(1) Taxes paid within the year, with the exception of the following taxes specifically excluded as deductions by statute are:

(a) Montana corporate income tax;

(b) taxes assessed against local benefits of a kind tending to increase the value of the property assessed;

(c) taxes on or according to or measured by net income or profits, imposed by authority of the government of the United States; or

(d) taxes imposed by any other state or country upon or measured by net income or profits. These taxes are not allowable as deductions irrespective of how characterized by regulations adopted by the IRS for purposes of foreign tax credit calculations. (i.e., 26 CFR 1.901 through 1.903.)

(i) A tax based on or measured by net income is a tax which is based on the residual of gross revenues less expenses.

(ii) To the extent any portion of the tax paid to foreign governments is imposed upon or measured by the difference between the posted price and the market price for a barrel of oil, then the tax attributable to this increment is not a tax based upon or measured by net income or profits and is therefore deductible.

(2) With the exception of the contractor's gross receipts tax, taxes may be claimed only as deductions in determining net income and cannot be converted into a credit against the corporate income tax. See ARM 42.4.3103 for details concerning the credit allowed with respect to the contractor's gross receipts tax.