Bill Summary – FastDemocracy

67th Legislature
                                                                                                              SB 51.01
                                                 SENATE BILL NO. 51
                                         INTRODUCED BY J. ELLSWORTH
                      BY REQUEST OF THE ECONOMIC AFFAIRS INTERIM COMMITTEE
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 A BILL FOR AN ACT ENTITLED: “AN ACT EXEMPTING CERTAIN FIBER OPTIC OR COAXIAL CABLE
 FROM PROPERTY TAXATION; AMENDING SECTIONS 15-6-135, 15-6-156, AND 15-6-219, MCA; AND
 PROVIDING AN EFFECTIVE DATE AND AN APPLICABILITY DATE.”
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         WHEREAS, the continuing prosperity of Montana relies upon its ability to embrace and adapt to
 accommodate modern economic and technological trends; and
         WHEREAS, greater broadband accessibility and affordability is critical to any competitive economy of
 the 21st century; and
         WHEREAS, this act ensures Montana's continuing prosperity by providing accessible and affordable
 broadband through incisive tax abatements.
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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. (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)   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)   all land and improvements and all personal property owned by a research and development firm,
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 provided that the property is actively devoted to research and development;
          (f)     machinery and equipment used in electrolytic reduction facilities;
          (g)     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
 (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), 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
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 capture equipment, only the market value of the enhancement is subject to the exemption under subsection
 (5)(b)(i).
          (e)   Except as provided in subsection (2)(d), equipment that does not qualify for the exemption under
 subsection (5)(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 state tax
 appeal board. Appeals on the property certification must name the department of environmental 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
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 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)   (a) Except as provided in subsection (5)(b)(i), 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 1,
 2014, and that satisfies the criteria in subsection (2)(d) is exempt from taxation for a period of 10 years from the
 date of certification, after which the property is assessed at 100% of its taxable value.
          (ii) Fiber optic or coaxial cable, as defined in 15-6-156, installed and placed in service on or after [the
 effective date of this act] is exempt from taxation during installation and for a period of 5 years starting from the
 date of deployment, 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 qualify for and maintain the
 exemption, the owner of fiber optic or coaxial cable must reinvest the tax savings from the exemption for fiber
 optic or coaxial cable in the installation of new fiber optic or coaxial cable in Montana within 2 years following
 the tax year in which the tax savings are received by the owner of fiber optic or coaxial cable without charging
 the costs to the consumer. An entity that claims a tax exemption under this subsection (5)(b)(ii) shall report to
 the department of revenue:
          (A)   its annual investment in new fiber optic or coaxial cable installation for the preceding year; and
          (B)   the counties in which the new fiber optic or coaxial cable was placed in service. The department
 shall make the reports available to the legislature upon request."
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          Section 2. Section 15-6-156, MCA, is amended to read:
          "15-6-156. Class thirteen property -- description -- taxable percentage. (1) Except as provided in
 subsections (2)(a) through (2)(h), class thirteen property includes:
          (a)   electrical generation facilities, except wind generation facilities, biomass generation facilities, and
 energy storage facilities classified under 15-6-157, of a centrally assessed electric power company;
          (b)   electrical generation facilities, except wind generation facilities, biomass generation facilities, and
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 energy storage facilities classified under 15-6-157, owned or operated by an exempt wholesale generator or an
 entity certified as an exempt wholesale generator pursuant to 42 U.S.C. 16451;
         (c)   noncentrally assessed electrical generation facilities, except wind generation facilities, biomass
 generation facilities, and energy storage facilities classified under 15-6-157, owned or operated by any
 electrical energy producer;
         (d) allocations of centrally assessed telecommunications services companies; and
         (e)   dedicated communications infrastructure described in 15-6-162(5) for which construction
 commenced after June 30, 2027, or for which the 15-year period provided for in 15-6-162(5)(c) has expired.
         (2)   Class thirteen property does not include:
         (a)   property owned by cooperative rural electric cooperative associations classified under 15-6-135;
         (b)   property owned by cooperative rural electric cooperative associations classified under 15-6-137 or
 15-6-157;
         (c)   allocations of electric power company property under 15-6-141;
         (d)   electrical generation facilities included in another class of property;
         (e)   property owned by cooperative rural telephone associations and classified under 15-6-135;
         (f)   property owned by organizations providing telecommunications services and classified under 15-6-
 135;
         (g)   generation facilities that are exempt under 15-6-225; and
         (h)   qualified data centers classified under 15-6-162.
         (3)     (a) For the purposes of this section, the following definitions apply:
         (a)   (i) "electrical Electrical generation facilities" means any combination of a physically connected
 generator or generators, associated prime movers, and other associated property, including appurtenant land
 and improvements and personal property, that are normally operated together to produce electric power. The
 term includes but is not limited to generating facilities that produce electricity from coal-fired steam turbines, oil
 or gas turbines, or turbine generators that are driven by falling water.
         (b)(ii) The term does not include electrical generation facilities used for noncommercial purposes or
 exclusively for agricultural purposes.
         (c)(iii) The term also does not include a qualifying small power production facility, as that term is
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 defined in 16 U.S.C. 796(17), that is owned and operated by a person not primarily engaged in the generation
 or sale of electricity other than electric power from a small power production facility and classified under 15-6-
 134 and 15-6-138.
         (b)   (i) "Fiber optic or coaxial cable" means any fiber optic or coaxial cable, including all capitalized
 costs associated with construction and deployment of the fiber optic or coaxial cable, and other property that is
 normally operated in the installation and deployment of fiber optic or coaxial cable to deliver digital
 communication and access to the internet.
         (ii) The term does not include routers, head-end equipment, central office equipment and other
 electronics, or hardware or software not directly associated with the installation and deployment of fiber optic or
 coaxial cable or the buildings used to house equipment.
         (4)   Class (a) Except as provided in subsection (4)(b), class thirteen property is taxed at 6% of its
 market value.
         (b)   Fiber optic or coaxial cable, as defined in 15-6-156, installed and placed in service on or after [the
 effective date of this act] is exempt from taxation during installation and for a period of 5 years starting from the
 date of deployment, 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 qualify for and maintain the
 exemption, the owner of fiber optic or coaxial cable must reinvest the tax savings from the exemption for fiber
 optic or coaxial cable in the installation of new fiber optic or coaxial cable in Montana within 2 years following
 the tax year in which the tax savings are received by the owner of fiber optic or coaxial cable without charging
 the costs to the consumer. An entity that claims a tax exemption under this subsection (4)(b) shall report to the
 department of revenue:
         (i)   its annual investment in new fiber optic or coaxial cable installation for the preceding year; and
         (ii) the counties in which the new fiber optic or coaxial cable was placed in service. The department
 shall make the reports available to the legislature upon request."
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         Section 3. Section 15-6-219, MCA, is amended to read:
         "15-6-219. Personal and other property exemptions. The following categories of property are
 exempt from taxation:
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           (1)   harness, saddlery, and other tack equipment;
           (2)   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;
           (3)   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;
           (4)   a bicycle or a moped, as defined in 61-8-102, used by the owner for personal transportation
 purposes;
           (5)   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:
           (a)   the acquired cost of the personal property is less than $15,000;
           (b)   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 t