BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the adoption of New Rule I (ARM 42.9.204) and amendment of ARM 42.9.102, 42.9.103, 42.9.104, 42.9.105, 42.9.106, 42.9.202, 42.9.203, 42.9.301, 42.9.401, 42.9.402, and 42.9.540 relating to income tax
NOTICE OF ADOPTION AND AMENDMENT
TO: All Concerned Persons
1. On October 29, 2009, the department published MAR Notice No. 42-2-809 regarding the proposed adoption and amendment of the above-stated rules at page 1883 of the 2009 Montana Administrative Register, issue no. 20.
2. A public hearing was held on November 18, 2009, to consider the proposed adoption and amendment. Oral and written comments are summarized as follows along with the responses of the department:
COMMENT NO. 1: Ms. Mary Whittinghill, Executive Director for the Montana Taxpayers' Association asked why a person would not be allowed to take the carry-forward or carry-back on their own losses?
RESPONSE NO. 1: It is only when it is part of the composite return that the carry-forward or carry-back losses can't be taken.
COMMENT NO. 2: Ms. Whittinghill further asked what type of credits would fall under the composite return election?
RESPONSE NO. 2: The credits cannot be taken on a composite return. The rule does not address credits, only net operating losses.
COMMENT NO. 3: Ms. Whittinghill suggested that the title to ARM 42.9.106 should be expanded to more clearly address what was covered in the rule.
RESPONSE NO. 3: ARM 42.9.106 explains how information about second-tier entity owners is reported on the different types of pass-through returns: partnerships, S corporations and disregarded entities. In the updated rule, this has not changed and the department does not think that the title should be amended.
COMMENT NO. 4: Mr. Tom Armbruster, of Heritage Propane asked if a company had a disregarded entity that was included on that entity's return would the company be required to also file a return for that disregarded entity.
RESPONSE NO. 4: The disregarded entity has always been required to file an information return, Form DER-1, for each taxable period that it has Montana source income. The rule changes only clarify that the Form DER-1 does not provide for a composite return for its owners.
COMMENT NO. 5: Ms. Lindsay Sander with the National Association of Publicly Traded Partnerships (NAPTP) stated that the association had worked proactively with the department for more than two years to address prior Montana statutory provisions that require partnerships to file composite returns and withhold an appropriate amount to cover any potential liability for Montana source income of nonresident unit holders.
Ms. Sander thanked the department for working with the NAPTP to address their members' concerns and working with them to find a mutually agreeable solution to the overall compliance issue. She further stated that the compromise enacted by the legislature will provide the department the information it needs to ensure the proper payment of income tax by NAPTP's members' unit holders while also providing relief to the members from a provision with which the publicly traded partnerships (PTPs) simply cannot comply. Further, the provision relating to composite returns and withholding is in line with the model statute adopted by the Multistate Tax Commission.
NAPTP expressed a need for clarification with regard to the manner in which PTPs report the required information to the department. Under the proposed rule and revised statute, PTPs must supply information in an electronic format that is acceptable to the department. However, there is no specific format mentioned. NAPTP would recommend the format be in Excel or a similar format. This would minimize compatibility problems, as the Excel program is in wide use, and would allow the department to easily sort, export or merge information as it sees fit. This format has been accepted by the other states that have adopted similar measures.
NAPTP does not believe the format needs to be included in the final rule, as PTPs should not be limited in their ability to adapt their reporting to ongoing developments and improvements in technology, but does believe it should be on record for the PTPs to reference that Excel is the required format at this time.
RESPONSE NO. 5: The department has contacted PTP representatives to confirm that Excel is an acceptable format for supplying the required information.
3. The department adopts New Rule I (ARM 42.9.204) and amends ARM 42.9.102, 42.9.103, 42.9.104, 42.9.105, 42.9.106, 42.9.202, 42.9.203, 42.9.301, 42.9.401, 42.9.402, and 42.9.540 as proposed.
4. An electronic copy of this Adoption Notice is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Adoption Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
/s/ Cleo Anderson Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State January 4, 2010