control and carbon capture equipment" means that portion of
   identifiable property, facilities, machinery, devices, or equipment certified as provided in subsections (2)(b) and
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   (2)(c) and designed, constructed, under construction, or operated for removing, disposing, abating, treating,
   eliminating, destroying, neutralizing, stabilizing, rendering inert, storing, or preventing the creation of air or
   water pollutants that, except for the use of the item, would be released to the environment. This includes
   machinery, devices, or equipment used to capture carbon dioxide or other greenhouse gases. Reduction in
   pollutants obtained through operational techniques without specific facilities, machinery, devices, or equipment
   is not eligible for certification under this section.
              (b)    Requests for certification must be made on forms available from the department of revenue.
   Certification may not be granted unless the applicant is in substantial compliance with all applicable rules, laws,
   orders, or permit conditions. Certification remains in effect only as long as substantial compliance continues.
              (c)    The department of environmental quality shall promulgate rules specifying procedures,
   including timeframes for certification application, and definitions necessary to identify air and water pollution
   control and carbon capture equipment for certification and compliance. The department of revenue shall
   promulgate rules pertaining to the valuation of qualifying air and water pollution control and carbon capture
   equipment. The department of environmental quality shall identify and track compliance in the use of certified
   air and water pollution control and carbon capture equipment and report continuous acts or patterns of
   noncompliance at a facility to the department of revenue. Casual or isolated incidents of noncompliance at a
   facility do not affect certification.
              (d)    To qualify for the exemption under subsection (5)(b)(i) (3)(b)(i), the air and water pollution
   control and carbon capture equipment must be placed into service after January 1, 2014, for the purposes of
   environmental benefit or to comply with state or federal pollution control regulations. If the air or water pollution
   control and carbon capture equipment enhances the performance of existing air and water pollution control and
   carbon capture equipment, only the market value of the enhancement is subject to the exemption under
   subsection (5)(b)(i) (3)(b)(i).
              (e)    Except as provided in subsection (2)(d), equipment that does not qualify for the exemption
   under subsection (5)(b)(i) (3)(b)(i) includes but is not limited to equipment placed into service to maintain,
   replace, or repair equipment installed on or before January 1, 2014.
              (f)    A person may appeal the certification, classification, and valuation of the property to the
   Montana tax appeal board. Appeals on the property certification must name the department of environmental
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   quality as the respondent, and appeals on the classification or valuation of the equipment must name the
   department of revenue as the respondent.
              (3)   (a) "New industrial property" means any new industrial plant, including land, buildings, machinery,
   and fixtures, used by new industries during the first 3 years of their operation. The property may not have been
   assessed within the state of Montana prior to July 1, 1961.
              (b)   New industrial property does not include:
              (i)   property used by retail or wholesale merchants, commercial services of any type, agriculture,
   trades, or professions unless the business or profession meets the requirements of subsection (4)(b)(v);
              (ii) a plant that will create adverse impact on existing state, county, or municipal services; or
              (iii) property used or employed in an industrial plant that has been in operation in this state for 3 years
   or longer.
              (4)   (a) "New industry" means any person, corporation, firm, partnership, association, or other group
   that establishes a new plant in Montana for the operation of a new industrial endeavor, as distinguished from a
   mere expansion, reorganization, or merger of an existing industry.
              (b)   New industry includes only those industries that:
              (i)   manufacture, mill, mine, produce, process, or fabricate materials;
              (ii) do similar work, employing capital and labor, in which materials unserviceable in their natural state
   are extracted, processed, or made fit for use or are substantially altered or treated so as to create commercial
   products or materials;
              (iii) engage in the mechanical or chemical transformation of materials or substances into new products
   in the manner defined as manufacturing in the North American Industry Classification System Manual prepared
   by the United States office of management and budget;
              (iv) engage in the transportation, warehousing, or distribution of commercial products or materials if
   50% or more of an industry's gross sales or receipts are earned from outside the state; or
              (v)   earn 50% or more of their annual gross income from out-of-state sales.
              (5)(3)   (a) Except as provided in subsection (5)(b) (3)(b), class five property is taxed at 3% of its
   market value.
              (b)      (i) Air and water pollution control and carbon capture equipment placed in service after January
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   1, 2014, and that satisfies the criteria in subsection (2)(d) is exempt from taxation.
              (ii)     (A) Except as provided in subsection (5)(b)(ii)(B) (3)(b)(ii)(B), fiber optic or coaxial cable, as
   defined in 15-6-156, installed and placed in service on or after July 1, 2021, is exempt from taxation for a period
   of 5 years starting from the date the fiber optic or coaxial cable was placed in service, after which the property
   exemption is phased out at a rate of 20% a year, with the property being assessed at 100% of its taxable value
   after a 10-year period. In order to maintain the exemption, the owner of fiber optic or coaxial cable shall reinvest
   the tax savings from the exemption by installing and placing in service new fiber optic or coaxial cable in
   Montana within 2 years from the date the owner first claimed the exemption provided for in this subsection
   (5)(b)(ii) (3)(b)(ii) without charging those costs to the consumer. The cost of installing or placing into service
   fiber optic or coaxial cable with the reinvested tax savings without charging those costs to the consumer must
   be equal to or greater than the value of the tax savings received from the tax incentive.
              (B)      Fiber optic or coaxial cable installed using federal funds received pursuant to section 9901 of
   the American Rescue Plan Act is not eligible for exemption from taxation under this section.
              (C)      An entity that claims a tax exemption under this subsection (5)(b)(ii) (3)(b)(ii) shall maintain
   adequate books and records demonstrating the investment the owner made when installing and placing in
   service fiber optic or coaxial cable in Montana. The property owners shall make those records available to the
   department for inspection upon request.
              (6)(4)   (a) The property taxes exempted from taxation by subsection (5)(b)(ii) (3)(b)(ii) are subject to
   termination or recapture if the department determines that the owner failed to install and place in service new
   coaxial or fiber cable in Montana as provided in subsection (5)(b)(ii) (3)(b)(ii) or otherwise violates the
   provisions of this section.
              (b)      Upon notice from the department that the owner's exemption has terminated, any local
   governing body may recapture taxes previously exempted in that jurisdiction, plus interest and penalties for
   nonpayment of property taxes as provided in 15-16-102, during any tax year in which an exemption under the
   provisions of subsection (5)(b)(ii) (3)(b)(ii) was improper. Any recapture must occur within 10 years after the
   end of the calendar year in which the exemption was first claimed.
              (c)      The recapture of abated taxes may be cancelled, in whole or in part, if the local governing body
   determines that the taxpayer's failure to meet the requirements is a result of circumstances beyond the control
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   of the taxpayer."
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              Section 2. Section 15-24-1401, MCA, is amended to read:
              "15-24-1401.   Definitions. The following definitions apply to 15-24-1402 unless the context requires
   otherwise:
              (1)    "Expansion" means that the industry has added or will add at least $50,000 worth of qualifying
   improvements or modernized processes to its property within the same jurisdiction either in the first tax year in
   which the benefits provided for in 15-24-1402 are to be received or in the preceding tax year.
              (2)    "Industry" includes but is not limited to a firm that:
              (a)    engages in the mechanical or chemical transformation of materials or substances into products
   in the manner defined as manufacturing in the North American Industry Classification System Manual prepared
   by the United States office of management and budget;
              (b)    engages in the extraction or harvesting of minerals, ore, or forestry products;
              (c)    engages in the processing of Montana raw materials such as minerals, ore, agricultural
   products, and forestry products;
              (d)    engages in the transportation, warehousing, or distribution of commercial products or materials
   if 50% or more of the industry's gross sales or receipts are earned from outside the state;
              (e)    earns 50% or more of its annual gross income from out-of-state sales;
              (f)    engages in the production of electrical energy in an amount of 1 megawatt or more by means
   of an alternative renewable energy source as defined in 15-6-225;
              (g)    operates a qualified data center or dedicated communications infrastructure classified under
   15-6-162; or
              (h)    operates a green hydrogen facility, green hydrogen pipeline, or green hydrogen storage system
   as defined in 15-6-163.
              (3)    "New" means that the firm is new to the jurisdiction approving the resolution provided for in 15-
   24-1402(2) and has invested or will invest at least $125,000 worth of qualifying improvements or modernized
   processes in the jurisdiction either in the first tax year in which the benefits provided for in 15-24-1402 are to be
   received or in the preceding tax year. New industry does not include property treated as new industrial property
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   under 15-6-135.
              (4)      "Qualifying" means meeting all the terms, conditions, and requirements for a reduction in
   taxable value under 15-24-1402 and this section."
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              Section 3. Section 20-9-407, MCA, is amended to read:
              "20-9-407.   Industrial facility agreement for bond issue in excess of maximum. (1) In a school
   district within which a new major industrial facility that seeks to qualify for taxation as class five property under
   15-6-135 is being constructed or is about to be constructed, the school district may require, as a precondition of
   the new major industrial facility qualifying as class five property, that the owners of the proposed industrial
   facility enter into an agreement with the school district concerning the issuing of bonds in excess of the
   limitation prescribed in 20-9-406. Under an agreement, the school district may, with the approval of the voters,
   issue bonds that exceed the limitation prescribed in this section by a maximum of 100% of the estimated
   taxable value of the property of the new major industrial facility subject to taxation when completed. The
   estimated taxable value of the property of the new major industrial facility subject to taxation must be computed
   by the department of revenue when requested to do so by a resolution of the board of trustees of the school
   district. A copy of the department's statement of estimated taxable value must be printed on each ballot used to
   vote on a bond issue proposed under this section.
              (2)(1)   Pursuant to the an agreement between the a new major industrial facility and the a school
   district and as a precondition to qualifying as class five property under 15-6-135(1)(c) before the amendment of
   15-6-135 in [this act], the new major industrial facility and its owners shall pay, in addition to the taxes imposed
   by the school district on property owners generally, as much of the principal and interest on the bonds provided
   for under former subsection (1) of this section before the amendment in [this act] as represents payment on an
   indebtedness in excess of the limitation prescribed in 20-9-406. After the completion of the new major industrial
   facility and when the indebtedness of the school district no longer exceeds the limitation prescribed in former
   subsection (1) of this section before the amendment in [this act], the new major industrial facility is entitled, after
   all the current indebtedness of the school district has been paid, to a tax credit over a period of no more than 20
   years. The credit must as a total amount be equal to the amount that the facility paid the principal and interest
   of the school district's bonds in excess of its general liability as a taxpayer within the district.
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              (3)(2)   A major industrial facility is a facility subject to the taxing power of the school district, whose
   construction or operation will increase the population of the district, imposing a significant burden upon the
   resources of the district and requiring construction of new school facilities. A significant burden is an increase in
   ANB of at least 20% in a single year."
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              NEW SECTION. Section 4. Repealer. The following section of the Montana Code Annotated is
   repealed:
   15-6-192.           Application for c