(1) The composite tax, required to be remitted to the department with the composite tax return, is the sum of each electing eligible participant's composite tax liability.
(2) The composite return liability of each eligible consenting participant is the product obtained by:
(a) determining the tax that would be imposed, using the rates specified in 15-31-121, MCA, for C corporations, and using the rates specified in 15-30-2103, MCA, for all other eligible participants, on the sum obtained by subtracting the allowable standard deduction for a single individual, an amount adjusted annually, and one exemption allowance, from the participant's share of the entity's income from all sources as determined for federal income tax purposes; and
(b) multiplying that amount by the ratio of the entity's Montana source income to the entity's income from all sources for federal income tax purposes.
(3) The entity is required to make quarterly estimated tax payments as prescribed by 15-30-2512, MCA, computed separately for each participant included in the filing of a composite return.
Example: Assume an S corporation's federal return shows income from all sources of $60,000, $20,000 of which is Montana source income, and that an eligible participant's share of the S corporation's federal income is one-fourth, or $15,000. The eligible participant's composite return liability is:
|Participant's share of entity income from all sources
|Standard deduction (2009)
|Exemption allowance (2009)
Assume the tax on the $9,390, using the rates set forth in 15-30-2103, MCA, is $237.
Participant's composite return liability would be $237 x $20,000/$60,000 = $79.