(1) To perfect a water's-edge election, a taxpayer must complete Form WE – ELECT and file the form with the department within the first 90 days of the first tax year of the three-year period for which the election is to become effective. If the first tax period for which the election is to become effective is less than 90 days, the taxpayer will have until the end of the tax period to file the election.

(a) A taxpayer cannot make a water's-edge election for prior tax periods.

(b) If a taxpayer files a water's-edge election after the 90-day deadline, the taxpayer must establish reasonable cause for failing to satisfy the 90-day deadline.

(i) Reasonable cause is defined in ARM 42.2.304. Examples of what ordinarily does or does not constitute reasonable cause are provided in ARM 42.2.512.

(ii) Failure to timely file a water's-edge election on the belief that an election was unnecessary because the taxpayer incorrectly asserted a nonunitary relationship with the foreign corporation(s) does not constitute reasonable cause.

(2) The provisions of (1) provide the only way to perfect a water's-edge election. Filing returns and paying tax under the water's-edge method without perfecting the election as provided for in (1) will not be accepted as a valid election.

(3) Each election is binding for a three-year renewable period and may only be revoked upon express written permission of the department.

(4) As stated in (3), the water's-edge election is binding for a three-year renewable period. If a taxpayer wishes to continue to file on a water's-edge basis, a Form WE – ELECT must again be filed with the department within the first 90 days of the first tax year of the three-year period for which the election is to become effective.