(1) A partnership and S corporation with one or more owners that are also pass-through entities (second-tier pass-through entities), during any part of the tax year for which an information return is required by this chapter, must for each second-tier pass-through entity:

(a) file a composite return as provided in ARM 42.9.202 and include the second-tier pass-through entity in the filing;

(b) obtain from the second-tier pass-through entity and file with its information return the second-tier pass-through entity owner statement on form PT-STM, Montana Second-tier Pass-through Entity Owner Statement establishing that its Montana source income will be fully accounted for in individual income or corporate license or income tax returns filed with the state; or

(c) remit an amount on the second-tier pass-through entity's account, determined as provided in (4), with the forms CLT-4S or PR-1, Pass-through Entity's Information Return; and

(d) provide form PT-WH or Montana Schedule K-1 to the second-tier pass-through entity setting forth the amount of withholding remitted to the department which can be passed through to its owners and used as a withholding payment against the tax liability of the owner of the second-tier pass-through entity upon filing a Montana individual income or corporation license tax return.

(2) A disregarded entity with one or more owners that are also pass-through entities (second-tier pass-through entities), during any part of the tax year for which an information return is required by this chapter, must for each second-tier pass-through entity:

(a) obtain from the second-tier pass-through entity and file with its information return the second-tier pass-through entity owner statement on form PT-STM, Montana Second-tier Pass-through Entity Owner Statement. This statement establishes that the owner's Montana source income will be fully accounted for in individual income or corporate license or income tax returns filed with the state; or

(b) remit an amount on the second-tier pass-through entity's account, determined as provided in (4) with the form DER-1, Disregarded Entity Information Return; and

(c) provide form PT-WH or Montana Schedule K-1 to the second-tier pass-through entity setting forth the amount of withholding remitted to the department which can be passed through to its owners and used as a withholding payment against the tax liability of the owner of the second-tier pass-through entity upon filing a Montana individual income or corporation license tax return.

(3) The pass-through entity is required to attach new statements, form PT-STM, each year.

(4) The amount that must be remitted by the due date described in (5) is the highest marginal rate in effect under 15-30-2103, MCA, multiplied by the share of Montana source income of the second-tier pass-through entity reflected on the first-tier pass-through entity's information return.

(5) The due date for the remittance described in (1)(c) and (2)(b) is the due date of the first-tier pass-through entity's information return.

(6) A publicly traded partnership as defined in section 7704(b) of the IRC, that is treated as a partnership for federal purposes, is exempt from the requirements in (1) for tax years beginning after December 31, 2008, if certain information is provided to the department. This information includes the name, address, taxpayer identification number, and Montana source income of each partner that had an interest in the partnership during the tax year. This information must be provided in an electronic format approved by the department.