Montana Department of Revenue

COVID-19 Update on Military Income

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COVID-19 Update on Military Income

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Currently, at the national level, the order in effect to activate service members to provide COVID-19 related assistance is the President’s Executive Order of March 27, 2020.

Governor Bullock has also implemented the activation of the Montana National Guard for state purposes.

This impacts the state taxation of the related military income as follows:

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National Guard

Montana National Guard salaries continue to be subject to Montana income tax.

Montana law provides that salaries received by National Guard servicemembers are exempt from Montana income tax only if received while serving under an order issued pursuant to United States Code Title 10, or for service in a homeland defense activity as defined in 32 U.S.C. 901 or in a contingency operation as defined in 10 U.S.C. 101.

Orders received by the Montana National Guard servicemembers to provide COVID-19 related support in Montana were issued by Governor Bullock. These orders were not issued as part of a homeland defense activity or contingency operation. As such, the salaries received while serving under these orders are not exempt from Montana income tax.

We recognize that the response to COVID-19 is ongoing. Therefore, we are committed to monitor the National Guard’s response to this emergency, as well as the corresponding federal and state orders issued relative to their service, to ensure fairness in our decisions regarding their wages.

Reserve Component of the Armed Forces

The Executive Order of March 27, 2020, was issued pursuant to United States Code, Title 10 by the President of the United States and specifically addressed members of the Ready Reserve. As such, salaries received by Reservists who were ordered to service as part of this Executive Order are exempt from Montana income tax.

COVID-19 Department of Revenue Property Assessment Updates

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The Property Assessment Division (PAD) staff, for the most part, is still working remotely. We do have a limited number of people working in offices where the space allows for social distancing and other COVID-19 safety protocols can be met. We have not started to open our offices up to the public yet; we will begin to develop plans to do so this week. We will coordinate with local government officials as we move forward in these planning activities.

Beginning this week, we are going to allow appraisers to be more active in the field, picking up new construction and updating current property data. They have been directed to follow current CDC guidance, How to Protect Yourself & Others – Coronavirus Disease 2019 (COVID-19). This includes proper social distancing and the use of protective face coverings. We will monitor and adjust this plan accordingly.

Personal Property assessment notices have been sent to print and mail, dated May 8, 2020.  Personal Property downloads will be available for all counties May 16-17. PAD will be doing final review of Real Property assessment notices starting in the last week of May, the notices will be sent to print as reviews are completed. Real Property assessment notices will be dated June 19, 2020, downloads will be available June 6-7.

Thank you.

Download a printable version of this letter (PDF, 95 KB)

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Net Operating Loss (NOL) Changes Due to COVID-19

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On March 27, 2020, Congress enacted the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Among other things, the Act addresses net operating losses (NOLs) and other related provisions.

For example:

  • Section 2303 allows a five-year carryback for NOLs arising in the 2018, 2019, and 2020 tax years. Section 2303 also temporarily repeals the 80% of income limitation for tax years beginning before 2021.
  • Section 2304 temporarily repeals the loss limitation for individuals, estates and trusts under section 461(l) of the Internal Revenue Code for tax years beginning before January 1, 2021.
  • Section 2306 added a special rule to section 163(j) of the IRC for tax years 2019 and 2020.
  • Section 2307 made some technical amendments to section 168(e) of the IRC relative to qualified improvement property.

The above-provisions apply when a taxpayer calculates Montana taxable income.  Note, sections 2303 and 2304 don’t apply to C corporations having a Montana filing obligation.

As a result:

  1. Some taxpayers may have to amend their 2018 and 2019 tax returns;
  2. Individuals, estates and trusts with an NOL incurred in tax years 2018 or 2019 may carry their NOL back five years and amend the corresponding returns filed in those years. A waiver of the carryback period will be available on their 2020 Montana income tax return for each impacted tax year.

We recommend that individuals, estates and trusts who amend returns from tax years 2013 through 2019 to calculate or carry back an NOL wait until the department issues guidance on a revised Montana Form NOL covering the period 2018 through 2020.

For Corporations, amended return instructions and Net Operating Loss provisions remain unchanged. See the Corporate Income Tax Return Instructions for more information.

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Frequently Asked Questions about COVID-19 Individual Income, Estate, and Trust Payments

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What payments are postponed from April 15 to July 15?
The payment deadlines that are extended are the taxes due with the 2019 income tax return for individuals, estates and trusts.
The payment of the first installment of 2020 estimated tax for individuals, estates and trusts that was due April 15, 2020 is also postponed to July 15, 2020. However, the second installment of estimated tax is still due on June 15.
The due dates to pay taxes for other tax types are not postponed.
Will the calculation of the 2019 interest on underpayment of estimated tax change?
No, the date used to calculate underpayment of estimated taxes does not change.
If you did not pay all the estimated taxes owed for the 2019 quarterly installments, no additional underpayment of estimated taxes will be assessed based on the postponement of the payment due date.
Is the extended due date also postponed?
No, the extended due date is not postponed. The automatic extension for individuals, estates and trusts is still October 15, 2020.
If the change of due date for the federal return has an effect in what is taxable or deductible on my federal return, does Montana income tax conform to the federal treatment?
In general, if the postponement of the federal due date results in an amount being includable or deductible from gross income—for example the deductibility of contributions to an IRA before July 15—then the same amount is includable or deductible for Montana tax purposes.
See the IRS Website for more information.
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Note to Montanans: COVID-19 Federal Stimulus Payments to Individuals are Tax-Free

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The Montana Department of Revenue has determined that  payments from the federal government related to the COVID-19 outbreak are exempt from state income tax. 

Many Montanans are expected to receive payments from the CARES Act, passed in late March. 

If you have questions please go to the IRS web change at IRS.gov. 

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