42.9.109    PARTNERS, SHAREHOLDERS, MANAGERS, AND MEMBERS WHO ARE TAX-EXEMPT ENTITIES

(1) A pass-through entity is required to withhold tax on behalf of a partner, shareholder, manager, or member even if the partner, shareholder, manager, or member is not organized and operated for profit or is a stock bonus, pension, profit-sharing, or individual retirement plan. A partner, shareholder, manager, or member seeking the benefits of exemption from Montana filing and tax requirements must comply with all statutory requirements authorizing the classification claimed.

(2) In order to establish exemption status and thus be relieved of the duty of filing returns and paying tax based upon income received from a pass-through entity, each partner, shareholder, manager, or member claiming exemption must file an affidavit with the department showing:

(a) the character of the organization;

(b) the purpose it was organized for;

(c) its actual activities; and

(d) the sources and the disposition of its income.

(3) Incorporated not-for-profit entities must file the affidavit required in (2) and include:

(a) a statement disclosing whether or not any of its income may inure to the benefit of any private shareholder or individual;

(b) a copy of the articles of incorporation;

(c) a copy of the by-laws; and

(d) copies of the latest financial statements showing the assets, liabilities, receipts, and disbursements.

(4) Other unincorporated stock bonus, pension, profit-sharing, or individual retirement plans must file the affidavit required in (2) and include:

(a) documents relevant to the adoption and administration of the plan;

(b) copies of the latest financial summary or statements showing assets, liabilities, receipts, and disbursements; and

(c) a copy of any form the partner, shareholder, manager, or member is required to file with the IRS, if applicable. An example is federal Form 5500 Annual Return/Report of Employee Benefit Plan.

(5) In addition, if the IRS has granted the partner, shareholder, manager, or member exemption from the federal income tax, a certified copy of the exemption certificate or letter must also be filed.

History: 15-30-2620, 15-31-501, MCA; IMP, 15-30-2151, 15-30-3313, 15-31-101, 15-31-102, MCA; NEW, 2015 MAR p. 2152, Eff. 12/11/15.