(1) An employer is not required to deduct Montana state income tax withholding on wages earned by residents of North Dakota under the provisions of the Income Tax and Withholding Tax Reciprocal Agreement between Montana and North Dakota. Relief from withholding is subject to the following provisions:

(a) A North Dakota resident performing services in Montana for compensation must annually provide a certificate of North Dakota residency (Form NR-2) to his or her employer before the employer may discontinue withholding on compensation earned in Montana. The certificate is valid only from the date filed to December 31 of the year in which filed. The certificate is rendered invalid if the employee changes his or her residence to any state other than North Dakota;

(b) Withholding from a North Dakota resident's compensation earned in Montana must be treated as if earned in North Dakota. If North Dakota requires withholding from the compensation, the North Dakota withholdings must be deducted from the compensation;

(c) A copy of the employee's NR-2 must be submitted by the employer to the department after it is provided to the employer; and

(d) 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.