Montana Administrative Code

42.26.306 APPLICABILITY (REPEALED) (REPEALED) Authorizing statute(s): 15-31-501, MCA Implementing statute(s): 15-31-322, MCA History: NEW, 1988 MAR p. 278, Eff. 2/12/88; TRANS, from 42.26.219 and AMD, 2001 MAR p. 2469, Eff. 12/21/01; AMD, 2004 MAR p. 1034, Eff. 4/23/04; REP, 2024…

42.26.307 APPORTIONMENT AND ALLOCATION GENERALLY If the business activity in respect to any trade or business of a taxpayer occurs both within and without this state and if by reason of such business activity the taxpayer is taxable in another state, the portion of the net income…

42.26.308 APPORTIONMENT FORMULA All apportionable income of each trade or business of the taxpayer shall be apportioned to this state by use of the apportionment formula set forth in 15-31-305, MCA. The elements of the apportionment formula are the property factor (see ARM 42.26.…

42.26.309 APPORTIONMENT FACTORS For purposes of 15-31-322, MCA, the assignment of payroll and property is determined under the individual states' laws and regulations that set forth the apportionment formulas used to assign net income subject to taxes on or measured by net income…

42.26.310 DISREGARDING OR MODIFYING A WATER'S-EDGE ELECTION The department shall review for completeness the domestic disclosure spreadsheets that are filed as required by ARM 42.26.304. Completeness means that entries are provided for each item requested. A spreadsheet which is …

42.26.311 CERTAIN CORPORATIONS INCLUDABLE IN A WATER'S-EDGE COMBINED RETURN Domestic international sales corporations (DISCs), as defined in sections 991 through 994 of the IRC, export trade corporations, as described in sections 970 and 971 of the IRC, and foreign sales corporat…

42.26.312 TREATMENT OF DIVIDENDS FOR PURPOSES OF A WATER'S-EDGE COMBINED RETURN Eighty percent of the dividends apportionable under this rule are to be excluded from income subject to apportionment where: dividends received from foreign corporations, taxable for federal purposes,…

42.26.313 REORGANIZATIONS OF WATER'S-EDGE TAXPAYERS A taxpayer who becomes a member of a water's-edge group, subsequent to an election by the group, will be deemed to have elected and will be bound by the election. Procedures provided in ARM 42.26.302 for renewal of a water's-edg…

42.26.401 SPECIAL RULES RELATED TO INSTALLMENT SALES The amount of the gain or loss from the sale of assets used in the regular course of business which is apportioned to this state shall be calculated separately if the taxpayer elects to report the gain on the installment method…

42.26.402 UNREPORTED INCOME ON INSTALLMENT OBLIGATION IN YEAR OF DISSOLUTION Where a taxpayer elects to report income arising from the sale or other disposition of property as provided under this rule and the entire income therefrom has not been reported prior to the year that th…

42.26.501 PUBLIC LAW 86-272 Public Law 86-272, 15 USC 381-384 (hereafter P.L. 86-272) , restricts a state from imposing a net income tax on income derived within its borders from interstate commerce if the only business activity of the company within the state consists of the sol…

42.26.502 NATURE OF PROPERTY BEING SOLD Only the solicitation to sell personal property is afforded immunity under P.L. 86-272; therefore, the leasing, renting, licensing, or other disposition of tangible personal property, or transactions involving intangibles, such as franchise…

42.26.503 SOLICITATION OF ORDERS AND ACTIVITIES ANCILLARY TO SOLICITATION For the in-state activity to be a protected activity under P.L. 86-272, it must be limited solely to solicitation (except for de minimis activities described in ARM 42.26.505, and those activities conducted…

42.26.504 DE MINIMIS ACTIVITIES De minimis activities are those that, when taken together, establish only a trivial connection with Montana. An activity conducted within Montana on a regular or systematic basis or pursuant to a company policy (whether such policy is in writing or…

42.26.505 SPECIFIC LISTING OF UNPROTECTED AND PROTECTED ACTIVITIES The following two listings set forth the in-state activities that are presently treated as "unprotected activities" or "protected activities." The mere inclusion of an activity on the listing of "protected activit…

42.26.506 INDEPENDENT CONTRACTORS P.L. 86-272 provides protection to certain in-state activities if conducted by an independent contractor that would not be afforded if performed by the company or its employees or other representatives. Independent contractors may engage in the f…

42.26.507 APPLICATION OF DESTINATION STATE LAW IN CASE OF CONFLICT When it appears that two or more signatory states have included, or will include, the same receipts from a sale in their respective sales factor numerators, at the written request of the company, these states shal…

42.26.508 APPLICATION OF STATEMENT OF FOREIGN COMMERCE P.L. 86-272 specifically applies, by its terms, to "interstate commerce" and does not directly apply to foreign commerce. Montana will apply the provisions of P.L. 86-272 and the rules found in this sub-chapter to business ac…

42.26.509 REGISTRATION OR QUALIFICATION TO DO BUSINESS A company that registers or otherwise formally qualifies to do business within Montana does not, by that fact alone, lose its protection under P.L. 86-272. Where separate from or ancillary to such registration or qualificatio…

42.26.510 LOSS OF PROTECTION FOR CONDUCTING UNPROTECTED ACTIVITY DURING PART OF THE TAX YEAR The protection afforded under P.L. 86-272 and the provisions of this rule shall be determined on a tax year by tax year basis. Therefore, if at any time during a tax year the company cond…

42.26.511 APPLICATION OF THE JOYCE RULE (REPEALED) Authorizing statute(s): 15-1-201, 15-31-313, MCA Implementing statute(s): 15-1-601, 15-31-301, 15-31-302, 15-31-303, 15-31-304, 15-31-305, 15-31-306, 15-31-307, 15-31-308, 15-31-309, 15-31-310, 15-31-311, 15-31-312, MCA History: …

42.26.601 DEFINITIONS The following definitions apply to this subchapter: "Total revenue ton-miles occurring everywhere" means the figure a railroad includes on Schedule 755, line 110, that is associated with the Class 1 Annual Railroad Report (R-1) which it files with the federa…

42.26.602 GENERAL RULES FOR RAILROADS Where a railroad has income from sources both within and without this state, the amount of apportionable income from sources within this state shall be determined pursuant to Title 15, chapter 31, part 3, MCA, except as modified by ARM 42.26.…

42.26.603 THE PROPERTY FACTOR (REPEALED) Authorizing statute(s): 15-1-201, 15-31-313, 15-31-501, MCA Implementing statute(s): 15-1-601, 15-31-305, 15-31-306, 15-31-307, 15-31-312, MCA History: NEW, 1982 MAR p. 104, Eff. 1/29/82; AMD, 1993 MAR p. 572, Eff. 4/16/93; TRANS, from 42.…

42.26.604 THE DENOMINATOR AND NUMERATOR OF THE PROPERTY FACTOR (REPEALED) Authorizing statute(s): 15-1-201, 15-31-313, 15-31-501, MCA Implementing statute(s): 15-1-601, 15-31-305, 15-31-306, 15-31-307, 15-31-312, MCA History: NEW, 1982 MAR p. 104, Eff. 1/29/82; TRANS, from 42.26.…

42.26.605 THE PAYROLL FACTOR (REPEALED) Authorizing statute(s): 15-1-201, 15-31-313, 15-31-501, MCA Implementing statute(s): 15-1-601, 15-31-305, 15-31-308, 15-31-309, 15-31-312, MCA History: NEW, 1982 MAR p. 104, Eff. 1/29/82; TRANS, from 42.26.268 and AMD, 2001 MAR p. 2469, Eff…

42.26.606 THE RECEIPTS FACTOR The numerator of the receipts factor is the taxpayer's total revenue ton-miles occurring within this state during the year. The denominator of the receipts factor is the taxpayer's total revenue ton-miles occurring everywhere during the year. Th e re…

42.26.701 DEFINITIONS The following definitions apply to this sub-chapter: "Trucking company" means a motor carrier, a motor contract carrier or an express carrier, which primarily transports tangible personal property of others by motor vehicle for compensation. Authorizing stat…

42.26.702 GENERAL RULES FOR TRUCKING COMPANIES Where a trucking company has income from sources both within and without this state, the amount of apportionable income from sources within this state shall be determined pursuant to Title 15, chapter 31, part 3, MCA, except as modif…

42.26.703 THE PROPERTY FACTOR The denominator of the property factor shall be the average value of all the taxpayer's real and tangible personal property owned or rented and used during the income year. The numerator of the property factor shall be the average value of the taxpay…

42.26.704 THE PAYROLL FACTOR The denominator of the payroll factor is the compensation paid everywhere by the taxpayer during the income year for the production of apportionable income as provided in ARM 42.26.243. The numerator of the payroll factor is the total compensation pai…

42.26.705 THE RECEIPTS FACTOR In general, all revenues derived from transactions and activities in the regular course of the taxpayer's trade or business which produces apportionable income shall be included in the denominator of the receipts factor as provided in ARM 42.26.253. …

42.26.706 DE MINIMUS NEXUS STANDARD Notwithstanding any provision contained herein, these rules shall not apply to require the apportionment of income to this state if the trucking company during the course of the income year neither: owns nor rents any real or personal property …

42.26.801 DEFINITIONS The following definitions apply to this sub-chapter: "Aircraft ready for flight" means aircraft owned or acquired through rental or lease (but not interchange) which are in the possession of the taxpayer and are available for service on the taxpayer routes. …

42.26.802 GENERAL STATEMENT Where an airline has income from sources both within and without this state, the amount of apportionable income from sources within this state shall be determined pursuant to Title 15, chapter 31, part 3, MCA, except as modified by this rule. Authorizi…

42.26.803 THE PROPERTY FACTOR Owned aircraft shall be valued at its original cost and rented aircraft shall be valued at eight times the net annual rental rate in accordance with ARM 42.26.235 through 42.26.237. The use of the taxpayer's owned or rented aircraft in an interchange…

42.26.804 THE PAYROLL FACTOR The denominator of the payroll factor is the total compensation paid everywhere by the taxpayer during the income year as provided in ARM 42.26.243. The numerator of the payroll factor is the total amount paid in this state during the income year by t…

42.26.805 THE RECEIPTS FACTOR The transportation revenue derived from transactions and activities in the regular course of the trade or business of the taxpayer and miscellaneous sales of merchandise, etc., are included in the denominator of the receipts factor as provided in ARM…

42.26.806 RECORDS The taxpayer must maintain the records necessary to arrive at departures by type of aircraft as used in these regulations. Such records are to be subject to review by the respective state taxing authorities or their agents. Authorizing statute(s): Sec. 15-1-201,…

42.26.807 AIRLINE REGULATION EXAMPLES Assume the following facts for an airline for the tax year: It has ten 747s ready for flight and in revenue service at an average per unit cost of $40,000,000 for nine of the aircraft. It rents the remaining 747 from another airline for $9,00…

42.26.902 LONG-TERM CONSTRUCTION CONTRACTS When a taxpayer elects to use the percentage of completion method of accounting, or the completed contract method of accounting for long-term contracts (construction contracts covering a period in excess of one year from the date of exec…

42.26.903 APPORTIONMENT OF APPORTIONABLE INCOME Apportionable income, in general, is apportioned to this state by a three-factor formula consisting of property, payroll, and receipts regardless of the method of accounting for long-term contracts elected by the taxpayer. The total…

42.26.904 COMPLETED CONTRACT METHOD - SPECIAL COMPUTATION The completed contract method of accounting requires that the reporting of income (or loss) be deferred until the year the construction project is completed or accepted. Accordingly, a separate computation is made for each…

42.26.905 COMPUTATION FOR YEAR OF WITHDRAWAL, DISSOLUTION, OR CESSATION OF BUSINESS - COMPLETED CONTRACT METHOD Use of the completed contract method of accounting for long-term contracts requires that income derived from sources within this state from incomplete contracts in prog…