Corporate Income Tax
The corporate income tax is a franchise tax levied on corporations for the privilege of doing business in Montana. The rate of the tax is 6.75% and is calculated on net income earned in Montana. Corporations making a "water's edge" election are required to pay tax at a rate of 7%. Corporations whose only activity in Montana consists of making sales, and do not own or rent real estate or tangible personal property, and whose annual gross volume of sales made in Montana does not exceed $100,000, may elect to pay a tax of 1/2 of 1% of gross sales. There is a minimum tax of $50. However, if a corporation has no property, payroll or sales in Montana during the tax period, it is excluded from the minimum payment. All Montana corporations must file a tax return even if they are excluded from the minimum payment.
Corporations electing to file as a subchapter S Corporation for federal income tax purposes must also file as an "S-Corp" for Montana corporate income tax purposes. Montana S-Corps are required to file form CLT-4S. The income of the S-Corp will then flow through to the individual shareholders' personal tax return and tax would be paid at the individual level. In computing net income, gross income is the same as for federal corporate tax purposes. Allowable deductions include all ordinary and necessary business expenses, certain losses and depreciation of assets, resource depletion allowance, interest paid on business debts, taxes paid (except all taxes measured by net income or profits), certain charitable contributions, certain energy-related investments and net operating losses.
Corporations conducting business that is taxable both within and without the state (multi-state corporations) are required to allocate income to Montana based on an equally-weighted, three-factor apportionment formula, where sales, property and payroll are the three factors. Banks and savings and loan associations are treated for corporate tax purposes similar to other corporations, except that 80% of the tax they pay is returned to the counties in which the bank or savings and loan association is located. This allocation was designed to reimburse local governments for revenue lost when the property tax on bank shares was repealed in 1979.
The corporate income tax return is due on the 15th day of the 5th month following the end of the corporation's taxable year. C-corporations are entitled to an automatic six-month extension to file the return if they so choose. C-corporations which have an annual estimated tax of $5,000 or more are required to make quarterly estimated tax payments on the 15th day of the 4th, 6th, 9th and 12th months of their tax year.
Penalties and Interest
If the tax is not paid on or before the due date of the return, there is assessed a penalty of 1.2% a month; the total penalty may not exceed 12% of the tax due. Interest will accrue on unpaid tax at an annual rate of 12%. (MCA 15- 31-545)
Corporate income tax revenue is distributed 100% to the general fund.