(1) Under the terms of the Income Tax and Withholding Tax Reciprocal Agreement between Montana and North Dakota, and to the extent this agreement is in effect, an employer is not required to withhold Montana state income tax on wages earned by residents of North Dakota subject to the provisions in this rule.

(2) A North Dakota resident performing services in Montana for compensation must annually provide Form MW-4 to their employer before the employer may discontinue withholding on compensation earned in Montana. The certificate is valid from January first of the exemption year or from the date the certificate is provided to the employer whichever comes last, and until December 31 of the exemption year or until the date when the employee establishes residency in a state other than North Dakota whichever comes first.

(3) 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.