BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the adoption of New Rule I 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

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

 

TO:  All Concerned Persons

 

1.  On November 18, 2009, at 1:00 p.m., a public hearing will be held in the Third Floor Reception Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the adoption and amendment of the above-stated rules.

Individuals planning to attend the hearing shall enter the building through the east doors of the Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.

 

2.  The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice.  If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., November 9, 2009, to advise us of the nature of the accommodation that you need.  Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail canderson@mt.gov.

 

3.  The proposed new rule does not replace or modify any section currently found in the Administrative Rules of Montana.  The proposed new rule provides as follows:

 

            NEW RULE I  COMPOSITE RETURN – NET OPERATING LOSS

            (1)  Net operating losses pass through to the individual shareholders and partners and are not available for carryover or carryback on the entity return.  When these shareholders and partners elect to be included in the composite return, they lose their ability to use their distributive share of the net operating losses.

 

AUTH: 15-1-201, 15-30-2620, 15-31-501, MCA

IMP: 15-30-3312, MCA

 

            REASONABLE NECESSITY:  The department is proposing to adopt New Rule I to clarify the proper treatment of a net operating loss carryover and carryback in regards to shareholders and partners electing to be included in a composite return.  The department interprets the statute to limit net operating loss carryover and carryback to the individual shareholders and partners when a composite return election is made.  This treatment is consistent with the application of other tax credits as they relate to composite return elections.  Taxpayers have not understood the department's interpretation of the statute, and the adoption of this rule will clarify that requirement. 

In addition to the adoption of this rule, the department will provide instructional information in the pass-through tax booklets to further clarify and assist the taxpayers regarding this subject.

           

4.  The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

 

            42.9.102  PASS-THROUGH ENTITY INFORMATION RETURNS  (1)  Every pass-through entity with Montana source income is subject to the requirement in 15-30-1102, 15-30-3302, MCA, to file pass-through entity information returns.  Most pass-through entities are subject to an annual filing requirement.  In general, the status of a pass-through entity is the same as its status for federal income tax purposes.  Disregarded entities with Montana source income, whose separate existence is disregarded for federal income tax purposes, are subject to the information return filing requirements in this rule, even though no filing requirement may be imposed in the IRC.  Some disregarded entities are required to file information returns only on the happening of an event.  A pass-through entity falls into one of three categories:

(a)  partnership;

(b)  S corporation; or

(c)  disregarded entity.

(2)  Pass-through entity information returns are to can be filed on paper with the and mailed to:

Montana Department of Revenue,

P.O. Box 5805 8021,

Helena, Montana 59604-5805 8021.

(3)  Partnership and S corporation returns can also be filed electronically through the joint federal/state program using approved software vendors.

(3)(4)  On written application, and for good cause shown, the department may grant extensions for the filing requirements provided in this subchapter.

 

            AUTH: 15-1-201, 15-30-305, 15-30-1102, 15-30-2620, 15-31-501, MCA

            IMP: 15-30-142, 15-30-143, 15-30-301, 15-30-1102, 15-30-1111, 15-30-1112, 15-30-2602, 15-30-2603, 15-30-2616, 15-30-3302, 15-30-3311, 15-30-3312, 15-31-101, 15-31-111, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.102 to correct the mailing address and to include information about electronic filing of the returns.  The ability to file these returns electronically will assist the taxpayers and the department in the ability to expedite the process.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.103  LATE-FILE PENALTY FOR PASS-THROUGH ENTITIES  (1) through (3)(c) remain the same.

(4)  ARM 42.3.101 through 42.3.114 42.3.115 and 42.3.120 apply to requests for waiving penalties.

 

AUTH: 15-1-201, 15-30-305, 15-30-1102, 15-30-2620, 15-31-501, MCA

IMP: 15-30-142, 15-30-143, 15-30-1102, 15-30-1111, 15-30-1112, 15-30-2602, 15-30-2603, 15-30-3302, 15-30-3311, 15-30-3312, 15-31-101, 15-31-111, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.103 to include references to all of the penalty waiver rules.  The internal reference to the penalty waiver rules previously concluded with ARM 42.3.114 when ARM 42.9.103 was originally adopted in 2002.  In 2007, ARM 42.3.115 was adopted and that rule should also be included as an internal reference within this rule.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.104  CONSENT, COMPOSITE RETURN, OR WITHHOLDING FOR PARTNERS, SHAREHOLDERS, MANAGERS, AND SINGLE-MEMBER LLC MEMBERS WHO ARE NONRESIDENT INDIVIDUALS  (1)  A partnership and, S corporation, and single-member LLC with one or more nonresident individual owners, during any part of a tax year for which an information return is required by this chapter, must for each nonresident individual:

(a)  file a composite return as provided in ARM 42.9.202 and include the nonresident individual in the filing;

(b)  obtain from the nonresident individual and file with its information return the pass-through entity owner tax agreement to timely file a Montana individual income tax return, to timely pay tax due, and to be subject to the state's tax collection jurisdiction on Form PT-AGR (Montana Pass-through Entity Owner Agreement); or

(c)  remit an amount on the individual's account, determined as provided in (3) (4), with the Pass-through Entity Information Return, Forms forms CLT-4S, or PR-1, or DER-1; and

(d)  provide Form form PT-WH or Montana Schedule K-1 to the nonresident individual setting forth the amount of withholding remitted to the Department of Revenue department which can be used as an estimated a withholding payment against the tax liability of the nonresident individual upon filing a form 2, Montana income tax return Form 2.

(2)  A disregarded entity with one or more nonresident individual owners, during any part of a tax year for which an information return is required by this chapter, must for each nonresident individual:

(a)  obtain from the nonresident individual and file with its information return the pass-through entity owner tax agreement to timely file a Montana individual income tax return, to timely pay tax due, and to be subject to the state's tax collection jurisdiction on form PT-AGR, Montana Pass-through Entity Owner Agreement; or

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

(c)  provide form PT-WH or Montana Schedule K-1 to the nonresident individual setting forth the amount of withholding remitted to the department which can be used as a withholding payment against the tax liability of the nonresident individual upon filing a form 2, Montana income tax return.

            (2)(3)  The pass-through entity is not required to attach new agreements each year, but must attach a currently effective agreement for each new nonresident individual owner.

(3)(4)  The amount that must be remitted by the due date described in (4) (5) is the highest marginal rate in effect under 15-30-103, 15-30-2103, MCA, multiplied by the share of Montana source income of the nonresident individual reflected on the pass-through entity's information return.

            (4)(5)  The due date for the remittance described in (1)(c) and (2)(b) is different for tax years beginning before January 1, 2003, than it is for later tax years.

(a)  For an entity's tax year beginning before January 1, 2003, the due date is the later of 180 days after the due date (including extensions) for filing its information return or the date the department sends it notice of the requirement to withhold and liability for penalties for not remitting the withholding amount.

(b)  For tax years beginning after December 31, 2002, the due date is the due date of the 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.

 

            AUTH: 15-30-305, 15-30-1112, 15-30-2620, MCA

            IMP: 15-30-1113, 15-30-3312, 15-30-3313, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.104 to conform to 15-30-3311 and 15-30-3312, MCA, as part of a general cleanup of the department rules.  Section 15-30-3311, MCA, has a broader definition of the owner of a disregarded entity which includes a manager or member who is a nonresident individual.  Section 15-30-3312, MCA, does not allow a disregarded entity to file a composite tax return.  Therefore, the filing options for disregarded entities need to be described separately.

The department is proposing to add new section (6) to adopt and clarify the provisions enacted by the 2009 Legislature in Senate Bill 260 (Ch. 401, L. 2009).  Publicly traded partnerships are exempt from the reporting and remitting requirements in section (1) of the rule for tax years beginning after December 31, 2008, but are subject to the reporting requirements as defined by Senate Bill 260 (Ch. 401, L. 2009) and the new section (6) in ARM 42.9.104. 

For reporting and remitting purposes for tax years beginning before December 31, 2008, publicly traded partnerships are governed by the statutes and rules in place for the respective tax year.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.105  CONSENT, COMPOSITE RETURN, OR WITHHOLDING FOR PARTNERS, SHAREHOLDERS, MANAGERS, AND SINGLE MEMBER LLC MEMBERS THAT ARE FOREIGN C CORPORATIONS  (1)  A partnership, and S corporation, and disregarded entity with one or more foreign C corporation owners, during any part of a tax year for which an information return is required by this chapter, must for each foreign C corporation:

(a)  file a composite return as provided in ARM 42.9.202 and include the foreign C corporation in the filing;

(b)  obtain from the foreign C corporation and file with its information return the pass-through entity owner tax agreement to timely file a Montana corporate license tax or corporate income tax return, to timely pay tax due, and to be subject to the state's tax collection jurisdiction on the Montana pass-through entity owner tax agreement, Form form PT-AGR, (Montana Pass-through Entity Owner Tax Agreement); or

(c)  remit an amount on the foreign C corporation's account, determined as provided in (3) (4), with the Pass-through Entity's Information Return, Forms CLT-4S, PR-1, or DER-1; and

(d)  provide Form form PT-WH or Montana Schedule K-1 to the foreign C corporation setting forth the amount of withholding remitted to the department of revenue department which can be used as an estimated a withholding payment against the tax liability of the foreign C corporation upon filing a Montana corporation license tax return or income tax return.

(2)  A disregarded entity with one or more foreign C corporation owners, during any part of a tax year for which an information return is required by this chapter, must for each foreign C corporation:

(a)  obtain from the foreign C corporation and file with its information return the pass-through entity owner tax agreement to timely file a Montana corporate license tax or corporate income tax return, to timely pay tax due, and to be subject to the state's tax collection jurisdiction on the Montana pass-through entity owner tax agreement, form PT-AGR, Montana Pass-through Entity Owner Tax Agreement; or

(b)  remit an amount on the foreign C corporation'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 foreign C corporation setting forth the amount of withholding remitted to the department which can be used as a withholding payment against the tax liability of the foreign C corporation upon filing a Montana corporation license tax return or income tax return.

            (2)(3)  The pass-through entity is not required to attach new agreements each year, but must attach a currently effective agreement for each new foreign C corporation owner.

(3)(4)  The amount that must be remitted by the due date described in (4) (5) is the tax rate in effect under 15-31-121, MCA, multiplied by the foreign C corporation's share of Montana source income reflected on the pass-through entity's information return.

            (4)(5)  The due date for the remittance described in (1)(c) and (2)(b) is the due date of the 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.

 

            AUTH: 15-30-305, 15-30-1112, 15-30-2620, MCA

            IMP: 15-30-1113, 15-30-3312, 15-30-3313, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.105 to conform to 15-30-3311 and 15-30-3312, MCA, as part of a general cleanup of the rules.  Section 15-30-3311, MCA, has a broader definition of the owner of a disregarded entity, which includes a manager or member of a foreign corporation.  Section 15-30-3312, MCA, does not allow a disregarded entity to file a composite tax return.  Therefore, the filing options for disregarded entities need to be described separately.

The department is proposing to add new section (6) to adopt and clarify the provisions enacted by the 2009 Legislature in Senate Bill 260 (Ch. 401, L. 2009).  Publicly traded partnerships are exempt from the reporting and remitting requirements in section (1) of the rule for tax years beginning after December 31, 2008, but are subject to the reporting requirements as defined by Senate Bill 260 (Ch 401, L. 2009) and the new section (6) in ARM 42.9.105. 

For reporting and remitting purposes for tax years beginning before December 31, 2008, publicly traded partnerships are governed by the statutes and rules in place for the respective tax year.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24, (Ch. 147, L. 2009).

 

42.9.106  STATEMENT, COMPOSITE RETURN, OR WITHHOLDING FOR PARTNERS, SHAREHOLDERS, MANAGERS, AND SINGLE MEMBER LLC MEMBERS THAT ARE SECOND-TIER PASS-THROUGH ENTITIES  (1)  A partnership, and S corporation, and 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)  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 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 (3) (4), with the forms CLT-4S or PR-1, Pass-through Entity's Information Return, Forms CLT-4S, PR-1, or DER-1; and

(d)  provide Form form PT-WH or Montana Schedule K-1 to the second-tier Pass-through pass-through entity setting forth the amount of withholding remitted to the department of revenue which can be passed through to its owners and used as an estimated 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.

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

(3)(4)  The amount that must be remitted by the due date described in (4) (5) is the highest marginal rate in effect under 15-30-103, 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.

(4)(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.

 

AUTH: 15-30-305, 15-30-1102, 15-30-1112, 15-30-2620, MCA

IMP: 15-30-1113, 15-30-3302, 15-30-3312, 15-30-3313, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.106 to conform to 15-30-3311 and 15-30-3312, MCA, as part of a general cleanup of the rules and to include the exemption from filing for publicly traded partnerships according to 15-30-3302, MCA.  Section 15-30-3311, MCA, has a broader definition of the owner of a disregarded entity, which includes a manager or member, as it applies to second tier pass-through entities.  Section 15-30-3312, MCA, does not allow a disregarded entity to file a composite tax return.  Therefore, the filing options for disregarded entities need to be described separately.

The department is proposing to add new section (6) to adopt and clarify the provisions enacted by the 2009 Legislature in Senate Bill 260 (Ch. 401, L. 2009).  Publicly traded partnerships are exempt from the reporting and remitting requirements in section (1) of the rule for tax years beginning after December 31, 2008 but are subject to the reporting requirements as defined by Senate Bill 260 (Ch. 401, L. 2009) and the new section (6) in ARM 42.9.106. 

For reporting and remitting purposes for tax years beginning before December 31, 2008, publicly traded partnerships are governed by the statutes and rules in place for the respective tax year.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

            42.9.202  FILING REQUIREMENT  (1)  The Montana Composite Income Tax Return, Form PT-CR1, composite income tax return is due on or before the due date (including extensions) of the entity's information return provided in ARM 42.9.301 and 42.9.401.  Extension of the date for filing the composite return does not extend the date for paying the composite tax,. and Interest accrues Interest and a late payment penalty accrue from the original due date of the return.

            (2)  The composite return must include the name, address, social security or federal employer identification number, ownership interest in the entity that is used to calculate the owner's distributive share of income, and composite return liability of each consenting eligible participant included in the filing.

 

            AUTH: 15-30-305, 15-30-1112, 15-30-2620, MCA

            IMP: 15-30-105, 15-30-1112, 15-30-2104, 15-30-3312, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.202 as part of a general cleanup of the rules.  The form mentioned in the rule no longer exists.  The rule should provide information about the date that late payment penalty start to accrue.  The rule should clarify the description of the ownership interest required to be reported on the return.  This clarification of ownership interest reflects the distributive share of items discussed in 15-30-3312, MCA, to calculate the composite tax.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

            42.9.203  COMPUTATION OF COMPOSITE TAX  (1) remains the same.

(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 15-30-103, 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 15-30-241, 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 $161:

 

Participant's share of entity income from all sources                    $15,000

Standard deduction (2003) (2009)                                                 (3,330) (3,500)

Exemption allowance (2003) (2009)                                              (1,780) (2,110)

                                                                                                            $ 9,890 $9,390

 

Assume the tax on the $9,890 $9,390, using the rates set forth in 15-30-103, 15-30-2103, MCA, is $482 $237.

 

Participant's composite return liability would be $482 $237 x $20,000/$60,000 = $161 $79.

 

            AUTH: 15-30-305, 15-30-1112, 15-30-2620, 15-30-3312, MCA

            IMP: 15-30-1112, 15-30-3312, MCA

 

            REASONABLE NECESSITY:  The department is proposing to amend ARM 42.9.203 to clarify the composite tax rate for corporate owners and to conform to 15-30-3312, MCA.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.301  PASS-THROUGH ENTITY INFORMATION RETURNS FOR PARTNERSHIPS  (1)  Every partnership that has Montana source income must file an Annual a form PR-1, Montana Partnership Information and Composite Tax Return, Form PR-1, on or before the 15th day of the fourth month following the close of its annual accounting period.

(2)  See ARM 42.15.201 and 42.15.202 to determine the time for filing a short-period return.

(3)  For tax years beginning before January 1, 2003, the partnership must file a Pass-through Entity Extension Form PT-EXT to extend the filing date.  For tax years beginning after December 31, 2002, approval Approval of an extension to file the partnership's federal Return of Partnership Income or federal Return of Income for Electing Large Partnerships automatically extends the time for filing the Montana return to the date approved for filing the federal return.  A copy of the federal extension form must be attached to the Montana partnership information return in order to receive the Montana extension.

(4)(3)  A partnership required to file a Montana partnership information return is subject to a late-filing penalty if:

(a)  the Montana partnership information return is not filed by the due date (including extensions);

(b)  a copy of the partnership's federal partnership return in is not filed with the Montana partnership information return; or

(c)  a return is filed that does not include all of the following information:

(i)  name, address, and social security or federal identification number of each partner;

(ii)  the partnership's Montana source income;

(iii)  each partner's distributive share of Montana source income, gain, loss, deduction, or credit or items of income, gain, loss, deduction, or credit; and

(iv)  each partner's distributive share of income, gain, loss, deduction, or credit, or item of income, gain, loss, deduction, or credit from all sources.

 

AUTH: 15-1-201, 15-30-305, 15-30-1102, 15-30-2620, 15-31-501, MCA

IMP: 15-30-142, 15-30-143, 15-30-1102, 15-30-1111, 15-30-1112, 15-30-2602, 15-30-2603, 15-30-3302, 15-30-3311, 15-31-101, 15-31-111, MCA

 

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.9.301 as a general cleanup of all rules by correcting the form names referred to in the rule, eliminating references to outdated filing requirements, removing the reference to repealed administrative rules, and clarifying the procedure for requesting a filing extension.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.401  PASS-THROUGH ENTITY INFORMATION RETURNS FOR S CORPORATIONS  (1)  Every S corporation that has Montana source income must file an Annual a form CLT-4S, Montana S Corporation and Composite Information Return, Form CLT4-S, on or before the 15th day of the third month following the close of its annual accounting period.

(2)  See ARM 42.15.201 and 42.15.202 to determine the time for filing a short-period return.

(3)  For tax years beginning before January 1, 2003, the S corporation must file a Pass-through Entity Extension Form PT-EXT to extend the filing date.  For tax years beginning after December 31, 2002, approval Approval of an extension to file the S corporation's federal income tax return for an S corporation automatically extends the time for filing the Montana return to the date approved for filing the federal return.  A copy of the federal extension form must be attached to the Montana S corporation information return in order to receive the Montana extension.

(4)(3)  An S corporation required to file a Montana S corporation information return is subject to a late filing penalty if:

(a)  the Montana S corporation information return is not filed by the due date (including extensions);

(b)  a copy of the S corporation's federal return is not filed with the Montana S corporation information return; or

(c)  a return is filed that does not include the following information:

(i)  name, address, and social security or federal identification number of each shareholder;

(ii)  the S corporation's Montana source income;

(iii)  each shareholder's pro rata share of separately and nonseparately stated Montana source income, gain, loss, deduction, or credit, or item of income, gain, loss, deduction, or credit; and

(iv)  each shareholder's pro rata share of separately and nonseparately stated income, gain, loss, deduction, or credit, or item of income, gain, loss, deduction, or credit from all sources.

 

            AUTH: 15-1-201, 15-30-305, 15-30-1102, 15-30-2620, 15-31-501, MCA

            IMP: 15-30-142, 15-30-143, 15-30-1102, 15-30-1111, 15-30-1112, 15-30-2602, 15-30-2603, 15-30-3302, 15-30-3311, 15-30-3312, 15-31-101, 15-31-111, MCA

 

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.9.401 as a general cleanup of all rules by correcting the form names referred to in the rule, eliminating references to outdated filing requirements, removing the reference to repealed administrative rules, and clarifying the procedure for requesting a filing extension.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

42.9.402  S CORPORATION ADDITION TO MONTANA ADJUSTED GROSS INCOME S CORPORATION SHAREHOLDER'S ADDITION TO MONTANA ADJUSTED GROSS INCOME  (1)  through (1)(c) remains the same.

 

AUTH: 15-30-305, 15-30-2620, MCA

IMP: 15-30-111, 15-30-2110, MCA

 

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.9.402 to correct the title of the rule that refers to a shareholder's income.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 legislature in HB 24 (Ch. 147, L. 2009).

 

42.9.540  PASS-THROUGH ENTITY RETURNS FOR REMIC  (1)  Every unincorporated Real Estate Mortgage Investment Conduit (REMIC) described in IRC 860D, that has Montana source income, must file a copy of its form 1066, federal Real Estate Mortgage Investment Conduit Income Tax Return, Form 1066, on or before the due date (including extensions) for filing its federal return.  See ARM 42.15.201 and 42.15.202 to determine the time for filing a short-period return.

 

AUTH: 15-1-201, 15-30-305, 15-30-1102, 15-30-2620, 15-31-501, MCA

IMP: 15-30-142, 15-30-143, 15-30-1102, 5-30-1111, 15-30-1112, 15-30-2602, 15-30-2603, 15-30-3302, 15-30-3311, 15-30-3312, 15-31-101, 15-31-111, MCA

 

            REASONABLE NECESSITY:  The department proposes to amend ARM 42.9.540 to correct the form references and remove the reference to administrative rules that have been repealed.

            The statutory amendment in the authority and implementing cites is necessary to reflect the recodification of the statutes in Title 15, chapter 30, MCA, enacted by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009).

 

5.  Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing.  Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail canderson@mt.gov and must be received no later than November 30, 2009.

 

6.  Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

 

7.  An electronic copy of this Notice of Public Hearing 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 Notice of Public Hearing 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.

 

8.  The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency.  Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters.  Notices will be sent by e-mail unless a mailing preference is noted in the request.  Such written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

 

9.  The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled.  The primary bill sponsor for Senate Bill 260, Senator Kim Gillan, was contacted on July 14, 2009, by regular mail.  The primary bill sponsor for House Bill 24, Representative Penny Morgan, was contacted by electronic mail on October 14, 2009.

 

 

/s/ Cleo Anderson                             /s/ Dan R. Bucks

CLEO ANDERSON                          DAN R. BUCKS

Rule Reviewer                                   Director of Revenue

 

Certified to Secretary of State October 19, 2009