24.11.2506    REASONABLE WAGES

(1) A business filing income taxes as a corporation shall accurately report compensation for services performed by a corporate officer, LLC member, or shareholder employee as wages for the purpose of unemployment insurance taxation.

(2) The department shall use the following factors to evaluate whether reasonable compensation for services performed by a corporate officer, LLC member, or shareholder employee has been reported to the department as wages:

(a) qualifications and business role of corporate officer, LLC member, or shareholder employee, including but not limited to:

(i) the amount of time devoted to the business;

(ii) position and responsibility within the business; and

(iii) duties performed for business;

(b) compensation paid to other similarly situated employees of the business and the business entity's wage policy;

(c) a review of the State Occupational Employment and Wage Estimates for the pertinent occupation; and

(d) nature, size, and location of business, including:

(i) complexity of the business;

(ii) financial condition of the business including, but not limited to, the relationship of the compensation to gross and net business income, cash flows, total sales or revenues, and net income adjusted for non cash items such as depreciation, depletion, and amortization; and

(iii) cost of living and general economic conditions in the business's locale.

(3) The department shall calculate the actual remuneration received by a corporate officer, LLC member, or shareholder employee by examining payments including, but not limited to, the following:

(a) direct payments by check, electronic transfer, or cash;

(b) payments to any family member who did not perform services for the payment;

(c) payments classified as gifts, distributions of profit, dividends, owner draws or contributions, and return of capital;

(d) distribution of property or services paid for by the corporation;

(e) payments for personal expenses including, but not limited to direct payments for personal debts, payments of credit card bills that include personal purchases, and use of company vehicles for personal use;

(f) payments classified as loans for which there is no evidence of a repayment schedule or the payment schedule does not impose a reasonable interest rate;

(g) payments for rent in excess of market value; and

(h) the market value of any remuneration paid in any medium other than cash.

(4) The department shall compare the reported wages to actual remuneration received by a corporate officer, LLC member, or shareholder employee and consider the factors enumerated by (2) to determine a reasonable compensation for services performed.

History: 39-51-301, 39-51-302, MCA; IMP, 39-51-201, 39-51-203, 39-51-602, 39-51-603, 39-51-1103, 39-51-1108, MCA; NEW, 2011 MAR p. 573, Eff. 4/15/11.