(1) A pass-through entity required to file a Montana information return as provided in ARM Title 42, chapter 9, is subject to a late-filing penalty if the return is not filed by the due date (including extensions) .

(2) The late-filing penalty is calculated by multiplying $10 times the number of the pass-through entity's partners, shareholders, members, or other owners at the close of the tax year for each month or fraction of each month the information return is not filed, not to exceed five months. For example, if a pass-through entity had 20 members at the close of its tax year and filed its information return six months after it was due, the late-filing penalty would be $1,000 ($10 x 20 x 5) . For disregarded entities that do not have a tax year, the number of partners, shareholders, members, or other owners will be determined as of the preceding December 31.

(3) The late-filing penalty described in (2) is not imposed on certain small pass-through entities. If the pass-through entity has 10 or fewer partners, shareholders, members, or other owners, the penalty will not be imposed if the pass-through entity demonstrates that:

(a) each of the partners, shareholders, members, or other owners is an individual, an estate of a deceased individual, or a C corporation;

(b) each partner, shareholder, member, or other owner has filed any required tax return or report with the department by the due date (including extensions) for the return or report; and

(c) each partner, shareholder, member, or other owner paid all taxes when due.

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