HELENA (AP) - Business, real estate and ranching interests are accusing the state Revenue Department of exceeding its authority with a proposed tax rule change.

"We believe it's a dangerous precedent for a department of government to establish rules without legislative authority," said Barbara Ranf of the Montana Chamber of Commerce. "We believe that the proper venue is the 2007 (legislative) session."

"It's a sneaky, secret attack, and it's a direct affront to me as a lawmaker," said Rep. Scott Mendenhall, R-Clancy.

But Dan Bucks, director of the state Revenue Department, defended the moving, calling the proposed rule "an attempt to advertise and inform the public about the intent of the law."

At issue is a proposal to change the definition of Montana's "source income."

In simple terms, the rule is directed at what are known as tax-deferred or 1031 exchanges, in which someone sells a piece of property and has a capital gain. Then the person within a certain time limit replaces the sold property with the purchase of another piece of property of equal or greater value. This exchange allows the state taxes on the capital gain to be deferred until the replacement property is sold.

An issue arises when a Montanan does a property exchange with a resident of a state with no state income tax, such as Wyoming. Bucks said the rule makes clear that Montana will still be able to collect taxes owed on the gain realized here.

Critics called the proposal a significant change, one which only the Legislature should be allowed to make.

"This ruling is an attempt by the department to change tax law," said Joseph F. Shevlin, a Helena certified public accountant representing the Montana Society of CPAs. "The society feels it should be a legislative decision."

Mike Green, a Helena lawyer representing the Montana Taxpayers' Association and Montana Association of Realtors warned that the change could have a detrimental impact on the flow of investment capital into Montana.

Bucks said the proposal was simply an effort to make sure nonresidents pay taxes on income earned from the sale of Montana property, "just as Montana residents are required to do."

"The law prevents Montana from giving a tax break for earning income in Montana from the sale of property and investing it outside Montana," he said.