(1) An oil and gas remittor is not required to withhold from their royalty interest owners if the 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 an entity is required to withhold from their royalty interest owners for 2008 by averaging the production numbers for calendar years 2004, 2005, and 2006 and comparing this average to the production exemption limits.

(2) If an entity does not have three years of recent oil and/or gas production records, the remittor may provide the department with information supporting the exemption from the withholding requirements of 15-30-261, MCA. The department shall review this information to determine if an exemption is warranted and notify the remittor 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 15-30-261 and 15-30-264, MCA.

(4) If a person that is required to withhold on behalf of their royalty interest owners sells their mineral interests during the year and ceases to be the remittor, the person that acquired the mineral interests becomes the remittor and must continue to withhold 6% of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-261, MCA.

(5) If a remittor produces both oil and gas and only one resource meets the requirements for withholding as provided in 15-30-264, 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 15-30-264, MCA.

(6) If a person, not previously extracting resources in the state, begins extracting from new 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% of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-261, MCA.

(7) The person described in (6) that extracts oil and/or gas only may not be required to withhold on net royalty payments from their royalty interest owners if the person can provide information that satisfies the department that the new producing property will not meet the threshold requirements established for oil and gas in 15-30-264, MCA.

(8) All persons that extract minerals other than oil and gas must withhold 6% of the net royalty payments of all royalty interest owners subject to the withholding requirements of 15-30-261, MCA.

(9) The person described in (8) 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.

(10) Section 15-30-264, MCA, allows for a publicly traded partnership to be exempt from the withholding requirements of 15-30-261, MCA, provided the publicly traded partnership, who is a royalty owner, submits a report to both the remittor and the Department of Revenue. 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 15-30-261, MCA. The request must be received by the remittor 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 remittor 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) Section 15-30-264, MCA, allows for an organization that is exempt from taxation under 15-31-102, MCA, to be exempt from the withholding requirements of 15-30-261, MCA provided the exempt organization, who is a royalty owner, submits a report to both the remittor and the department. The report, which can be in the form of a letter, must contain the exempt organization's letterhead and requests exemption from 15-30-261, MCA. The request must be received by the remittor 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 remittor 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.

(12) According to 15-30-264, MCA, the department grants remittors 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 remittor 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.