BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
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In the matter of the amendment of ARM 42.17.101, 42.17.103, 42.17.105, 42.17.111, 42.17.113, 42.17.114, 42.17.120, 42.17.122, 42.17.131, 42.17.133, 42.17.134, 42.17.135, 42.17.304, 42.17.305, 42.17.306, 42.17.308, 42.17.309, 42.17.310, 42.17.311, 42.17.312, 42.17.313, 42.17.314, 42.17.315, 42.17.316, 42.17.317, 42.17.601, 42.17.602, 42.17.603, 42.17.604, 42.17.605 and repeal of ARM 42.17.136, 42.17.137, and 42.17.138 relating to withholding taxes |
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TO: All Concerned Persons
1. On November 24, 2009, at 1:00 p.m., a public hearing will be held in the Third Floor Reception Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the amendment and repeal of the above-stated rules.
Individuals planning to attend the hearing shall enter the building through the east doors of the Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.
2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., November 9, 2009, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail [email protected].
3. The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:
42.17.101 DEFINITIONS The following terms pertain to this chapter:
(1) through (10) remain the same.
(11) "Reporting forms" includes, but is not limited to:
(a) form M-1 - payment coupon is the Montana Withholding Tax Payment Form;
(b) form MW-3 - State Income Tax Withholding Reconciliation and Transmittal Document (W-2) is the Montana Annual Wage Withholding Tax Reconciliation; and
(c) federal form W-2 is the federal Wage and Tax Statement wage and tax statement.
(12) "Sole proprietor," as used in 15-30-256, MCA, includes the individual owner of a single-member limited liability company that is disregarded for income tax purposes and may include a husband and wife partnership for the purpose of withholding.
(13) remains the same.
AUTH: 15-30-272, 15-30-305, 15-30-2547, 15-30-2620, MCA
IMP: 15-30-201, 15-30-256, 15-30-263, 15-30-2501, 15-30-2538, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.101 to update form titles in the rule to match the titles of the forms. The department is striking a reference to a statute in the definition of "sole proprietor" because that statute was repealed.
The amendment to the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.103 OTHER PAYMENTS (1) through (6)(b) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-201, 15-30-2501, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.103 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.105 COMPUTATION OF WITHHOLDING (1) Employers shall calculate the state income tax amount to withhold according to the "Montana State Wage Withholding Tax Tables," provided by the department.
(2) The referenced tax tables in (1) may be obtained by:
(a) telephoning:
Department of Revenue
Customer Service Center
(406) 444-6900 (Helena)
(866) 859-2254 (toll free);
(b) writing to:
Montana Department of Revenue
P.O. Box 5835
Helena, Montana 59604-5835; or
(c) accessing:
the department's web site: www.mt.gov. revenue.mt.gov.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-103, 15-30-202, 15-30-2103, 15-30-2502, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.105 to update form titles and provide additional avenues for taxpayers to contact the department and correct the address for the web site for the department.
The amendment to the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.111 WHO MUST WITHHOLD MONTANA STATE INCOME TAX AND WHO IS SUBJECT TO WITHHOLDING (1) through (5) remain the same.
(6) Wages paid to an enrolled member of a Native American tribe are subject to withholding except as provided in this rule.:
(a) Wages are exempt from withholding When:
(i) the employee is an enrolled tribal member of the governing tribe of the reservation on which the enrolled tribal member works and resides;:
(ii) (i) the wages earned by the employee are derived from reservation sources; and
(iii) (ii) the employee submits a statement to the employer attesting that the employee resides on his or her reservation, together with a certificate of enrollment.
(b) When wages are derived from both reservation sources and nonreservation sources, only wages derived from reservation sources are exempt from withholding, provided the employee meets all the criteria in (6)(a).
(c) When an employee does not reside on his or her reservation for an entire pay period, only wages earned while the employee was residing on the reservation are exempt from taxation, provided the employee meets all the criteria in (6)(a).
(7) Wages paid to a resident of North Dakota for personal services rendered within Montana are not subject to withholding provided the employee has filed a form NR-2, certification of North Dakota residency, (form NR-2) in accordance with ARM 42.17.134.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-202, 15-30-2502, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.111 to change the format of the rule in order to make the rule consistent with other rules in ARM Title 42.
The amendment to the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.113 PAYMENTS (1) Failure to pay withheld amounts within the time provided, and the use thereof by the employer in forwarding its own business, is considered to be an illegal conversion of trust money. The employer will not regard withheld wages as being equivalent to its own personal income tax indebtedness. Penalties provided in 15-1-216 and 15-30-321 15-30-2641, MCA, apply to any violation of the requirement to collect, truthfully account for, and pay amounts required to be deducted from employee wages.
(2) remains the same.
(3) Once an employer becomes subject to withholding tax as provided in 15-30-201 15-30-2501, MCA, the employer must continue to withhold, and report, income tax from the employees' wages for all subsequent calendar years.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-1-208, 15-30-204, 15-30-210, 15-30-2504, 15-30-2510, 15-30-2641, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.113 to update the statutes referenced in the rule and the authority and implementing cites because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.114 ANNUAL RECONCILIATION AND WAGE STATEMENTS (1) On or before February 28 of each year, every employer must file with the department a Reconciliation and Transmittal Document Form MW3 form MW-3, Montana Annual Wage Withholding Tax Reconciliation. Form MW-3 must be accompanied by the original copies of each employee's earnings statements on federal form W-2.
(a) Employee's earning statements, federal form and the federal form W-2, must be prepared for each employee, regardless of whether or not withholding taxes were actually withheld from the employee's wages. The state wages and state income tax withheld must be shown in the area provided boxes labeled for state information.
(b) An original copy of the federal form W-2 must be filed with the Employer's Annual Reconciliation Statement form MW-3, and two copies must be furnished to the employee not later than January 31 of each year.
(c) Montana does not provide substitute earning statement forms or allow earning statements which do not conform to federal form W-2 requirements.
(2) remains the same.
(3) Computer-generated federal form W-2 equivalents in printout form may be allowed by the department in lieu of W-2s or electronic media.
(4) and (5) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-206, 15-30-207, 15-30-2506, 15-30-2507, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.114 to update form titles so that they match the current form titles the taxpayers are using.
The amendment to the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.120 EMPLOYER'S FAILURE TO WITHHOLD TAX FROM WAGES
(1) If an employer fails to deduct and withhold the tax from wages as required under 15-30-202 15-30-2502, MCA, and thereafter the income tax against which the withholdings may be credited is paid, the amount required to be deducted and withheld shall not be collected from the employer. However, Such such payment does not, however, operate to relieve the employer from liability for penalties, interest, or additions to the tax applicable because of such failure to deduct and withhold. The employer will not be relieved under this rule from their liability for payment of the amounts required to be withheld unless they can show that the income tax against which the required withholdings may be credited has been paid.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-203, 15-30-2502, 15-30-2503, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.120 to clarify that the rule applies to taxes that are withheld from an employee's wages and to correct the grammatical form of one sentence.
The department is further amending the rule to correct the internal statutory references and the authority and implementing cites because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.122 RETURNS OF INFORMATION AGENTS (1) Agent Information Returns Federal form 1099s, U.S. Information Returns are required to be filed for certain dividends, interest in excess of $10, royalties, payments to retirement plans, rents, salaries, wages, prizes, awards, annuities, pensions, and real estate transactions as specified in 15-30-301 15-30-2616, MCA. These Agent Information Returns Federal form 1099s may be filed on paper documents, or electronically, or on magnetic media. They are due on or before the 15th day of April February 28 following the close of the calendar year with respect to which the payments made are being reported. The returns are to be filed with: the
Montana Department of Revenue,
P.O. Box 5805 5835,
Helena, Montana 59604-5805 5835.
(2) Paper documents are to be prepared on the appropriate federal information return and a copy filed with the department. Returns filed on paper forms are to be accompanied by a copy of federal form 1096, Annual Summary summarizing the information being reported to the department.
(3) Agent Information Returns Federal form 1099s filed electronically or on magnetic media are to conform to the specifications outlined in Federal Publication 1220 for the applicable year. A copy of federal form 4804/4802 must be used to transmit the magnetic files.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-301, 15-30-2616, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.122 to reflect media formats that the department can accept electronic data. In addition the rule is amended to require Agent Information Returns (1099s) to be filed on a time table that reflects federal requirements with the exception of W-2s whose filing deadline is defined in statute.
The amendments to the internal statutory reference and the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.131 EMPLOYEE'S WITHHOLDING ALLOWANCES (1) For purposes of determining the employee's withholding allowances, the amount claimed for Montana may be different than the amount claimed on the IRS federal form W-4, Withholding Allowance Certificate, reported (on the line stating "Total total number of allowances you are claiming"), furnished by the employee to the employer for federal withholding tax purposes. The department may determine whether the amount claimed on the IRS federal form W-4 should be adjusted. The department does not provide forms for this purpose. The department has determined that the federal child tax credit that allows extra allowances for federal withholding is not allowed for state Montana purposes when determining the number of allowances for state Montana withholding.
(2) remains the same.
(3) If an employee fails or refuses to provide the number of allowances on federal form W-4 reported on the (line stating "Total total number of allowances you are claiming"), the employer shall withhold, for Montana purposes, on the basis of zero withholding allowances.
(4) Any change to the "Total total number of allowances you are claiming", on federal form W-4 for federal purposes, including federal re-determinations of allowances, automatically changes the number of allowances for Montana purposes unless the allowances have been set at a fixed number by the department under (5). If a re-determination allows extra allowances for the federal child tax credit for federal purposes, these extra allowances will not be allowed for state purposes.
(5) An employer is required to provide a copy of any Withholding Allowance Certificate ( federal form W-4) on which an employee has claimed more than ten withholding allowances to:
the Department of Revenue,
P.O. Box 5805 5835,
Helena, Montana 59604-5805 5835,
on which an employee has claimed more than ten withholding allowances. (a) Each such certificate is to be provided at the same time and in the same manner as such certificate is required to be provided to the IRS under 26 CFR 37.3402-1.
(a) (b) If, upon review of any such certificates, the department determines that the certificate is defective, it may require in writing that the employer disregard the allowances claimed and advise the employer of a maximum number of withholding allowances permitted the employee for state purposes.
(b) (c) The filing of a new certificate by an employee whose withholding allowances have been set at a fixed maximum number by the department shall be disregarded by the employer unless a number equal to or less than the set maximum is claimed or written notice by the department is given authorizing a different maximum.
(6) When adjusting claimed withholding allowances for an employee under (5), the department shall consider:
(a) exemptions provided under 15-30-112, 15-30-113, and 15-30-114, 15-30-2114, 15-30-2115, and 15-30-2116, MCA;
(b) marital status and number of employers;
(c) estimated wages and salaries;
(d) estimated allowable deductions under 15-30-121, 15-30-122, 15-30-123, and 15-30-131, 15-30-2131, 15-30-2132, 15-30-2133, and 15-30-2111, MCA, to the extent that such deductions exceed the average itemized deductions taken into account in the withholding tables;
(e) business losses;
(f) annuity plan contributions; and
(g) residency.
(7) remains the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-202, 15-30-2502, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.131 to make titles to forms consistent and update the address.
The amendment to the internal statutory references and the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.133 TREATMENT OF SUPPLEMENTAL WAGES - STATE INCOME TAX WITHHOLDING (1) through (3) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-201, 15-30-2501, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.133 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.134 RECIPROCAL AGREEMENT - NORTH DAKOTA (1) An employer is not required to deduct Montana state income tax withholding on wages earned by residents of North Dakota under the provisions of the Income Tax and Withholding Tax Reciprocal Agreement between Montana and North Dakota. Relief from withholding is subject to the following provisions:
(a) A North Dakota resident performing services in Montana for compensation must annually provide form NR-2, a certificate of North Dakota residency, (form NR-2) to his or her employer before the employer may discontinue withholding on compensation earned in Montana. The certificate is valid only from the date filed to December 31 of the year in which filed. The certificate is rendered invalid if the employee changes his or her residence to any state other than North Dakota;
(b) Withholding from a North Dakota resident's compensation earned in Montana must be treated as if earned in North Dakota. If North Dakota requires withholding from the compensation, the North Dakota withholdings must be deducted from the compensation;
(c) A copy of the employee's form NR-2 must be submitted by the employer to the department after it is provided to the employer; and
(d) If the department determines that an employee's certificate is false or unsubstantiated, it may require an employer to disregard any claim to North Dakota residency and resume withholding on compensation earned in Montana.
AUTH: 15-30-305, 15-30-2621, MCA
IMP: 15-30-202, 15-30-209, 15-30-2502, 15-30-2509, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.134 to update forms references.
The amendment to the authority and implementing statutes is necessary because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.135 FALSE STATEMENTS BY EMPLOYEES - RECOMPUTATION OF WITHHOLDING (1) and (2) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-202, 15-30-209, 15-30-2502, 15-30-2509, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.135 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.304 DETERMINATION OF TAX LIABILITY FOR PRECEDING TAX YEAR; DETERMINATION OF TAX PAID FOR CURRENT TAX YEAR (1) and (2) remain the same.
(3) To determine the preceding tax year liability of an individual who participates in a composite return, the following requirements apply:
(a) For a taxpayer who was a participant in a composite return for the preceding year, the tax liability for the preceding year is the participant's preceding year composite tax liability.
(b) For a taxpayer who filed a Montana Individual Income Tax Return individual income tax return for the preceding tax year and for the current year, and participated in a composite return filing, their tax liability for the preceding tax year is their individual liability as determined in (1).
(4) remains the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.304 to change the title of a form.
The amendment to the statutory references in the authority and implementing cites were updated to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.305 ESTIMATED TAX AND PAYMENT OF INSTALLMENTS
(1) Except as provided in 15-30-241, 15-30-2512, MCA, a taxpayer is required to pay at least 100% of their tax liability for the preceding tax year or 90% of their tax for the current tax year through employer withholding and estimated payments. If they do not, they will be liable for interest on the underpayment provided in 15-30-241, 15-30-2512, MCA. In addition, unless the department grants a taxpayer an extension to pay an installment of estimated tax as provided in ARM 42.17.306, a taxpayer required to make installment payments of estimated tax who fails to timely pay an installment is liable for interest on the unpaid installment from the due date of the installment to the earlier of the date of payment or the due date of their income tax return, not including extensions, as provided in 15-1-216, MCA, and ARM 42.2.306.
(2) Taxpayers must complete the form ESW, Montana Individual Estimated Income Tax Worksheet, form ESW, to determine if they are required to make current year installment payments of estimated tax and, if they are necessary, to determine the amount. If a taxpayer's income fluctuates or is seasonal, employing the annualization method may lower the amount of one or more installments. A taxpayer using the optional annualization method must complete the form ESA, Annualization Worksheet, form ESA. Taxpayers are not required to file the estimated tax worksheet with their income tax return but it is a tax record the taxpayer must retain and provide the department on request. Taxpayers using the annualization method must file form ESA with their income tax return. If the taxpayer files their individual income tax return electronically, the Annualization Worksheet form ESA is a tax record the taxpayer must retain and provide the department on request.
(3) The department will provide taxpayers with estimated tax payment coupons on request. Unless paid electronically, as set forth in ARM 42.5.201 and 42.5.202, installment payments of estimated tax must be accompanied by a payment coupon voucher and be:
(a) personally delivered to:
Montana Department of Revenue
Sam W. Mitchell Building
125 North Roberts, 3rd Floor
Helena, Montana; or
(b) mailed to:
Montana Department of Revenue
P.O. Box 6309
Helena, Montana 59604-6309.
(4) If a taxpayer has not received estimated tax payment coupons vouchers from the department before the first installment due date, the payment should be accompanied by a writing written statement setting forth that the payment is an estimated tax payment, the tax year, the due date of the installment, and the taxpayer's name, mailing address, and social security number and be:
(a) personally delivered to:
Montana Department of Revenue
Sam W. Mitchell Building
125 North Roberts, 3rd Floor; or
(b) mailed to:
Montana Department of Revenue
P.O. Box 6308
Helena, Montana 59604-6308.
(5) Coupons Payment vouchers will be mailed to the taxpayer if a request for them is included with the first installment. Payments must be received by the department on or before the installment due date.
(6) remains the same.
(7) If fewer than four installments are required, the applicable percentage of the required annual amount for each installment is increased. The applicable percentage per installment is as follows:
(a) 100% for one installment;
(b) 50% for two installments; and
(c) 33 1/3% for three installments.
Example 1: If the short tax year is the 10-month period from January 1 through October 31, the estimated tax must be paid in four installments, on April 15, June 15, September 15, and November 15. Each installment is 25% of the total payment required.
Example 2: If the short tax year ended on September 30 is the 9-month period from January 1 through September 30, the estimated tax must be paid in three installments, on April 15, June 15, and October 15. With three installments, each installment is 33 1/3% of the total payment required.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The word "employer" was deleted in reference to withholding because mineral royalty withholding is also applicable beginning with the 2008 tax year. Coupons are now referred to as vouchers on forms and other publications.
The amendment to the internal statutory references and the authority and implementing cites were updated to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.306 WRITTEN REQUEST FOR EXTENSION - PAYMENT OF ESTIMATED TAX (1) through (3) remain the same.
(4) If an extension is granted, no further notice or demand will be given and the taxpayer must pay the estimated payment on or before the expiration of the period of the extension. If an extension is granted and the extended installment timely paid, the penalty and interest provided in 15-1-216, MCA, is not imposed. Section 15-30-241 15-30-2512, MCA, which provides for interest on an underpayment of tax, is in addition to the uniform penalties and interest provided in 15-1-216, MCA, and is imposed whether or not a taxpayer obtains an extension as provided in this rule.
(5) through (8) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.306 to update the internal statutory references and the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30 of the Montana Code Annotated.
42.17.308 DETERMINING ANNUALIZED INCOME (1) and (2) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.308 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.309 ANNUALIZED PERIODS (1) and (2) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.309 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.310 DETERMINATION OF TAX LIABILITY - STATUS CHANGE FROM JOINT TO SEPARATE (1) Taxpayers who file separate returns on separate forms for the current period and who filed a joint return for the preceding tax year must compute their prior year's estimated tax liability as follows:
(a) 100% of the tax liability of the joint return for the preceding tax year; or
(b) a prorated portion of the preceding year's joint tax liability. This prorated amount is determined by calculating the tax liability of the taxpayers as if they filed separately and totaling their individual taxes. Each spouse's prior year estimated tax liability is found by dividing their separate liability by the total of the two separate liabilities and multiplying this figure by the preceding year's joint tax liability.
Example: Husband and wife file a joint return for the calendar year 2003 one showing taxable income of $50,000 and a tax of $3,556. Of the taxable income, $30,000 was attributable to the husband and $20,000 to the wife. Husband and wife filed separate returns on separate forms for calendar year 2004 two. The tax shown on the return for the preceding taxable year, for purposes of determining if interest is owed on an underpayment, is determined as follows:
Taxable income of husband for 2003 year one: $30,000
Tax on $30,000 (on basis of separate return): $ 1,712
Taxable income of wife for 2003 year one: $20,000
Tax on $20,000 (on basis of separate return): $ 934
Aggregate tax of husband and wife (on basis of
separate returns): $ 2,646
Portion of 2003 year one tax shown on joint return
attributable to husband ($1,712/$2,646 X $3,556): $ 2,301
Portion of 2003 year one tax shown on joint return
attributable to wife ($934/$2,646 X $3,556): $ 1,255
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The reference to 2003 and 2004 has been changed to year one and year two to avoid updating the administrative rule in future years.
The amendment to the statutory references in the authority and implementing cites are necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.311 DETERMINATION OF TAX LIABILITY - STATUS CHANGE FROM SEPARATE TO EITHER A JOINT RETURN OR MARRIED FILING SEPARATE
(1) remains the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.311 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.312 ESTIMATED TAX PAYMENTS - DIVORCE (1) through (3) remain the same.
AUTH: 15-30-305, 15-30-2512, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.312 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.313 PAYMENT OF ESTIMATED TAX - DECEDENT (1) through (4) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.313 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.314 NONRESIDENTS AND PART-YEAR RESIDENTS (1) A nonresident or part-year resident who was not required to file a Montana Individual Income Tax Return individual income tax return for the previous tax year is not required to pay estimated taxes. ARM 42.15.301 sets forth the rules for determining who must file an Individual Income Tax Return individual income tax return.
(2) through (6) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.314 to remove the capitalization of the form name.
The amendment to the statutory references in the authority and implementing cites were updated to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.315 WAIVER OF INTEREST ON ESTIMATED TAX UNDERPAYMENT (1) remains the same.
(2) The calculation of the estimated underpayment penalty must be made on form EST-P EST-I.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.315 to update the name of the form.
The amendment to the statutory references in the authority and implementing cites were updated to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.316 TRUSTS, ESTATES, AND FIDUCIARY RETURNS (1) remains the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.316 to update the statutory references in the authority and implementing cites to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.317 ESTIMATED PAYMENTS FOR MARRIED TAXPAYERS FILING SEPARATE RETURNS (1) through (2)(b) remain the same.
AUTH: 15-30-305, 15-30-2620, MCA
IMP: 15-30-241, 15-30-2512, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.317 to update the authority and implementing statutes because the 2009 Legislature enacted House Bill 24 (Ch. 147, L. 2009), which recodified the existing statutes in Title 15, chapter 30, Montana Code Annotated.
42.17.601 ADVANCE PAYMENTS AND FURTHER DISTRIBUTIONS
(1) remains the same.
(2) Each remittor who disburses funds that are owed to any person owning a royalty interest, overriding royalty interest, production payment, or any other nonworking interest in minerals produced in this state, is subject to the withholding requirement of 15-30-261 15-30-2536, MCA.
(3) If a mineral is taken in-kind by a royalty owner, the take-in-kind owner must forward 6% of the net value of the mineral that was taken in-kind to the department unless they are exempt from withholding due to 15-30-264 15-30-2539 or 15-31-102, MCA.
(4) If you are a remittor and you are providing accounting services, and these accounting services include fulfilling the requirements of 15-30-266 15-30-2541, MCA, for more than one producer, you must remit separate withholding payments and submit a separate form RW-3, Montana Mineral Royalty Withholding Tax Reconciliation Return (form RW-3), for each producer.
AUTH: 15-30-272, 15-30-2547, MCA
IMP: 15-30-266, 15-30-2541, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.601 to update form names.
The amendment to the internal statutory references and the authority and implementing cites is necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.602 CLAIMING THE CREDIT FOR TAX WITHHELD (1) Claiming credit for the tax withheld shall be accomplished as follows:
(a) Credit may be claimed for the tax withheld on a Montana Individual Income Tax Return individual income tax return or a Montana Corporation License Tax Return corporation license tax return.
(b) Taxpayers who are shareholders in a corporation taxed under Subchapter S of the Internal Revenue Code IRC doing business in this state must maintain a copy of federal form K-1. They may claim credit for the amount shown as their percentage share of the tax withheld from Montana net royalty payments by the corporation, limited liability company, or partnership.
(c) An estate or trust is entitled to credit for the tax withheld in proportion to its share of federal distributable net income. The remaining credit must be passed through to the beneficiaries in proportion to their respective shares of federal distributable net income of the estate or trust. To claim the credit, the beneficiaries must maintain a copy of federal form K-1 and claim credit for the amount shown by the fiduciary as their percentage share of the tax withheld from Montana mineral production payments.
(d) Any person filing on a fiscal year ending other than December 31 must claim a credit for the withholding tax shown on the personal income tax return required to be filed during the year following the December closing period of the form RW-3, Montana Mineral Royalty Withholding Tax Reconciliation Return (form RW-3).
(e) Production taxes cannot be claimed as withholding for mineral royalty withholding or as income tax withholding.
AUTH: 15-30-272, 15-30-2547, MCA
IMP: 15-30-264, 15-30-2539, MCA
REASONABLE NECESSITY: During the first year of administering the mineral royalty withholding tax several taxpayers attempted to claim production taxes as withholding. This provision simply clarifies that production taxes are not a withholding tax.
The amendment to the statutory references in the authority and implementing cites is necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.603 APPLICABLE THRESHOLDS - CHANGE OF OWNERSHIP - PUBLICLY TRADED PARTNERSHIPS - NONPROFIT ORGANIZATIONS - EXEMPT ROYALTY OWNERS (1) An oil and gas remittor is not required to withhold from their royalty interest owners if the 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 an entity is required to withhold from their royalty interest owners for 2008 2010 by averaging the production numbers for calendar years 2004, 2005, and 2006 2006, 2007, and 2008 and comparing this average to the production exemption limits.
(2) If an entity does not have three years of recent oil and/or gas mineral production records, the remittor may provide the department with information supporting the exemption from the withholding requirements of 15-30-261, 15-30-2536, MCA. The department shall review this information to determine if an exemption is warranted and notify the remittor 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 15-30-261 15-30-2536 and 15-30-264, 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 that is required to withhold on behalf of their royalty interest owners sells their mineral interests during the year and ceases to be the remittor, the person that acquired the mineral interests becomes the remittor and must continue to withhold 6% of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-261, 15-30-2536, MCA.
(5) If a remittor produces both oil and gas and only one resource meets the requirements for withholding as provided in 15-30-264, 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 15-30-264, 15-30-2539, MCA.
(6) If a person, not previously extracting resources in the state, begins extracting from new 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% of the net royalty payments from the royalty interest owners subject to the withholding requirements of 15-30-261, 15-30-2536, MCA.
(7) The person described in (6) that extracts oil and/or gas minerals only may not be required to withhold on net royalty payments from their royalty interest owners if the person can provide information that satisfies the department that the new producing property will not meet the threshold requirements established for oil and gas in 15-30-264, 15-30-2539, MCA.
(8) All persons that extract minerals other than oil and gas must withhold 6% of the net royalty payments of all royalty interest owners subject to the withholding requirements of 15-30-261, 15-30-2536, MCA.
(9) The person described in (8) 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 $5,000,000. The only filing requirement for this type of entity is the filing of the RW-3 by February 28 of the following year along with a listing of all royalty recipients. The $5,000,000 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 their royalty interest owners for 2010 by averaging the valuation reported for 2006, 2007, and 2008.
(10) Section 15-30-264, 15-30-2539, MCA, allows for a publicly traded partnership to be exempt from the withholding requirements of 15-30-261, 15-30-2536, MCA, provided the publicly traded partnership, who is a royalty owner, submits a report to both the remittor and the Department of Revenue 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 15-30-261, 15-30-2536, MCA. The request must be received by the remittor 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 remittor 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) Section 15-30-264, 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 15-30-261, 15-30-2536, MCA, provided the exempt organization, who is a royalty owner, submits a report to both the remittor and the department. The report, which can be in the form of a letter, must contain the exempt organization's letterhead and requests exemption from 15-30-261, 15-30-2536, MCA. The request must be received by the remittor 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 remittor 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.
(12) According to 15-30-264, 15-30-2539, MCA, the department grants remittors 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) remains the same.
AUTH: 15-30-272, 15-30-2547, MCA
IMP: 15-30-264, 15-30-2539, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.603 to update various dates and establish valuation levels whereas mineral producers, other than oil and gas producers, are not required to withhold from their mineral interest owners. The rule is proposed to establish an equivalent de minimus amount for all mineral producers.
The amendment to the internal statutory references and the authority and implementing cites is necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.604 REGISTRATION FOR WITHHOLDING (1) and (2) remain the same.
(3) Each registration application must contain the applicable tax identification number assigned by the Internal Revenue Service IRS.
(4) and (5) remain the same.
AUTH: 15-30-272 15-30-2547, MCA
IMP: 15-30-263, 15-30-266 15-30-2538, 15-30-2541, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.604 to change the reference to the Internal Revenue Service to IRS so that this rule is consistent with other rules of ARM Title 42.
The amendment to the statutory references in the authority and implementing cites is necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
42.17.605 FILING REQUIREMENTS (1) The following forms are to be completed and filed in accordance with instructions provided by the department:
(a) Form RW-1, Mineral Royalty Withholding Payment Coupon Voucher, must be filed quarterly unless the department establishes that the entity is exempt from the withholding requirements of 15-30-261, 15-30-2536, MCA. A remittor may request to file a form RW-1 on an accelerated basis. The remittor must receive approval from the department before remitting the withholding tax on a more frequent basis than quarterly;
(b) A remittor who has no withholding to remit for a remittance period shall on or before the due date, submit send a payment coupon voucher showing that a zero amount is being remitted;
(c) Form RW-3, Montana Annual Mineral Royalty Withholding Tax Reconciliation (form RW-3), must be filed on or before February 28 of each year. Form RW-3 must be accompanied by copies of each royalty owner's Withholding Statements on Federal withholding statements on federal form 1099-MISC;
(d) Form 1099-MISC, Miscellaneous Income, shall be furnished by the remittor to each person who is entitled to a credit for taxes withheld each calendar year before January 31 of each year; and
(e) Each remittor that is exempt from withholding is still required to file the form RW-3 with the department a along with a copy of form 1099-MISC for every recipient of royalties. For ease of reporting the department will accept the comparable federal form, or submission of the form in electronic format as defined by the IRS. These reports are due on or before February 28 of each year.
(2) remains the same.
(3) If a remittor does not withhold on a royalty interest owner who in the previous year met the exemption requirement in 15-30-264, 15-30-2539, MCA, but exceeded that requirement in the current year, the department will not penalize the remittor for the lack of withholding in that current year.
AUTH: 15-30-272, 15-30-2547, MCA
IMP: 15-30-266, 15-30-268, 15-30-269, 15-30-2541, 15-30-2543, 15-30-2544, MCA
REASONABLE NECESSITY: The department is proposing to amend ARM 42.17.605 to make general grammatical changes so that the rules read more clearly for the taxpayers.
In addition, the department is proposing to amend the rule in order to clarify that royalty payors that are not required to withhold still have a filing obligation to submit the RW-3 itself, and not a comparable form.
The amendment to the internal statutory references and the authority and implementing cites is necessary to reflect the changes made by the 2009 Legislature in House Bill 24 (Ch. 147, L. 2009), which recodified Title 15, chapter 30, Montana Code Annotated.
4. The department proposes to repeal the following rules:
42.17.136 AFFIDAVIT - FORM AND CONTENT which can be found on page 42-1724 of the Administrative Rules of Montana.
AUTH: 15-30-305, MCA
IMP: 15-30-208, MCA
REASONABLE NECESSITY: The department is proposing to repeal 42.17.136 because the Accounts Receivable and Collections Bureau does not currently use the provisions outlined in this rule and does not intend to use them in the future.
42.17.137 AFFIDAVIT - TIME PERIOD FOR EXECUTION which can be found on page 42-1724 of the Administrative Rules of Montana.
AUTH: 15-30-305, MCA
IMP: 15-30-208, 39-71-2503, MCA
REASONABLE NECESSITY: The department is proposing to repeal 42.17.137 because the department's Accounts Receivable and Collections Bureau does not currently use the provisions outlined and they do not anticipate using the provisions in the rule in the future.
42.17.138 RECORD OF AFFIDAVIT - NOTICE which can be found on page 42-1724 of the Administrative Rules of Montana.
AUTH: 15-30-305, MCA
IMP: 15-30-208, 39-71-2503, MCA
REASONABLE NECESSITY: The department is proposing to repeal ARM 42.17.138 because the department's Accounts Receivable and Collections Bureau does not currently use the provisions outlined and they do not anticipate using the provisions in the rule in the future.
5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-3696; or e-mail [email protected] and must be received no later than December 4, 2009.
6. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.
7. An electronic copy of this Notice of Public Hearing is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
8. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.
9. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor for House Bill 24, Representative Penny Morgan, was contacted on October 14, by electronic mail.
/s/ Cleo Anderson /s/ Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State October 19, 2009
