42.17.603    APPLICABLE THRESHOLDS - CHANGE OF OWNERSHIP - PUBLICLY TRADED PARTNERSHIPS - NONPROFIT ORGANIZATIONS - EXEMPT ROYALTY OWNERS

(1) There is not a requirement to withhold from payments to royalty interest owners if the producing entity's 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 payments for an entity's production are subject to withholding from their royalty interest owners for 2015 by averaging the production numbers for calendar years 2011, 2012, and 2013 and comparing this average to the production exemption limits.

(2) If an entity does not have three years of recent mineral production records, the remitter may provide the department with information supporting the exemption from the withholding requirements of 15-30-2536, MCA. The department shall review this information to determine if an exemption is warranted and notify the remitter 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 15-30-2538 and 15-30-2539, MCA. The department will notify all other mineral producers by September 15 only if they are required to withhold.

(4) If a person who is required to withhold on behalf of their royalty interest owners sold their mineral interests during the year and ceases to be the remitter, the person who acquired the mineral interests becomes the remitter and must continue to withhold 6 percent of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(5) If a remitter produces both oil and gas, and only one resource meets the requirements for withholding as provided in 15-30-2539, 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 15-30-2539, MCA.

(6) If a person not previously extracting resources in the state begins extracting from new or existing 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 percent of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(7) All persons that extract minerals other than oil and gas must withhold 6 percent of the net royalty payments of all royalty interest owners subject to the withholding requirements of 15-30-2538, MCA.

(8) The person described in (7) 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.

(a) The department has defined an entity that has immaterial net royalty payments as an entity that has production amounts for minerals, other than oil and gas, with a value less than $5 million. The only filing requirement for this type of entity is the filing of the Form RW-3 by January 31 of the following year along with a listing of all royalty recipients. The $5 million value will be based on a three-year average of production value reported to the department's Business Tax and Valuation Bureau. For example, the department will calculate whether an entity is required to withhold from its royalty interest owners for 2017 by averaging the valuation reported for 2013, 2014, and 2015.

(9) Section 15-30-2539, MCA, allows for a publicly traded partnership to be exempt from the withholding requirements of 15-30-2536 through 15-30-2547, MCA, provided the publicly traded partnership, that is a royalty owner, submits a report to both the remitter and the department. 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 15-30-2536 through 15-30-2547, MCA. The request must be received by the remitter 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 remitter of either acceptance or denial of the request within 30 days. The election does not need to be repeated annually unless requested by the department.

(10) Section 15-30-2539, MCA, allows for an organization that is exempt from taxation under 15-31-102, MCA, to be exempt from the withholding requirements of 15-30-2536 through 15-30-2547, MCA, provided the exempt organization, that is a royalty owner, submits a report to both the remitter and the department. The report, which can be in the form of a letter, must contain the exempt organization's letterhead and request exemption from 15-30-2536 through 15-30-2547, MCA. The request must be received by the remitter 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 remitter 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) The exception provided in 15-30-2539, MCA, for payments to a federally recognized Indian tribe, applies to all mineral production described in the Mineral Leasing Act of 1939.

(12) According to 15-30-2539, MCA, the department grants remitters 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 remitter 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.

 

History: 15-30-2547, MCA; IMP, 15-30-2538, 15-30-2539, 15-30-2540, 15-30-2541, 15-30-2542, 15-30-2543, 15-30-2544, 15-30-2545, 15-30-2546, 15-30-2547, 15-31-102, MCA; NEW, 2007 MAR p. 2151, Eff. 12/21/07; AMD, 2010 MAR p. 177, Eff. 1/15/10; AMD, 2012 MAR p. 2640, Eff. 12/21/12; AMD, 2015 MAR p. 27, Eff. 1/16/15; AMD, 2018 MAR p. 853, Eff. 4/28/18.