67th Legislature SB 181.1
1 SENATE BILL NO. 181
2 INTRODUCED BY G. HERTZ
3 BY REQUEST OF THE GOVERNOR
4
5 A BILL FOR AN ACT ENTITLED: “AN ACT ADOPTING A SINGLE-SALES FACTOR APPORTIONMENT
6 MODEL FOR PURPOSES OF MONTANA’S CORPORATE INCOME TAX; AMENDING SECTIONS 15-1-601,
7 15-30-2104, 15-30-3313, 15-31-122, 15-31-310, 15-31-311, 15-31-312, 15-31-403, AND 15-31-406, MCA;
8 REPEALING SECTIONS 15-31-306, 15-31-307, 15-31-308, AND 15-31-309, MCA; AND PROVIDING AN
9 IMMEDIATE EFFECTIVE DATE AND AN APPLICABILITY DATE.”
10
11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
12
13 Section 1. Section 15-1-601, MCA, is amended to read:
14 "15-1-601. Compact adopted -- text. The Multistate Tax Compact is enacted into law and entered
15 into with all jurisdictions legally joining in the compact, in the form substantially as set forth in this section.
16 Article VIII of the Multistate Tax Compact relating to interstate audits is specifically adopted.
17 Article I. Purposes
18 The purposes of this compact are to:
19 (1) facilitate proper determination of state and local tax liability of multistate taxpayers, including the
20 equitable apportionment of tax bases and settlement of apportionment disputes;
21 (2) promote uniformity or compatibility in significant components of tax systems;
22 (3) facilitate taxpayer convenience and compliance in the filing of tax returns and in other phases of
23 tax administration;
24 (4) avoid duplicative taxation.
25 Article II. Definitions
26 As used in this compact:
27 (1) "state" means a state of the United States, the District of Columbia, the Commonwealth of Puerto
28 Rico, or any territory or possession of the United States;
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1 (2) "subdivision" means any government unit or special district of a state;
2 (3) "taxpayer" means any corporation, partnership, firm, association, governmental unit or agency, or
3 person acting as a business entity in more than one state;
4 (4) "income tax" means a tax imposed on or measured by net income including any tax imposed on or
5 measured by an amount arrived at by deducting expenses from gross income, one or more forms of which
6 expenses are not specifically and directly related to particular transactions;
7 (5) "capital stock tax" means a tax measured in any way by the capital of a corporation considered in
8 its entirety;
9 (6) "gross receipts tax" means a tax, other than a sales tax, which is imposed on or measured by the
10 gross volume of business, in terms of gross receipts or in other terms, and in the determination of which no
11 deduction is allowed which would constitute the tax an income tax;
12 (7) "sales tax" means a tax imposed with respect to the transfer for a consideration of ownership,
13 possession, or custody of tangible personal property or the rendering of services measured by the price of the
14 tangible personal property transferred or services rendered and which is required by state or local law to be
15 separately stated from the sales price by the seller or which is customarily separately stated from the sales
16 price but does not include a tax imposed exclusively on the sale of a specifically identified commodity or article
17 or class of commodities or articles;
18 (8) "use tax" means a nonrecurring tax, other than a sales tax, which:
19 (a) is imposed on or with respect to the exercise or enjoyment of any right or power over tangible
20 personal property incident to the ownership, possession, or custody of that property or the leasing of that
21 property from another including any consumption, keeping, retention, or other use of tangible personal property;
22 and
23 (b) is complementary to a sales tax;
24 (9) "tax" means an income tax, capital stock tax, gross receipts tax, sales tax, use tax, and any other
25 tax which has a multistate impact, except that the provisions of Articles III, IV, and V of this compact shall apply
26 only to the taxes specifically designated therein and the provisions of Article IX of this compact shall apply only
27 in respect to determinations pursuant to Article IV.
28 Article III. Elements Of Income Tax Laws
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1 Taxpayer Option, State and Local Taxes
2 (1) Any taxpayer subject to an income tax whose income is subject to apportionment and allocation
3 for tax purposes pursuant to the laws of a party state or pursuant to the laws of subdivisions in two or more
4 party states may elect to apportion and allocate the taxpayer's income in the manner provided by the laws of
5 such state or by the laws of such states and subdivisions without reference to this compact or may elect to
6 apportion and allocate in accordance with Article IV. This election for any tax year may be made in all party
7 states or subdivisions thereof or in any one or more of the party states or subdivisions thereof without reference
8 to the election made in the others. For the purposes of this subsection, taxes imposed by subdivisions shall be
9 considered separately from state taxes and the apportionment and allocation also may be applied to the entire
10 tax base. In no instance wherein Article IV is employed for all subdivisions of a state may the sum of all
11 apportionments and allocations to subdivisions within a state be greater than the apportionment and allocation
12 that would be assignable to that state if the apportionment or allocation were being made with respect to a state
13 income tax.
14 Taxpayer Option, Short Form
15 (2) Each party state or any subdivision thereof which imposes an income tax shall provide by law that
16 any taxpayer required to file a return whose only activities within the taxing jurisdiction consist of sales and do
17 not include owning or renting real estate or tangible personal property and whose dollar volume of gross sales
18 made during the tax year within the state or subdivision, as the case may be, is not in excess of $100,000 may
19 elect to report and pay any tax due on the basis of a percentage of such volume and shall adopt rates which
20 shall produce a tax which reasonably approximates the tax otherwise due. The multistate tax commission, not
21 more than once in 5 years, may adjust the $100,000 figure in order to reflect such changes as may occur in the
22 real value of the dollar, and such adjusted figure, upon adoption by the commission, shall replace the $100,000
23 figure specifically provided herein. Each party state and subdivision thereof may make the same election
24 available to taxpayers additional to those specified in this subsection.
25 Coverage
26 (3) Nothing in this article relates to the reporting or payment of any tax other than an income tax.
27 Article IV. Division Of Income
28 (1) As used in this article, unless the context otherwise requires:
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1 (a) "apportionable income" means:
2 (i) all income that is apportionable under the Constitution of the United States and is not allocated
3 under the laws of this state, including:
4 (A) income arising from transactions and activity in the regular course of the taxpayer's trade or
5 business, and
6 (B) income arising from tangible and intangible property if the acquisition, management, employment,
7 development, or disposition of the property is or was related to the operation of the taxpayer's trade or
8 business; and
9 (ii) any income that would be allocable to this state under the Constitution of the United States but that
10 is apportioned rather than allocated pursuant to the laws of this state;
11 (b) "commercial domicile" means the principal place from which the trade or business of the taxpayer
12 is directed or managed;
13 (c) "compensation" means wages, salaries, commissions, and any other form of remuneration paid to
14 employees for personal services;
15 (d)(c) "financial organization" means any bank, trust company, savings bank, industrial bank, land
16 bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank,
17 small loan company, sales finance company, investment company, or any type of insurance company;
18 (e)(d) "nonapportionable income" means all income other than apportionable income;
19 (f)(e) "public utility" means any business entity:
20 (i) which owns or operates any plant, equipment, property, franchise, or license for the transmission of
21 communications, transportation of goods or persons, except by pipeline, or the production, transmission, sale,
22 delivery, or furnishing of electricity, water, or steam; and
23 (ii) whose rates of charges for goods or services have been established or approved by a federal,
24 state, or local government or governmental agency;
25 (g)(f) "receipts" means all gross receipts of the taxpayer that are not allocated under paragraphs of
26 this article and that are received from transactions and activity in the regular course of the taxpayer's trade or
27 business, except that receipts of a taxpayer from hedging transactions and from the maturity, redemption, sale,
28 exchange, loan, or other disposition of cash or securities shall be excluded;
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1 (h)(g) "state" means any state of the United States, the District of Columbia, the Commonwealth of
2 Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision
3 thereof;
4 (i)(h) "this state" means the state in which the relevant tax return is filed or, in the case of application
5 of this article to the apportionment and allocation of income for local tax purposes, the subdivision or local
6 taxing district in which the relevant tax return is filed.
7 (2) Any taxpayer having income from business activity which is taxable both within and without this
8 state, other than activity as a financial organization or public utility or the rendering of purely personal services
9 by an individual, shall allocate and apportion the taxpayer's net income as provided in this article. If a taxpayer
10 has income from business activity as a public utility but derives the greater percentage of the taxpayer's income
11 from activities subject to this article, the taxpayer may elect to allocate and apportion the taxpayer's entire net
12 income as provided in this article.
13 (3) For purposes of allocation and apportionment of income under this article, a taxpayer is taxable in
14 another state if:
15 (a) in that state the taxpayer is subject to a net income tax, a franchise tax measured by net income, a
16 franchise tax for the privilege of doing business, or a corporate stock tax; or
17 (b) that state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact,
18 the state does or does not do so.
19 (4) Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or
20 patent or copyright royalties, to the extent that they constitute nonapportionable income, shall be allocated as
21 provided in subsections (5) through (8) of this article.
22 (5) (a) Net rents and royalties from real property located in this state are allocable to this state.
23 (b) Net rents and royalties from tangible personal property are allocable to this state:
24 (i) if and to the extent that the property is utilized in this state; or
25 (ii) in their entirety if the taxpayer's commercial domicile is in this state and the taxpayer is not
26 organized under the laws of or taxable in the state in which the property is utilized.
27 (c) The extent of utilization of tangible personal property in a state is determined by multiplying the
28 rents and royalties by a fraction, the numerator of which is the number of days of physical location of the
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1 property in the state during the rental or royalty period in the taxable year and the denominator of which is the
2 number of days of physical location of the property everywhere during all rental or royalty periods in the taxable
3 year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by
4 the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the
5 rental or royalty payer obtained possession.
6 (6) (a) Capital gains and losses from sales of real property located in this state are allocable to this
7 state.
8 (b) Capital gains and losses from sales of tangible personal property are allocable to this state if:
9 (i) the property had a situs in this state at the time of the sale; or
10 (ii) the taxpayer's commercial domicile is in this state and the taxpayer is not taxable in the state in
11 which the property had a situs.
12 (c) Capital gains and losses from sales of intangible personal property are allocable to this state if the
13 taxpayer's commercial domicile is in this state.
14 (7) Interest and dividends are allocable to this state if the taxpayer's commercial domicile is in this
15 state.
16 (8) (a) Patent and copyright royalties are allocable to this state:
17 (i) if and to the extent that the patent or copyright is utilized by the payer in this state; or
18 (ii) if and to the extent that the patent or copyright is utilized by the payer in a state in which the
19 taxpayer is not taxable and the taxpayer's commercial domicile is in this state.
20 (b) A patent is utilized in a state to the extent that it is employed in production, fabrication,
21 manufacturing, or other processing in the state or to the extent that a patented product is produced in the state.
22 If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures
23 do not reflect states of utilization, the patent is utilized in the state in which the taxpayer's commercial domicile
24 is located.
25 (c) A copyright is utilized in a state to the extent that printing or other publication originates in the
26 state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting
27 procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer's
28 commercial domicile is located.
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1 (9) All apportionable income shall be apportioned to this state by multiplying the income by a fraction,
2 the numerator of which is the property factor plus the payroll factor plus the receipts factor and the denominator
3 of which is 3 the receipts factor.
4 (10) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real
5 and tangible personal property owned or rented and used in this state during the tax period and the
6 denominator of which is the average value of all the taxpayer's real and tangible personal property owned or
7 rented and used during the tax period.
8 (11) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is
9 valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the
10 taxpayer less any annual rental rate received by the taxpayer from subrentals.
11 (12) The average value of property shall be determined by averaging the values at the beginning and
12 ending of the tax period, but the tax administrator may require the averaging of monthly values during