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68th Legislature 2023 HB 447.1
1 HOUSE BILL NO. 447
2 INTRODUCED BY M. THANE, E. MCCLAFFERTY, J. COHENOUR, M. LANG, J. TREBAS, T. WELCH, B.
3 BEARD, C. KEOGH, A. BUCKLEY, S. O'BRIEN
4
5 A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING FOR EXCEPTIONS TO IMPOSITION OF INCOME
6 TAX ON CERTAIN NONRESIDENTS AND WITHHOLDING BY CERTAIN EMPLOYERS FOR NONRESIDENT
7 INCOME IN THE STATE; PROVIDING EXCEPTIONS TO EMPLOYER WITHHOLDING PENALTIES;
8 AMENDING SECTIONS 15-30-2104, 15-30-2502, 15-30-2503, 15-30-2504, AND 15-30-2602, MCA; AND
9 PROVIDING A DELAYED EFFECTIVE DATE AND AN APPLICABILITY DATE.”
10
11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
12
13 NEW SECTION. Section 1. Nonresident compensation -- exclusion. (1) Except as provided in
14 subsection (2), compensation subject to withholding pursuant to Title 15, chapter 30, part 25, without regard to
15 [section 2], that is received by a nonresident for employment duties performed in this state, is excluded from
16 Montana source income if:
17 (a) the nonresident performed employment duties in more than one state during the year;
18 (b) the nonresident is present in this state to perform employment duties for not more than 30 days
19 during the tax year in which the compensation is received, where presence in this state for any part of a day
20 constitutes presence for that day unless the presence is purely for purposes of transit through the state; and
21 (c) the nonresident's state of residence provides a substantially similar exclusion or does not
22 impose an individual income tax.
23 (2) This section does not apply to compensation received by a person:
24 (a) who is a professional athlete or member of a professional athletic team;
25 (b) who is a professional entertainer who performs services in the professional performing arts;
26 (c) of prominence who performs services for compensation on a per-event basis;
27 (d) who receives lottery winnings on a lottery ticket purchased in Montana;
28 (e) who performs construction services to improve real property, predominantly on construction
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1 sites, as a laborer;
2 (f) who is a key employee for the year immediately preceding the current tax year; or
3 (g) who is a qualified production employee.
4 (3) This section does not prevent the operation, renewal, or initiation of any agreement with the
5 taxing authorities of states contiguous to this state pursuant to 15-30-2621.
6 (4) This section creates an exclusion from nonresident compensation under certain de minimis
7 circumstances and has no application to this state's jurisdiction to impose a tax under this chapter or any other
8 tax imposed in this state on a taxpayer;
9 (5) For the purpose of this section, the following definitions apply:
10 (a) "Key employee" means an individual who, for the year immediately preceding the current tax
11 year, had annual compensation from the employer of greater than $500,000.
12 (b) "Qualified production employee" means a person who performs production services of any
13 nature:
14 (i) directly in connection with a qualified production activity, as that term is defined under 15-31-
15 1003; and
16 (ii) for compensation, provided the compensation paid to the person qualifies as compensation
17 under 15-31-1003.
18
19 NEW SECTION. Section 2. Withholding from compensation -- exception. (1) No amount is
20 required to be deducted or retained from compensation paid to a nonresident for employment duties performed
21 in this state if the compensation is excluded from Montana source income pursuant to [section 1], without
22 regard to [section 1(1)(a)]. The number of days a nonresident employee is present in this state for purposes of
23 [section 1(1)(b)] includes all days the nonresident employee is present and performing employment duties in
24 this state on behalf of the employer or any subsidiary, division, agent, or contractor of the employer.
25 (2) An employer that has erroneously applied the exception provided by this section solely as a
26 result of miscalculating the number of days a nonresident employee is present in this state to perform
27 employment duties is not subject to penalties imposed under 15-30-2503 and 15-30-2509 if:
28 (a) the employer relied on a regularly maintained time and attendance system that:
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1 (i) requires the employee to record, on a contemporaneous basis, the employee's work location
2 each day the employee is present in a state other than:
3 (A) the state of residence; or
4 (B) where services are considered performed for purposes of unemployment insurance benefits, as
5 provided in Title 39, chapter 51; and
6 (ii) is used by the employer to allocate the employee's wages between all taxing jurisdictions
7 where the employee performs duties;
8 (b) the employer does not maintain a time and attendance system described in subsection (2)(a)
9 and relied on employee travel records that the employer requires the employee to maintain and record on a
10 regular and contemporaneous basis; or
11 (c) the employer does not maintain a time and attendance system described in subsection (2)(a),
12 or require the maintenance of employee records described in subsection (2)(b), and relied on travel expense
13 reimbursement records that the employer requires the employee to submit on a regular and contemporaneous
14 basis.
15 (3) This section establishes an exception to withholding and deduction requirements and has no
16 application to the imposition of this state's jurisdiction to impose a tax under this chapter or any other tax on any
17 taxpayer.
18
19 Section 3. Section 15-30-2104, MCA, is amended to read:
20 "15-30-2104. (Temporary) Tax on nonresident. (1) (a) A tax is imposed upon each nonresident
21 equal to the tax computed under 15-30-2103 as if the nonresident were a resident during the entire tax year,
22 multiplied by the ratio of Montana source income to total income from all sources.
23 (b) This subsection (1) does not permit any items of income, gain, loss, deduction, expense, or
24 credit to be counted more than once in determining the amount of Montana source income, and the department
25 may adopt rules that are reasonably necessary to prevent duplication or to provide for allocation of particular
26 items of income, gain, loss, deduction, expense, or credit.
27 (2) Pursuant to the provisions of Article III, section 2, of the Multistate Tax Compact, each
28 nonresident taxpayer required to file a return and whose only activity in Montana consists of making sales and
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68th Legislature 2023 HB 447.1
1 who does not own or rent real estate or tangible personal property within Montana and whose annual gross
2 volume of sales made in Montana during the taxable year does not exceed $100,000 may elect to pay an
3 income tax of 1/2 of 1% of the dollar volume of gross sales made in Montana during the taxable year. The tax is
4 in lieu of the tax imposed under 15-30-2103 and subsection (1)(a) of this section. The gross volume of sales
5 made in Montana during the tax year must be determined according to the provisions of Article IV, sections 16
6 and 17, of the Multistate Tax Compact.
7 15-30-2104. (Effective January 1, 2024) Tax on nonresident. (1) (a) A Except as provided in
8 [section 1], a tax is imposed upon each nonresident individual, estate, or trust equal to the tax computed under
9 15-30-2103 as if the nonresident individual, estate, or trust were a resident during the entire tax year, multiplied
10 by the ratio of Montana source income to total income from all sources.
11 (b) This subsection (1) does not permit any items of income, gain, loss, deduction, expense, or
12 credit to be counted more than once in determining the amount of Montana source income, and the department
13 may adopt rules that are reasonably necessary to prevent duplication or to provide for allocation of particular
14 items of income, gain, loss, deduction, expense, or credit.
15 (2) Pursuant to the provisions of Article III, section 2, of the Multistate Tax Compact, each
16 nonresident taxpayer required to file a return and whose only activity in Montana consists of making sales and
17 who does not own or rent real estate or tangible personal property within Montana and whose annual gross
18 volume of sales made in Montana during the taxable year does not exceed $100,000 may elect to pay an
19 income tax of 1/2 of 1% of the dollar volume of gross sales made in Montana during the taxable year. The tax is
20 in lieu of the tax imposed under 15-30-2103 and subsection (1)(a) of this section. The gross volume of sales
21 made in Montana during the tax year must be determined according to the provisions of Article IV, sections 16
22 and 17, of the Multistate Tax Compact."
23
24 Section 4. Section 15-30-2502, MCA, is amended to read:
25 "15-30-2502. Withholding of tax from wages. (1) Each Except as provided in [section 2], each
26 employer making payment of wages shall withhold from wages a tax determined in accordance with the
27 withholding tax tables prepared and issued by the department.
28 (2) An employer who maintains two or more separate establishments within this state is
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1 considered to be a single employer for the purposes of this part.
2 (3) A disregarded entity and its owner are considered to be a single employer for the purposes of
3 this part."
4
5 Section 5. Section 15-30-2503, MCA, is amended to read:
6 "15-30-2503. Employer liable for withholding taxes and statements. (1) Each Except as provided
7 in [section 2], each employer is liable for the payments required by 15-30-2504, the amounts required to be
8 deducted and withheld under this part, and the annual statements required by 15-30-2506 and 15-30-2507. The
9 payments required by 15-30-2504 and the amounts required to be deducted and withheld, plus interest due, are
10 a tax. With respect to the tax, the employer is the taxpayer.
11 (2) The officer of a corporation whose responsibility it is to collect, truthfully account for, and pay to
12 the state the amounts withheld from the corporation's employees and who fails to pay the withholdings is liable
13 to the state for the amounts withheld and the penalty and interest due on the amounts.
14 (3) (a) Each officer of the corporation is individually liable along with the corporation for filing
15 statements to the extent that the officer has access to the requisite records and for unpaid taxes, penalties, and
16 interest upon a determination that the officer:
17 (i) possessed the responsibility to file statements and pay taxes on behalf of the corporation; and
18 (ii) possessed the responsibility on behalf of the corporation for directing the filing of tax
19 statements or the payment of other corporate obligations and exercised that responsibility, resulting in the
20 corporation's failure to file statements required by this part or pay taxes due as required by this part.
21 (b) In determining which corporate officer is liable, the department is not limited to considering the
22 elements set forth in subsection (3)(a) to establish individual liability and may consider any other available
23 information.
24 (4) In the case of a corporate bankruptcy, the liability of the individual remains unaffected by the
25 discharge of penalty and interest against the corporation. The individual remains liable for any statements and
26 the amount of taxes, penalties, and interest unpaid by the corporation.
27 (5) For the purpose of determining liability for the filing of statements and the remittance of taxes,
28 penalties, and interest owed under this part:
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1 (a) each partner of a partnership is jointly and severally liable, along with the partnership, for any
2 statements, taxes, penalties, and interest due while a partner;
3 (b) each member of a limited liability company that is treated as a partnership or as a corporation
4 for income tax purposes is jointly and severally liable, along with the limited liability company, for any
5 statements, taxes, penalties, and interest due while a member;
6 (c) the member of a single-member limited liability company that is disregarded for income tax
7 purposes is jointly and severally liable, along with the limited liability company, for any statements, taxes,
8 penalties, and interest due while a member; and
9 (d) each manager of a manager-managed limited liability company is jointly and severally liable,
10 along with the limited liability company, for any statements, taxes, penalties, and interest due while a manager.
11 (6) If the employer fails to deduct and withhold the amounts specified in 15-30-2502 and the tax
12 against which the deducted and withheld amounts would have been credited is paid, the amounts required to
13 be deducted and withheld may not be collected from the employer."
14
15 Section 6. Section 15-30-2504, MCA, is amended to read:
16 "15-30-2504. Schedules for remitting income withholding taxes -- records. (1) Subject to the due
17 date provision in 15-30-2604(1)(b) and the nonresident exclusion in [section 2], an employer shall remit the
18 taxes withheld from employee wages as follows:
19 (a) An employer whose total liability for state income tax withholding during the preceding lookback
20 period was $12,000 or more shall remit on an "accelerated schedule", which is the same as the employer's
21 federal due dates for federal tax deposits.
22 (b) An employer whose total liability for state income tax withholding during the preceding lookback
23 period was less than $12,000 but more than $1,199 shall remit on a "monthly schedule" for which the
24 remittance due date is on or before the 15th day of the month following the payment of wages.
25 (c) An employer whose total liability for state income tax withholding during the preceding lookback
26 period was less than $1,200 shall remit on an "annual schedule" for which the remittance due date is on or
27 before January 31 of the year following payment of wages.
28 (d) An employer who has no withholding to remit for a remittance period shall, on or before the due
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1 date of the applicable remittance schedule, submit a payment coupon showing that a zero amount is being
2 remitted.
3 (2) An employer who has not complied with the requirements of this section shall, upon written
4 notice from the department, remit on the monthly schedule described in subsection (1)(b).
5 (3) On or before November 1 of each year, the department shall notify the employers subject to the
6 provisions of this section of the employers' remittance schedules for the following calendar year based upon the
7 department's review of the preceding lookback period.
8 (4) A new employer or an employer with no filing history is subject to the monthly remittance
9 schedule in subsection (1)(b) until the department is able to determine the employer's proper remittance
10 schedule by a review of the employer's first complete lookback period.
11 (5) An employer may elect to remit payments on a more frequent basis than is required by
12 subsection (1).
13 (6) An employer may use alternative remittance methods in conjunction with the department's
14 electronic remittance program in accordance with department rules.
15 (7) If the department has reason to believe that collection of the amount of any tax withheld is in
16 jeopardy, it may proceed as provided for under 15-1-703.
17 (8) Each employer shall keep accurate payroll records containing the information that the
18 department may prescribe by rule. Those records must be