The following terms pertain to this chapter:

(1) "Advanced mineral payments" are payments made to royalty interest owners that represent the royalty interest owner's future share of the receipts from the sale of the natural resource.

(2) "Individual" means a worker who renders service in the course of an occupation.

(3) "Lookback letter" means the letter sent to employers notifying them of their filing frequency for employee wage withholding.

(4) "Mineral payments" are payments made to royalty interest owners that represent the royalty interest owner's future share of the receipts from the sale of the natural resource.

(5) "Net royalty amount payable" means the amount of mineral proceeds subject to withholding. This amount is equal to the gross royalty payments less any taxes and other expenses deducted pursuant to the royalty agreement in effect.

(6) "Net taxable earnings" means an employee's gross earnings minus the number of the employee's claimed withholding allowances multiplied by the withholding exemption amount provided in 15-30-2114, MCA for the year the Montana withholding tables were last revised.

(7) "Overriding royalty interest" means ownership in a percentage of production or production revenues, free of the cost of production, created by the lessee, company and/or working interest owner and paid by the lessee, company and/or working interest owner out of revenue from the well.

(8) "Person" means any natural person, company, corporation, association, partnership, joint venture, cooperative, estate, trust, receiver, or any other party or entity that has a working interest, royalty interest, overriding royalty interest, production payment, production payment including in-kind exchanges, or any other ownership interest entitled to production proceeds from deposits in this state.

(9) "Producer" is the person that extracts natural resources from deposits in the state.

(10) "Remitter" means the individual, entity, or trust obligated under a mineral lease to pay royalties to the royalty owner or their assignee, to deliver minerals to a purchaser to the credit of the royalty owner or their assignee, or to pay a portion of the proceeds of the sale of the minerals to the royalty owner or their assignee.

(11) "Reporting forms" include, but are not limited to:

(a) Form MW-1, the Montana Withholding Tax Payment Voucher;

(b) Form MW-3, the Montana Annual W-2 1099 Withholding Tax Reconciliation form;

(c) Montana Employee's Withholding Allowance and Exemption Certificate form (Form MW-4);

(d) Form W-2, the federal wage and tax statement form;

(e) Form RW-1, the Mineral Royalty Withholding Tax Payment Voucher form;

(f) Form RW-3, the Montana Annual Mineral Royalty Withholding Tax Reconciliation form; and

(g) Form 1099, the federal Information Return.

(12) "Take in kind" means an operator or non-operator who elects to receive production in lieu of proceeds from the sale of production.

This rule has been repealed.

(1) Employee contributions to pensions, profit sharing, stock bonus, or annuity plans, deferred compensation and cafeteria plans where the payments are not otherwise considered wages, an IRA, or commercial annuity contracts are exempt from withholding to the extent that the contributions are not includable in the employee's adjusted gross income for federal income tax purposes.

(2) Sick pay paid by a third party is not subject to withholding taxes unless the payor receives a written request from the employee, or the employer and the third party entered into an agreement that makes the third party responsible for the reporting and payment of withholding taxes. When a third party reports and pays withholding taxes, the third party must use its own name and tax identification number instead of the employer's.

(3) A recipient of any designated distribution from a deferred compensation plan, individual retirement plan, or commercial annuity, as defined in IRC 3405, may elect to have the payor withhold state income tax from these payments by filing a Form MW-4 with the payor.

(a) The recipient's tax withholding election shall specify a flat dollar amount of income tax to be withheld by the payor from each designated distribution or a number of allowances claimed by the recipient to be used with the withholding tax tables provided by the department. The election shall also specify the name, current address, and taxpayer identification number of the recipient. Any change or revocation of a previously filed election shall include the same information as required in this rule for an initial election except the recipient should indicate whether a change or revocation of a previously filed election is being made. In this case, the payor shall remit the withholding tax to the department as required in ARM 42.17.113.

(b) The payor has the option to choose not to withhold from any designated distribution if the amount to be deducted and withheld is less than $10. Additionally, income tax withholding by the payor from any designated distribution shall not be required if the amount to be withheld would reduce the net amount of the distribution to less than $10.

(c) The payor of distributions, made up in whole or in part of contributions made pursuant to (1) or solely of employer contributions, shall notify the recipients of the availability to state withholding and the requirements for the payment to state income tax on the taxable portion of a distribution.

(i) Payors shall notify recipients of the state requirements at the same time recipients are notified of the federal election requirements under IRC 3405(d)(10)(B).

(ii) Payors shall notify recipients at the time of distribution and yearly thereafter.

This rule has been repealed.

(1) Employers shall calculate the state income tax amount to withhold from employees according to the length of the payroll period, the employee's gross wages, the number of allowances claimed by the employee on Form MW-4, and the department's "Montana Withholding Tax Tables," provided online at www.mtrevenue.gov. The tables are based on the formulas provided in (2) and (3) and show the amount to withhold each pay period.

(2) Montana withholding tables are based on the following annual withholding formulas as adjusted annually for inflation. Wage withholding is equal to:

(a) 1.80% of the first $7,105 of net taxable earnings; plus

(b) 4.40% of the next $8,120 of net taxable earnings; plus

(c) 6.00% of the next $106,575 of net taxable earnings; plus

(d) 6.60% of net taxable earnings over $121,800.

(3) Withholding formulas for nonannual payroll periods are calculated by dividing the dollar amounts for annual payroll in (2) by the ratio of the number of working days in a year to the number of working days in the payroll period. The following table shows payroll periods and the corresponding divisors:

(4) By October 1 of each year, the department shall adjust the withholding formulas for inflation by multiplying the dollar amounts in (2) and the withholding exemption amount used in the determination of net taxable earnings in ARM 42.17.101 by the inflation factor, as defined in 15-30-2101, MCA.

(5) If the department determines that the inflation adjustment is immaterial, it may keep existing withholding tables in effect for another year.

(1) Every employer transacting business in Montana is required to withhold Montana state income tax from wages paid to an employee for services rendered within Montana, unless the compensation is specifically exempted under Montana law.

(2) Compensation which may be excludable from adjusted gross income under a United States tax treaty remains subject to Montana withholding as the determination whether a nonresident alien qualifies for tax treaty exclusion cannot be made until the individual's Montana income tax return is filed.

(3) Temporary employment or employment of short duration within Montana does not relieve the employer of the obligation to withhold employee wages.

(4) The Amtrak Reauthorization and Improvement Act of 1990 exempts from state income tax and withholding the compensation of certain railroad, trucking, and air and water carrier employees unless they are Montana residents. The exemption from withholding applies only to nonresident interstate carrier employees and the employer applies the exemption based on the residency status claimed by the employee. No Form MW-4 is required for this exemption.

(5) Wages paid to an enrolled member of a Native American tribe are subject to withholding, except as provided in ARM 42.15.220.

(a) When the employee is an enrolled tribal member of the governing tribe of the reservation on which the enrolled tribal member works and resides:

(i) the wages earned by the employee are derived from reservation sources; and

(ii) the employee submits a Form MW-4 to the employer attesting that the employee resides on his or her reservation, together with a certificate of enrollment.

(b) When wages are derived from both reservation sources and nonreservation sources, only wages derived from reservation sources are exempt from withholding, provided the employee meets all the criteria in (5)(a).

(c) When an employee does not reside on his or her reservation for an entire pay period, only wages earned while the employee was residing on the reservation are exempt from taxation, provided the employee meets all the criteria in (5)(a).

(6) Wages paid to a resident of North Dakota for personal services rendered within Montana are not subject to withholding provided the employee has filed a Form MW-4, in accordance with ARM 42.17.134.

(7) Wages paid to the nonmilitary spouse of a military serviceperson for personal services rendered in Montana which meet the criteria in ARM 42.15.112, are not subject to withholding provided the employee has completed a Form MW-4.

(8) A withholding exemption claimed on Form MW-4 must be renewed annually. When an employee no longer needs or qualifies for an exemption, the employee must notify the employer by providing a new Form MW-4 without the previously claimed exemption. If an employee fails or refuses to provide the updated Form MW-4, the employer must withhold on the basis of zero withholding allowances, in compliance with ARM 42.17.131.

This rule has been transferred.

(1) Failure to pay withheld amounts within the time provided, and the use thereof by the employer in forwarding its own business, is considered to be an illegal conversion of trust money. The employer will not regard withheld wages as being equivalent to its own personal income tax indebtedness. Penalties provided in 15-1-216 and 15-30-2641, MCA, apply to any violation of the requirement to collect, truthfully account for, and pay amounts required to be deducted from employee wages.

(2) If an employer's payment requirement of withholding tax for state purposes conflicts with the federal tax deposit requirements, the employer may elect to remit according to the federal schedule. The employer must provide the department with a copy of its federal notification.

(3) Once an employer becomes subject to withholding tax as provided in 15-30-2501, MCA, the employer must continue to withhold, and report, income tax from the employees' wages for all subsequent calendar years.

(1) On or before January 31 of each year, every employer must file with the department a Form MW-3, Montana Annual W-2 1099 Withholding Tax Reconciliation. Form MW-3 must be accompanied by the original copies of each employee's earnings statements on federal Form W-2.

(a) Employee's earning statements and the federal Form W-2 must be prepared for each employee, regardless of whether or not withholding taxes were actually withheld from the employee's wages. The state non-exempt wages as provided in ARM 42.17.111 or 42.17.134 and state income tax withheld must be shown in the boxes labeled for state information.

(b) An original copy of the federal Form W-2 must be filed with the Form MW-3, and two copies must be furnished to the employee not later than January 31 of each year.

(c) Montana does not provide substitute earning statement forms or allow earning statements which do not conform to federal Form W-2 requirements.

(2) Electronic reporting of employee earnings may be allowed if in conformity with department and federal specifications.

(3) Computer-generated federal Form W-2 equivalents in printout form may be allowed by the department in lieu of W-2s or electronic media.

(4) Application to provide electronic or printout reports must be made, and department approval given, before such reports are made.

(5) The federal Form 1099R that has Montana state income tax withholding must be filed with the department in paper or electronic form by January 31 following the year that the tax was withheld.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been transferred.

This rule has been repealed.

(1) If an employer fails to deduct and withhold the tax from wages as required under 15-30-2502, MCA, and thereafter the income tax against which the withholdings may be credited is paid, the amount required to be deducted and withheld shall not be collected from the employer. However, such payment does not relieve the employer from liability for penalties, interest, or additions to the tax applicable because of such failure to deduct and withhold. The employer will not be relieved under this rule from their liability for payment of the amounts required to be withheld unless they can show that the income tax against which the required withholdings may be credited has been paid.

This rule has been repealed.

(1) Federal Form 1099s, U.S. Information Returns, are required to be filed for certain dividends, interest in excess of $10, royalties, payments to retirement plans, rents, salaries, wages, prizes, awards, annuities, pensions, and real estate transactions as specified in 15-30-2616, MCA. Federal Form 1099s may be filed on paper documents or electronically. The dates for filing the information returns with the department are the same as the due dates for filing the corresponding federal return. The returns are to be filed with:

Montana Department of Revenue

P.O. Box 5835

Helena, Montana 59604-5835.

(2) Paper documents are to be prepared on the appropriate federal information return and a copy filed with the department. Returns filed on paper forms are to be accompanied by a copy of federal Form 1096, Annual Summary, summarizing the information being reported to the department.

(3) Federal Form 1099s filed electronically are to conform to the specifications outlined in Federal Publication 1220 for the applicable year.

(1) For purposes of determining the employee's withholding allowances and withholding exemptions, the department provides Form MW-4. The department has determined that the federal child tax credit that allows extra allowances for federal withholding is not allowed for Montana purposes when determining the number of allowances for Montana withholding.

(2) Exempt status claimed for federal purposes does not exempt an employee's wages from withholding requirements for Montana purposes.

(3) If an employee fails or refuses to provide the number of allowances on Form MW-4 reported on the line stating "total number of allowances," the employer shall withhold, for Montana purposes, on the basis of zero withholding allowances.

(4) The department may revise the number of withholding allowances claimed to a maximum allowed for state tax purposes.

(a) For any Form MW-4 on which an employee has claimed more than ten withholding allowances, the following apply:

(i) The employer must provide the department with an electronic copy of the Form MW-4 provided by the employee as described in (5).

(ii) The employer must continue to withhold based on the most recently filed Form MW-4 with fewer than 11 allowances claimed. If no Form MW-4 with fewer than 11 allowances was previously filed, the employer shall withhold for Montana purposes on the basis of zero withholding allowances.

(iii) If upon review, the department determines that the Form MW-4 provided is defective, the department may require that the employer disregard the allowances claimed and advise the employer in writing of the maximum number of withholding allowances permitted the employee.

(b) The filing of a new Form MW-4 by an employee whose withholding allowances have been set at a fixed maximum number by the department shall be disregarded by the employer unless a number equal to or fewer than the set maximum is claimed or written notice by the department is given authorizing a different maximum.

(c) When adjusting claimed withholding allowances for an employee, the department shall consider:

(i) exemptions provided under 15-30-2114, 15-30-2115, and 15-30-2116, MCA;

(ii) marital status and number of employers;

(iii) estimated wages and salaries;

(iv) allowable deductions under 15-30-2132, MCA;

(v) any Montana net operating loss deduction carryover or allowable tax credit carried over from past years;

(vi) annuity plan contributions; and

(vii) residency.

(d) If the department does not have sufficient information to determine the maximum number of permitted allowances, the department shall use its best estimate of the employee's eligible exemptions when determining the withholding allowances.

(5) Employers shall provide a copy of an employee's Form MW-4 no later than the last day of the payroll period during which the employer received the form, if more than ten allowances or one of the exemptions referenced on the form were claimed, or at any time upon request by the department for the purposes of state tax administration. The employer's electronic submission must be made to the department as instructed on Form MW-4.

This rule has been repealed.

(1) If supplemental wages, such as bonuses, commissions, or overtime pay, are paid at the same time as regular wages, the state income tax to be withheld should be determined as if the total of the supplemental and the regular wages were a single wage payment for the regular payroll period.

(2) If the supplemental wages are paid at a different time, the employer may determine the state income tax to be withheld by adding the supplemental wages either to the regular wages for the current payroll period or to the regular wages for the last preceding payroll period within the same calendar year.

(3) In lieu of the above, the employer may withhold on supplemental wages at the rate of 6%.

(1) Under the terms of the Income Tax and Withholding Tax Reciprocal Agreement between Montana and North Dakota, and to the extent this agreement is in effect, an employer is not required to withhold Montana state income tax on wages earned by residents of North Dakota subject to the provisions in this rule.

(2) A North Dakota resident performing services in Montana for compensation must annually provide Form MW-4 to their employer before the employer may discontinue withholding on compensation earned in Montana. The certificate is valid from January first of the exemption year or from the date the certificate is provided to the employer whichever comes last, and until December 31 of the exemption year or until the date when the employee establishes residency in a state other than North Dakota whichever comes first.

(3) If the department determines that an employee's certificate is false or unsubstantiated, it may require an employer to disregard any claim to North Dakota residency and resume withholding on compensation earned in Montana.

(1) Where the department determines that an employee has provided a false statement through a Form MW-4, it may require the employer to deduct and withhold from the employee's current wages a recomputed amount of withholding for the current year wages of the employee based on the proper amount of withholding which would have been taken had the false filing not been made. If the employee has terminated employment and has been paid all wages earned prior to notification of required recomputation, the employer shall not be held liable for the uncollected withholding.

(2) If an employer has knowledge that a falsified Form MW-4 has been provided by the employee and fails to notify the department as required, the employer may be held liable for withholding not collected.

(3) The department may estimate the amount of non-exempt wages and withholding owed by the employer if it determines that the method used to account for non-exempt wages reported on Form W-2 or MW-3 does not accurately reflect the proportion of non-exempt wages earned by an employee. When no records have been kept, or no records are provided, the department may subject all wages to withholding, as required by 15-30-2502, MCA.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

(1) Employers must keep employment records for each employee for five years from date of payment and make records available for department review, as provided by ARM 42.2.305. The records must show:

(a) For each pay period:

(i) the beginning and ending dates;

(ii) the total wages, as defined in 15-30-2501, MCA, for employment in the pay period; and

(iii) the number and date of weeks in which there were one or more employees.

(b) For each employee:

(i) the employee's full name;

(ii) social security number;

(iii) wages for each pay period, showing separately:

(A) money wages payable including special payments or constructive payment of wages;

(B) reasonable cash value of remuneration by the employer in any medium other than cash;

(C) estimated or actual amount of gratuities received from persons other than employer; or

(D) special payments of any kind, including annual bonuses, gifts, prizes, etc.

(iv) the date on which the employee was hired, rehired, or returned to work after a temporary layoff;

(v) the date employment was terminated;

(vi) the cause of any termination, such as voluntary by employee, layoff, discharge, or death;

(vii) the method of payment:

(A) whether the employee is paid a salary or commission, or paid on an hourly, or by-piece basis; and

(B) if the employee is paid on a fixed daily basis, the employee's daily rate and the customarily scheduled days per week prevailing in the establishment for their occupation; and

(C) if the employee is paid on a piece rate or other variable pay basis.

(viii) documents supporting employee expense reimbursements; and

(ix) when an exemption under ARM 42.17.111 is in effect, the portion of non-exempt wages paid to the employee for each pay period, and the method used to calculate this portion.

(2) Evidence of business ownership including, but not limited to, partnership agreements and documents issued or acknowledgments by the Secretary of State.

(3) The department is authorized to examine all records necessary for the administration of the withholding and estimated tax law (Title 15, chapter 30, part 25, MCA). Examples of these records include:

(a) payroll records;

(b) disbursement records;

(c) tax returns;

(d) personnel records;

(e) minutes of meetings;

(f) loan documentation;

(g) federal and state withholding allowance and exemption certificates; and

(h) any other records which might be necessary to determine employer liability.

(1) The remittance schedule is established annually by the department pursuant to 15-30-2504, MCA. On or before November 1 of each year, the department shall notify the employers of the employers' remittance schedules for the following calendar year based upon the department's review of the preceding lookback period. The lookback letter will not be sent to employers whose remittance frequency for the next calendar year remains the same.

(2) Every employer must report information to the department on an approved payment voucher or upon alternative remittance methods in conjunction with the department's electronic remittance program. The department may request any information from the employer necessary for the collection of the tax.

(3) All employers must complete and return this payment voucher even if the employer did not pay any wages or withhold from employees during the pay period.

(4) Wages become subject to tax when they are actually or constructively paid. Wages must be reported in the period in which they are actually or constructively paid. Wages are constructively paid if they are credited to the employee's account and set apart for an employee so that they may be withdrawn at the employee's discretion.

(5) If a due date falls on a weekend or holiday, the next business day becomes the due date for which the payment voucher must be remitted.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

(1) Every employer required to withhold Montana income tax must register for a Montana tax identification number on Form GenReg, Montana Department of Revenue Business Registration, which is provided by the department. A new employer who has acquired the business of another employer must not use the predecessor's identification number. Application for a Montana tax identification number shall be sent to:

Department of Revenue

P.O. Box 5805

Helena, Montana 59604-5805.

(2) Registration is not considered complete unless:

(a) the federal employer identification number appears on the registration; and

(b) all applicable social security numbers of the owners, partners, corporate officers, or other principals appear on the registration.

(3) Failure to register does not relieve an employer from withholding, reporting and remitting state income tax.

This rule has been repealed.

This rule has been repealed.

(1) Withholding taxes are due as provided in 15-30-2504, MCA.

(2) Payments are applied to tax liabilities as provided in ARM 42.2.501, unless bankruptcy proceedings or the department has determined otherwise.

(3) Payments submitted with payment vouchers are applied to the period noted on the payment vouchers. If an employer pays more than the amount owed for withholding tax on the payment vouchers, the withholding overpayment is applied to other amounts due as provided in (2). The employer may request that payments be applied to a more recent period.

(1) An employer must file Form MW-3 with applicable federal Form W-2s and submit payment within 30 days after ceasing to be an employer, as defined in 15-30-2501, MCA, or ceasing activity. Ceasing activity includes, but is not limited to:

(a) quits doing business;

(b) sells or transfers the business, or the major portion of the business assets; or

(c) becomes insolvent.

(2) If the report and payment are not received within 30 days, the accrued taxes are subject to penalty and interest as provided in 15-1-216, MCA.

(1) It is the intent of the department that any determination of a worker's status as an employee for withholding tax purposes be consistent with the determination of the same person's status under the Department of Labor and Industry or the Workers' Compensation Act.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

(1) A taxpayer's tax liability for the preceding tax year is the total tax imposed by Title 15, chapter 30, MCA, less any nonrefundable tax credits allowed under Montana law, as shown on the taxpayer's return.

Example: A taxpayer has a tax, before applying nonrefundable credits, of $5,000. The taxpayer has a nonrefundable energy conservation installation credit of $500. The taxpayer's tax liability for the prior year for estimated tax purposes is $4,500 computed as follows:

Tax before nonrefundable credit	$5,000
nonrefundable credits	(    500)
tax liability	$4,500

(2) The amount of tax paid for the current year is the sum of the withholding and estimated tax payments plus any refundable credit(s) claimed, as shown on the taxpayer's return.

A taxpayer has $800 in Montana withholding, an elderly homeowner/renter credit of $400 and paid $200 in estimated payments. The amount of tax the taxpayer has paid for the current year is $1,400 computed as follows:

Montana tax withheld	$  800
Estimated payments	200
Refundable elderly homeowner/renter credit	400
Total taxes paid for the current year	$1,400

(3) To determine the preceding tax year liability of an individual who participates in a composite return, the following requirements apply:

(a) For a taxpayer who was a participant in a composite return for the preceding year, the tax liability for the preceding year is the participant's preceding year composite tax liability.

(b) For a taxpayer who filed a Montana individual income tax return for the preceding tax year and for the current year, and participated in a composite return filing, their tax liability for the preceding tax year is their individual liability as determined in (1).

(4) Estimated payments made by a partnership or S corporation with respect to a participant's composite tax liability are not taxes paid by the participant for the current tax year. The rules for filing composite returns are located in ARM Title 42, chapter 9, subchapter 2.

(1) Except as provided in 15-30-2512, MCA, a taxpayer is required to pay at least 100 percent of their tax liability for the preceding tax year or 90 percent of their tax for the current tax year through withholding and estimated payments. If they do not, they will be liable for interest on the underpayment provided in 15-30-2512, MCA. In addition, unless the department grants a taxpayer an extension to pay an installment of estimated tax as provided in ARM 42.17.306, a taxpayer required to make installment payments of estimated tax who fails to timely pay an installment is liable for interest on the unpaid installment from the due date of the installment to the earlier of the date of payment or the due date of their income tax return, not including extensions, as provided in 15-1-216, MCA, and ARM 42.2.306.

(2) Taxpayers may complete the Form ESW, Montana Individual Estimated Income Tax Worksheet, to determine if they are required to make current year installment payments of estimated tax and, if necessary, to determine the amount. If a taxpayer's income fluctuates or is seasonal, employing the annualization method may lower the amount of one or more installments. A taxpayer using the optional annualization method must complete the Form ESA, Annualization Worksheet. Taxpayers are not required to file the estimated tax worksheet with their income tax return, but it is a tax record the taxpayer must retain and provide the department on request. Taxpayers using the annualization method must file Form ESA with their income tax return. If the taxpayer files their individual income tax return electronically, the Form ESA is a tax record the taxpayer must retain and provide the department on request.

(3) The department will provide taxpayers with estimated tax payment coupons on request. Unless paid electronically, as set forth in ARM 42.5.201 and 42.5.202, installment payments of estimated tax must be accompanied by a payment voucher and be:

(a) personally delivered to:

Montana Department of Revenue

Sam W. Mitchell Building

125 North Roberts, 3rd Floor

Helena, Montana; or

(b) mailed to:

Montana Department of Revenue

P.O. Box 6309

Helena, Montana 59604-6309.

(4) If a taxpayer has not received estimated tax payment vouchers from the department before the first installment due date, the payment should be accompanied by a written statement setting forth that the payment is an estimated tax payment, the tax year, the due date of the installment, and the taxpayer's name, mailing address, and social security number and be:

(a) personally delivered to:

Montana Department of Revenue

Sam W. Mitchell Building

125 North Roberts, 3rd Floor

Helena, Montana; or

(b) mailed to:

Montana Department of Revenue

P.O. Box 6308

Helena, Montana 59604-6308.

(5) Payment vouchers will be mailed to the taxpayer if a request for them is included with the first installment. Payments must be received by the department on or before the installment due date.

(6) Estimated tax payments are not required for a tax year shorter than four months. Individuals who have a short tax year of four months or more are required to pay estimated tax on the following dates:

(a) The first installment is due on April 15 or on the 15th day of the fourth month of the tax year;

(b) The second and third installments are due on the 15th day of the sixth month of the tax year and the 15th day of the ninth month of the tax year if the short tax year does not close prior to these dates; and

(c) The final installment is due on the 15th day of the first month of the succeeding tax year.

(7) If fewer than four installments are required, the applicable percentage of the required annual amount for each installment is increased. The applicable percentage per installment is as follows:

(a) 100 percent for one installment;

(b) 50 percent for two installments; and

(c) 33 1/3 percent for three installments.

Example 1: If the short tax year is the 10-month period from January 1 through October 31, the estimated tax must be paid in four installments, on April 15, June 15, September 15, and November 15. Each installment is 25 percent of the total payment required.

Example 2: If the short tax year is the 9-month period from January 1 through September 30, the estimated tax must be paid in three installments, on April 15, June 15, and October 15. With three installments, each installment is 33 1/3 percent of the total payment required.

(1) A taxpayer may request an extension of time to pay all or a part of an installment of estimated taxes by making a written request identifying the evidence showing that undue hardship would result to the taxpayer if the extension were refused. The extension will not be granted under a general statement of "hardship."

(2) The written request, with supporting documents, must be:

(a) personally delivered to:

Montana Department of Revenue

Sam W. Mitchell Building

125 North Roberts, 3rd Floor

Helena, Montana; or

(b) mailed to:

Montana Department of Revenue

P.O. Box 5805

Helena, Montana 59604-5805.

(3) The request for extension must be received by the department 30 days before the installment date for which the extension is requested. The department will, within 30 days if possible, grant, deny, or tentatively grant the request subject to certain conditions.

(4) If an extension is granted, no further notice or demand will be given and the taxpayer must pay the estimated payment on or before the expiration of the period of the extension. If an extension is granted and the extended installment timely paid, the penalty and interest provided in 15-1-216, MCA, is not imposed. Section 15-30-2512, MCA, which provides for interest on an underpayment of tax, is in addition to the uniform penalties and interest provided in 15-1-216, MCA, and is imposed whether or not a taxpayer obtains an extension as provided in this rule.

(5) While the department may grant an extension of up to six months after the installment due date, it will not grant an extension beyond the original due date of the return, typically April 15 following the tax year.

(6) The granting of an extension of time for payment of one installment does not extend the time for payment of any subsequent installments.

(7) Inability to pay does not constitute "hardship."

(8) Examples of what does and what does not constitute "hardship" may be found in ARM 42.3.106.

This rule has been repealed.

(1) Taxpayers who use the annualization option in estimating their current year tax must accurately determine the amount of income and deductions for each installment period.

(2) Income or expenses that are paid occasionally during a year cannot be spread out during the year in determining the required installments. For example, a taxpayer who distributes year-end bonuses to employees but does not determine the amount of the bonuses until the last month of the tax year may not deduct any portion of such year-end bonuses in determining taxable income for any installment period other than the final installment period for the tax year, since deductions are not allowable until paid or accrued, depending on the taxpayer's method of accounting.

(1) For a calendar taxpayer, the annualization periods are January through March, January through May, January through August, and January through December of the tax year.

(2) For fiscal year taxpayers, the annualization periods all begin on the first day of the taxable year and end on the last day of the third, fifth, eighth and twelfth months following the beginning of the taxable year.

(1) Taxpayers who file separate returns on separate forms for the current period and who filed a joint return for the preceding tax year must compute their prior year's estimated tax liability as follows:

(a) 100% of the tax liability of the joint return for the preceding tax year; or

(b) a prorated portion of the preceding year's joint tax liability. This prorated amount is determined by calculating the tax liability of the taxpayers as if they filed separately and totaling their individual taxes. Each spouse's prior year estimated tax liability is found by dividing their separate liability by the total of the two separate liabilities and multiplying this figure by the preceding year's joint tax liability.

Example: Husband and wife file a joint return for the calendar year one showing taxable income of $50,000 and a tax of $3,556. Of the taxable income, $30,000 was attributable to the husband and $20,000 to the wife. Husband and wife filed separate returns on separate forms for calendar year two. The tax shown on the return for the preceding taxable year, for purposes of determining if interest is owed on an underpayment, is determined as follows:

Taxable income of husband for year one: $30,000

Tax on $30,000 (on basis of separate return): $ 1,712

Taxable income of wife for year one: $20,000

Tax on $20,000 (on basis of separate return): $ 934

Aggregate tax of husband and wife (on basis of

separate returns): $ 2,646

Portion of year one tax shown on joint return

attributable to husband ($1,712/$2,646 X $3,556): $ 2,301

Portion of year one tax shown on joint return

attributable to wife ($934/$2,646 X $3,556): $ 1,255

(1) If taxpayers who filed separate returns for the preceding tax year file a joint return, the tax liability shown on the return for the preceding tax year is the sum of both spouses' tax liabilities for the preceding tax year.

(1) Joint estimated income tax payments made by married individuals who are divorced at the end of the tax year or who are legally separated at the end of a tax year for which they do not file a joint return must be split equally unless the individuals enter into a written agreement, signed by each, providing a different division. By filing a return claiming other than an equal share of joint estimated income tax payments, a taxpayer represents that a written agreement signed by both parties, as provided in this rule has been executed.

(2) Duly executed copies of the agreement are tax records and the taxpayer must retain and provide the department with copies on request.

(3) The division of jointly filed estimated payments as provided in this rule does not relieve either taxpayer from the liability for interest on any underpayment.

(1) Joint estimated tax payments may not be made after the death of either spouse. The surviving spouse must recompute his or her estimated tax for the remainder of the year and pay separate installments for each remaining installment due date.

(2) Estimated tax payments are not required after the date of death for a deceased taxpayer.

(3) If a joint return is filed for the last tax year, the taxpayers' joint estimated tax payments may be applied on the return.

(4) If separate returns are filed for the last tax year of a deceased spouse, any joint estimated tax payments must be split equally.

(1) A nonresident or part-year resident who was not required to file a Montana individual income tax return for the previous tax year is not required to pay estimated taxes. ARM 42.15.301 sets forth the rules for determining who must file an individual income tax return.

(2) Part-year residents moving out of Montana, other than those in (1), are required to pay.

(3) Part-year residents moving in or out of Montana are not considered to have a short taxable year unless they have a short taxable year on their federal return.

(4) A participant in a composite return for the preceding tax year must pay estimated tax for the current tax year as provided in ARM 42.17.305 if they are not a participant in a composite return for the current tax year.

(5) A participant in a composite return for the current tax year is not required to pay estimated tax for the current tax year. The rules for filing composite returns are located in ARM Title 42, chapter 9, subchapter 2.

(6) A partnership or S corporation must pay estimated tax for the current tax year for each participant included in the filing of the current year composite return.

(1) The department may waive interest on underpayment of estimated tax as provided in ARM Title 42, chapter 3, subchapter 1.

(2) The calculation of the estimated underpayment penalty must be made on form EST-I.

This rule has been repealed.

(1) Married taxpayers who make estimated payments and anticipate filing separate returns on the same form or separate returns on separate forms should submit the payments on behalf of the spouse whose tax liability the payments are intended to satisfy. For example, if spouse A and B are married, spouse A has wages that are subject to withholding and spouse B is self-employed, the estimated payments should be submitted indicating they are to be applied to spouse B's liability.

(2) Married taxpayers who have submitted estimated payments under one spouse's social security number but who subsequently determine that all or a portion of the payments should be applied to the other spouse's separate tax liability may reallocate the payments. Taxpayers who wish to reallocate payments can do so by either:

(a) contacting the department by phone or in writing prior to filing their Montana tax return; or

(b) indicating on the line for estimated payments how they wish the payments to be allocated when they file their Montana tax return.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

This rule has been transferred.

This rule has been transferred.

This rule has been transferred.

This rule has been transferred.

This rule has been transferred.

This rule has been repealed.

This rule has been transferred.

This rule has been repealed.

This rule has been repealed.

This rule has been repealed.

(1) Advance mineral royalty payments that relate to, refer to, or concern production are subject to the mineral royalty tax withholding requirements.

(2) Each remitter who disburses funds that are owed to any person owning a royalty interest, overriding royalty interest, production payment, or any other nonworking interest in minerals produced in this state, is subject to the withholding requirement of 15-30-2538, MCA.

(3) If a mineral is taken in-kind by a royalty owner, the take-in-kind owner must forward 6 percent of the net value of the mineral that was taken in-kind to the department unless they are exempt from withholding under 15-30-2539 or 15-31-102, MCA.

(4) If you are a remitter and you are providing accounting services, and these accounting services include fulfilling the requirements of 15-30-2541, MCA, for more than one producer, you must remit separate withholding payments and submit a separate Form RW-3, Montana Mineral Royalty Withholding Tax Reconciliation Return, for each producer.

(1) Claiming credit for the tax withheld shall be accomplished as follows:

(a) Credit may be claimed for the tax withheld on a Montana individual income tax return or a Montana corporate income tax return, with a copy of Form 1099-MISC attached, to substantiate the amount claimed.

(b) Taxpayers, excluding pass-through entities, that receive a Montana Schedule K-1 from a pass-through entity, as defined in 15-30-2101, MCA, may claim a refundable credit for the amount shown as their share of the tax withheld from Montana net royalty. Taxpayers that claim such a credit must keep copies of the federal and Montana Schedule K-1(s) in their records.

(c) Pass-through entities must determine the owner's distributive share of mineral royalty withholding in proportion of the owner's share of profit and loss from the pass-through entity.

(d) A pass-through entity may claim mineral royalty withholding tax paid on its behalf as a credit against pass-through withholding tax owed by the pass-through entity on behalf of an owner in proportion of the owner's distributive share of profit or loss.

(e) A pass-through entity must claim the mineral withholding tax paid on its behalf as a refundable credit against composite tax owed by the pass-through entity on behalf of an owner in proportion of the owner's distributive share of income or loss.

(f) An estate or trust is entitled to credit for the tax withheld in proportion to the amount of royalty income that the estate or trust includes in Montana taxable income. A beneficiary is entitled to a credit for the tax withheld in proportion to the amount of royalty income the beneficiary must report on their Montana individual income tax return.

(g) Any person filing on a fiscal year ending other than December 31, must claim a credit for the withholding tax shown on the personal income tax return required to be filed during the year following the December closing period of the Form RW-3, Montana Mineral Royalty Withholding Tax Reconciliation Return.

(h) Production taxes cannot be claimed as withholding for mineral royalty withholding or as income tax withholding.

(1) There is not a requirement to withhold from payments to royalty interest owners if the producing entity's production does not exceed 100,000 barrels of oil and 500 million cubic feet of gas, based on the previous three calendar years' average production reported to the Montana Board of Oil and Gas Conservation. For example, the department will calculate whether payments for an entity's production are subject to withholding from their royalty interest owners for 2015 by averaging the production numbers for calendar years 2011, 2012, and 2013 and comparing this average to the production exemption limits.

(2) If an entity does not have three years of recent mineral production records, the remitter may provide the department with information supporting the exemption from the withholding requirements of 15-30-2536, MCA. The department shall review this information to determine if an exemption is warranted and notify the remitter of the determination.

(3) On or before September 15 of each year, the department shall notify all oil and gas producers of their requirements as it relates to the provisions of 15-30-2538 and 15-30-2539, MCA. The department will notify all other mineral producers by September 15 only if they are required to withhold.

(4) If a person who is required to withhold on behalf of their royalty interest owners sold their mineral interests during the year and ceases to be the remitter, the person who acquired the mineral interests becomes the remitter and must continue to withhold 6 percent of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(5) If a remitter produces both oil and gas, and only one resource meets the requirements for withholding as provided in 15-30-2539, MCA, the withholding provisions apply to both oil and gas regardless of the production volumes of the other resource that does not meet the requirements of 15-30-2539, MCA.

(6) If a person not previously extracting resources in the state begins extracting from new or existing sources of natural resources in Montana (i.e., newly drilled oil or gas wells or a new mine), that person is required to withhold 6 percent of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(7) All persons that extract minerals other than oil and gas must withhold 6 percent of the net royalty payments of all royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(8) The person described in (7) may not be required to withhold net royalty payments from their royalty interest owners if the person can provide information that satisfies the department that the net royalty payments are immaterial.

(a) The department has defined an entity that has immaterial net royalty payments as an entity that has production amounts for minerals, other than oil and gas, with a value less than $5 million. The only filing requirement for this type of entity is the filing of the Form RW-3 by January 31 of the following year along with a listing of all royalty recipients. The $5 million value will be based on a three-year average of production value reported to the department's Business Tax and Valuation Bureau. For example, the department will calculate whether an entity is required to withhold from its royalty interest owners for 2017 by averaging the valuation reported for 2013, 2014, and 2015.

(9) Section 15-30-2539, MCA, allows for a publicly traded partnership to be exempt from the withholding requirements of 15-30-2536 through 15-30-2547, MCA, provided the publicly traded partnership, that is a royalty owner, submits a report to both the remitter and the department. The report, which can be in the form of a letter, must contain the publicly traded partnership's letterhead and state that the partnership is publicly traded and the partnership requests exemption from 15-30-2536 through 15-30-2547, MCA. The request must be received by the remitter and the department prior to November 1 of the year prior to the calendar year in which the partnership requests exemption. Upon receipt of the report, the department will notify the partnership and the remitter of either acceptance or denial of the request within 30 days. The election does not need to be repeated annually unless requested by the department.

(10) Section 15-30-2539, MCA, allows for an organization that is exempt from taxation under 15-31-102, MCA, to be exempt from the withholding requirements of 15-30-2536 through 15-30-2547, MCA, provided the exempt organization, that is a royalty owner, submits a report to both the remitter and the department. The report, which can be in the form of a letter, must contain the exempt organization's letterhead and request exemption from 15-30-2536 through 15-30-2547, MCA. The request must be received by the remitter and the department prior to November 1 of the year prior to the calendar year in which the exempt organization requests exemption. Upon receipt of the report, the department shall notify the exempt organization and the remitter of either acceptance or denial of the request within thirty days. The election does not need to be repeated annually unless requested by the department.

(11) The exception provided in 15-30-2539, MCA, for payments to a federally recognized Indian tribe, applies to all mineral production described in the Mineral Leasing Act of 1939.

(12) According to 15-30-2539, MCA, the department grants remitters the authority to forego withholding the tax from royalty owners who meet the following qualifications:

(a) the amount of the royalty interest payment is less than $2,000 per year; or

(b) less than $166 per month.

(13) The remitter that does not withhold from royalty interest owners pursuant to (12) may, upon request from the department, be required to provide a list of the royalty interest owners.

(1) Every entity that extracts natural resources within the boundaries of Montana must register and file an application for a state identification number on the form provided by the department.

(2) Any owner or operator who has acquired the business of another entity shall not use the predecessor's state identification number. The owner or operator must register before the due date of the first report. This applies to both new businesses and businesses which have been purchased.

(3) Each registration application must contain the applicable tax identification number assigned by the IRS.

(4) No registration is considered complete unless the federal identification number appears on the form.

(5) Not being registered does not relieve a remitter from the collection and reporting requirements.

(1) The following forms are to be completed and filed in accordance with instructions provided by the department:

(a) Form RW-1, Mineral Royalty Withholding Payment Voucher, must be filed quarterly unless the department establishes that the entity is exempt from the withholding requirements of 15-30-2538, MCA. A remitter may request to file a Form RW-1 on an accelerated basis. The remitter must receive approval from the department before remitting the withholding tax on a more frequent basis than quarterly;

(b) A remitter who has no withholding to remit for a remittance period shall, on or before the due date, send a payment voucher showing that a zero amount is being remitted;

(c) Form RW-3, Montana Annual Mineral Royalty Withholding Tax Reconciliation, must be filed on or before January 31 of each year. Form RW-3 must be accompanied by copies of each royalty owner's withholding statements on federal form 1099-MISC, Miscellaneous Income, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding;

(d) On or before January 31 of each year, Form 1099-MISC, Miscellaneous Income, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, shall be furnished by the remitter to each person who has received royalties in each calendar year;

(e) Each remitter that is exempt from withholding is still required to file the Form RW-3 with the department along with a copy of Form 1099-MISC, Miscellaneous Income, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, for every recipient of royalties. These reports are due on or before January 31 of each year; and

(f) A substitute for Form 1099-MISC may be filed with the department provided it:

(i) generally follows the guidelines in federal Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns; and

(ii) reports all the information regarding Montana royalty payments as required in 15-30-2543, MCA, and the rules in this subchapter.

(2) Electronic filing requirements for state purposes are the same as those mandated for federal purposes.

(3) If a remitter does not withhold on a royalty interest owner who in the previous year met the exemption requirement in 15-30-2539, MCA, but exceeded that requirement in the current year, the department will not penalize the remitter for the lack of withholding in that current year.