Stock Videos
January 2020 Department of Revenue Stock Video
B-roll and stock video of operations at the Montana Department of Revenue in January, 2020
Updates
Federal Tax Reform – 965 Income, GILTI, and FDII
Montana Corporate Income Tax Treatment of International Tax Provisions under Tax Cuts and Jobs Act of 2017
The Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017. The TCJA, in part, makes significant changes to the taxation of foreign-sourced income earned by U.S. corporations and their foreign subsidiaries. The following provides guidance on the treatment for Montana Corporate Income Tax purposes of Internal Revenue Code (IRC) §§ 965 (deemed repatriation of foreign dividends); 951A and 250 (global intangible low-taxed income [GILTI] and the GILTI deduction); and 250 (Foreign-Derived Intangible Income [FDII]). This guidance applies to the 2017 and subsequent tax years.
IRC §965 – Deemed Repatriation of Foreign Income
The TCJA requires a mandatory “deemed repatriation of deferred foreign earnings” as Subpart F income. IRC §965 requires certain foreign corporations to add to Subpart F income the greater of their accumulated post-1986 deferred foreign earnings and profits, and deficits of certain foreign corporations (IRC §965 Inclusion Income). These taxpayers are then able to deduct a portion of the IRC §965 Inclusion Income (IRC §965 Deduction). While the deemed repatriation is required to be reported in the 2017 tax year, a taxpayer may make a federal election to pay the liability over eight years. Corporations that have IRC §965 income must include an IRC §965 Transition Tax Statement (Transition Tax Statement) with their federal return.
All taxpayers must treat IRC §965 Inclusion Income as Subpart F income for Montana purposes and attach federal Form 965 (Transition Tax Statement) to their Montana return. Any §965 income recognized as IRC §78 gross up for federal purposes will also be recognized as §78 gross up income for Montana purposes.
Tax Year 2017
To properly reflect the §965 inclusion income on the Montana return for taxpayers who file on a water’s edge basis, add the total amount of income reported on line 1 of federal Form 965 on Montana Form CIT page 3, line 2i “other additions.” §15-31-325(4), MCA, allows a corresponding deduction as a foreign dividend deduction on Montana Form CIT, page 3, line 3g “other reductions” totaling 80% of the §965 inclusion income added back for Montana purposes.
However, if any of the §965 inclusion income included in “other additions” is received from subsidiaries included in the Montana water’s edge filing, such as those incorporated in tax haven countries listed in §15-31-322, MCA, a 100% deduction of the total amount of inclusion income related to these entities is allowed as an intercompany dividend elimination rather than 80%. This amount should be reported on page 3, line 3g “other reductions.”
Furthermore, if any of the §965 inclusion income included in “other additions” is received by 80/20 companies, a 100% deduction of the total amount of inclusion income related to these entities is allowed rather than 80% pursuant to §15-31-322, MCA. This amount should be reported on page 3, line 3g “other reductions.”
To properly reflect §78 gross up income related to the §965 income on the Montana return for taxpayers who file on a water’s edge basis, add the total amount of income reported on line 4a of the federal Form 965 on Montana Form CIT page 3, line 2i “other additions.” Pursuant to §15-31-325(5), MCA, a 100% corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included in “other additions.”
Tax Year 2018
The §965 inclusion income is already properly reflected in federal taxable income, line 28 of federal Form 1120. The §965 inclusion income received by members of the Montana water’s edge group will not require a state addback. Pursuant to §15-31-325(4), MCA, a corresponding deduction is allowed as a foreign dividend deduction on Montana Form CIT, page 3, line 3g “other reductions” totaling 80% of the §965 inclusion income received by members of the Montana water’s edge group (figured without regard to any §78 gross up income). This deduction is allowed rather than the amount shown on federal Form 1120, Schedule C, line 15, column c. §78 gross up that is included in the calculation of §965 inclusion income must be removed from the §965 deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
However, if any of the §965 inclusion income is received from subsidiaries included in the Montana water’s edge filing, such as those incorporated in tax haven countries listed in §15-31-322, MCA, a 100% deduction of the total amount of inclusion income related to these entities is allowed as an intercompany dividend elimination rather than 80%. This amount should be reported on page 3, line 3g “other reductions.”
Income of 80/20 companies is excluded from the calculation of Montana taxable income on Montana Form CIT, page 3, line 3e; consequently, §965 inclusion income, including any §78 gross up, received by an 80/20 company is already properly excluded so no deduction is allowed.
§78 gross up income related to the §965 income is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income received by members of the Montana water’s edge group will not require a state addback. Pursuant to §15-31-325(5), MCA, Montana water’s edge filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to §965 income is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana water’s edge group.
Tax Year 2017
To properly reflect the §965 inclusion income on the Montana return for taxpayers who file on a worldwide basis, add the total amount of income reported on line 1 of the federal Form 965 on Montana Form CIT page 3, line 2i “other additions.” A corresponding deduction is allowed as an intercompany dividend elimination on Montana Form CIT, page 3, line 3g “other reductions” totaling 100% of the §965 inclusion income added back for Montana purposes.
If any of the §965 inclusion income is received from subsidiaries that are not included in the Montana worldwide filing, see instructions for Limited Combination filers below.
To properly reflect §78 gross up income related to the §965 income on the Montana return for taxpayers who file on a worldwide basis, add the total amount of income reported on line 4a of the federal Form 965 on Montana Form CIT page 3, line 2i “other additions.” A 100% corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included in “other additions.”
Tax Year 2018
The §965 inclusion income is already properly reflected in federal taxable income, line 28 of federal Form 1120. The §965 inclusion income received by members of the Montana worldwide group will not require a state addback. A corresponding deduction is allowed as an intercompany dividend elimination on Montana Form CIT, page 3, line 3g “other reductions” totaling 100% of the §965 inclusion income received from members of the Montana worldwide group (figured without regard to any §78 gross up income). This deduction is allowed rather than the amount shown on federal Form 1120, Schedule C, line 15, column c. §78 gross up that is included in the calculation of §965 inclusion income must be removed from the §965 deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
§78 gross up income related to the §965 income is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income received by members of the Montana worldwide group will not require a state addback. A deduction is allowed to Montana taxpayers filing on a worldwide basis for 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to §965 income is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana worldwide group.
If any of the §965 inclusion income is received from subsidiaries that are not included in the Montana worldwide filing, see instructions for Limited Combination filers below.
Tax Year 2017
To properly reflect the §965 inclusion income on the Montana return for taxpayers who file on a separate company, domestic or limited combination basis, add the total amount of income reported on line 1 of the federal Form 965 that was received by the entity or group of entities included in the Montana return. This amount should be reported on Montana Form CIT page 3, line 2i “other additions.” A corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling only those amounts reported on line 3 of the federal Form 965 that are associated with the entity or group of entities included in the Montana return.
However, if any of the §965 inclusion income is received from subsidiaries that are included in the Montana limited combination filing, a 100% deduction of the total amount of inclusion income related to these entities is allowed as an intercompany dividend elimination rather than the amount reported on federal Form 965.
To properly reflect §78 gross up income related to the §965 income on the Montana return for taxpayers who file on a separate company, domestic or limited combination basis, add the total amount of income reported on line 4a of the federal Form 965 that is received by the entity or group of entities included in the Montana return, on Montana Form CIT page 3, line 2i “other additions.” A 100% corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included in “other additions.”
Tax year 2018
The §965 inclusion income is already properly reflected in federal taxable income, line 28 of federal Form 1120. The §965 inclusion income will not require a state addback. A corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling only those amounts reported on federal Form 1120, Schedule C, line 15, column (c) that are received from the entity or group of entities included in the Montana return (figured without regard to any §78 gross up income). This deduction is allowed rather than the amount shown on federal Form 1120, Schedule C, line 15, column c. §78 gross up that is included in the calculation of §965 inclusion income must be removed from the §965 deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
However, if any of the §965 inclusion income is received from subsidiaries that are included in a Montana limited combination filing, a 100% deduction of the total amount of inclusion income related to these entities is allowed as an intercompany dividend elimination rather than the amount reported on federal Form 1120, Schedule C.
§78 gross up income related to the §965 income is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income will not require a state addback. A deduction is allowed to Montana taxpayers for 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to §965 income is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by the entity or group of entities included in the Montana return.
IRC §951A – Global Intangible Low-Taxed Income (GILTI) and IRC §250 GILTI deduction
Beginning with tax year 2018, the TCJA created this new category of foreign income under IRC §951A. GILTI requires the U.S. owner of a CFC to potentially include a portion of the CFC’s earnings in the U.S. owner’s federal taxable income. As deemed income to the U.S. owner, GILTI is comparable to Subpart F income. The TCJA also created a deduction related to the GILTI under IRC §250 (GILTI deduction).
For Montana Corporate Income Tax purposes, Montana considers GILTI a foreign dividend that is included in the owner’s federal taxable income. All taxpayers must attach federal Form 8992 (U.S. Shareholder Calculation of GILTI) and federal Form 8993 (§250 Deduction for FDII and GILTI) to their Montana return. Any GILTI recognized as IRC §78 gross up for federal purposes will also be recognized as §78 gross up income for Montana purposes.
Tax Year 2018
The GILTI is already properly reflected in federal taxable income, line 28 of federal Form 1120. No state addback is required. Pursuant to §15-31-325(4), MCA, a corresponding deduction is allowed as a foreign dividend deduction. The allowable deduction totals 80% of GILTI received by members of the Montana water’s edge group, figured without regard to any §78 gross up income included in the federal calculation. The deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions.” This deduction is allowed rather than the amount shown on federal Form 1120, Form 8993, Part IV, line 9. §78 gross up that is included in the calculation of GILTI must be removed from the GILTI deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
If any of the GILTI is received from subsidiaries included in the Montana water’s edge filing, such as those incorporated in tax haven countries listed in §15-31-322, MCA, a 100% deduction of the total amount of GILTI (figured without regard to any §78 gross up income included in the federal calculation) related to these entities is allowed as an intercompany dividend elimination rather than 80%. This amount should be reported on page 3, line 3g “other reductions.”
§78 gross up income related to GILTI is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income received by members of the Montana water’s edge group will not require a state addback. Pursuant to §15-31-325(5), MCA, Montana water’s edge filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to GILTI is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana water’s edge group.
Income of 80/20 companies is excluded from the calculation of Montana taxable income on Montana Form CIT, page 3, line 3e; consequently, any of the GILTI received, including §78 gross up associated with the GILTI, by an 80/20 company is already properly excluded so no deduction is allowed.
Tax Year 2018
The GILTI is already properly reflected in federal taxable income, line 28 of federal Form 1120. No state addback is required. A corresponding deduction is allowed as an intercompany dividend elimination. The allowable deduction totals 100% of GILTI received from members of the Montana worldwide group, figured without regard to any §78 gross up income included in the federal calculation. The deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions.” This deduction is allowed rather than the amount shown on federal Form 1120, Form 8993, Part IV, line 9. §78 gross up that is included in the calculation of GILTI must be removed from the GILTI deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
§78 gross up income related to GILTI is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income received by members of the Montana worldwide group will not require a state addback. Montana worldwide filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to GILTI is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana worldwide group.
If any of the GILTI is received from subsidiaries that are not included in the Montana worldwide filing, see instructions for Limited Combination filers below.
Tax Year 2018
The GILTI is already properly reflected in federal taxable income, line 28 of federal Form 1120. No state addback is required. A corresponding deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling only those amounts reported on federal Form 1120, Form 8993, Part IV, line 9 (figured without regard to any §78 gross up income included in the federal calculation) associated with the entity or group of entities included in the Montana return. §78 gross up that is included in the calculation of GILTI must be removed from the GILTI deduction allowable for Montana purposes, as the gross up deduction is calculated elsewhere as described below.
However, if any of the GILTI is received from subsidiaries that are included in the Montana limited combination filing, a 100% deduction of the total amount of GILTI (figured without regard to any §78 gross up income) related to these entities would be allowed as an intercompany dividend elimination rather than the amount reported on federal Form 8993.
Any §78 gross up income related to GILTI received from the entity or group of entities included in the Montana return is already properly reflected in federal taxable income, line 28 of federal Form 1120. This gross up income will not require a state addback. Montana filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to GILTI is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by the entity or group of entities included in the Montana return.
IRC §250 – Deduction for Foreign Derived Intangible Income (FDII)
For tax years beginning after December 31, 2017, the TCJA created this new deduction for corporations under IRC §250. The deduction relates to certain federal taxable income to which a special federal tax rate is intended to apply. FDII is not considered a foreign dividend for Montana Corporate Income Tax purposes. To claim a deduction for FDII, all taxpayers must attach federal Form 8993 (§250 Deduction for FDII and GILTI) to their Montana return.
Tax Year 2018
FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. A deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount reported on federal Form 1120, Form 8993, Part IV, line 8 (figured without regard to any §78 gross up income included in the federal calculation) that represents amounts related to those entities included in the Montana water’s edge group. §78 gross up that is included in the calculation of the §250 FDII deduction must be removed from the calculation for Montana purposes, as the gross up deduction is calculated elsewhere for Montana purposes as described below.
§78 gross up income related to FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. Pursuant to §15-31-325(5), MCA, Montana water’s edge filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to FDII is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana water’s edge group.
If any of the federal FDII deduction is related to entities excluded from the Montana water’s edge group, such as an 80/20 company, the deduction from federal Form 1120, Form 8993, Part IV, line 8 attributable to these entities is not allowed, as the income related to these entities has already been excluded.
Tax Year 2018
FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. A deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount reported on federal Form 1120, Form 8993, Part IV, line 8 (figured without regard to any §78 gross up income included in the federal calculation) that represents amounts related to those entities included in the Montana worldwide group. §78 gross up that is included in the calculation of the §250 FDII deduction must be removed from the calculation for Montana purposes, as the gross up deduction is calculated elsewhere for Montana purposes as described below.
§78 gross up income related to FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. Montana worldwide filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to FDII is included in this allowable deduction. The total Montana gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by members of the Montana worldwide group.
If any of the federal FDII deduction is related to entities excluded from the Montana worldwide filing, see instructions for Limited Combination filers below.
Tax Year 2018
FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. A deduction is allowed on Montana Form CIT, page 3, line 3g “other reductions” totaling only those amounts reported on federal Form 1120, Form 8993, Part IV, line 8 (figured without regard to any §78 gross up income included in the federal calculation) that represents amounts related to the entity or group of entities included in the Montana return. §78 gross up that is included in the calculation of the §250 FDII deduction must be removed from the calculation for Montana purposes, as the gross up deduction is calculated elsewhere for Montana purposes as described below.
§78 gross up income related to FDII is already properly reflected in federal taxable income, line 28 of federal Form 1120. Montana filers are allowed a deduction of 100%, but not more than 100%, of the §78 gross up that has been included in apportionable income. The §78 gross up related to FDII is included in this allowable deduction. The Montana total gross up deduction should be reported on Montana Form CIT, page 3, line 3g “other reductions” totaling the amount included on federal Form 1120, Schedule C, line 18, column (a) that represents amounts received by the entity or group of entities included in the Montana return.
If any of the federal FDII deduction is related to entities excluded from the Montana domestic or limited combination filing, the deduction from federal Form 1120, Form 8993, Part IV, line 8 attributable to these entities is not allowed, as the income related to these entities has already been excluded.
New for Tax Year 2019: Montana Pass-Through Entity Tax Return (Form PTE)
Beginning with Tax Year 2019, Partnerships and S corporations will file their Montana tax return on the new Montana Pass-Through Entity Tax Return (Form PTE).
The Montana S Corporation Information and Composite Tax Return (Form CLT-4S) and the Montana Partnership Information and Composite Tax Return (Form PR-1) have been discontinued.
For all tax years beginning before December 31, 2018, please continue to use the current forms:
- Partnerships
- Partnership Information and Composite Tax Return (Form PR-1)
- S Corporations
- S Corporation Information and Composite Tax Return (Form CLT-4S)
- Disregarded Enities
- Disregarded Entity Information Return (Form DER-1)
Filing Changes for Disregarded Entities
Starting with Tax Year 2019, we will not accept the Montana Disregarded Entity Information Return (Form DER-1) or payments for the following entities:
- Single-Member LLCs (SMLLC) owned by partnerships or S corporations
- SMLLCs owned by C corporations, and
- Qualified subchapter S corporation subsidiaries.
The new filing requirements for these entities are explained below.
New Filing and Payment Requirements
Disregarded Entities Owned by Partnerships or S corporations
Single-member LLCs (SMLLCs) owned by Partnerships or S corporations must report their Montana source income on their owner’s Montana Pass-Through Entity Tax Return (Form PTE), Schedule VII and Schedule DE. They will no longer file the Montana Disregarded Entity Information Return (Form DER-1).
For the purpose of determining the owner of a SMLLC, disregarded entities owned through a series of SMLLCs are considered directly owned by the first owner that is not a disregarded entity.
Qualified subchapter S corporation subsidiaries must be included on their owner’s Form PTE, Schedule VII and Schedule DE. They will no longer file Form DER-1.
Disregarded Entities Owned by C corporations
Disregarded entities owned by C corporations must be reported on their owner’s Form CIT, Schedule M.
They will no longer file Form DER-1.
Disregarded Entities Owned by Nonresident Individuals, Estates or Trusts
Disregarded entities owned by nonresident individuals, estates or trusts are still required to file Form DER-1. Disregarded entities with existing accounts on the department’s TransAction Portal (TAP) can file the form electronically.
Disregarded entities without TAP accounts can contact us at (406) 444-6900 for help with registering an account.
Property Appraisal Notices Coming from Department of Revenue
The Montana Department of Revenue is mailing notices to all owners of residential, commercial, industrial, and agricultural properties, showing their market and taxable values for the 2019-2020 appraisal cycle.
These notices are not tax bills. They include the department’s determination of market value for your property and will be used by your county treasurer to determine your property tax bills.
“It’s important that Montana property owners review this information thoroughly,” said Gene Walborn, Director of the Montana Department of Revenue. “If property owners wait until property tax bills are sent in November, it will be too late for the department to correct and update property characteristics that may impact the value of the property for the 2019 tax year. So please review the notice as soon as possible and contact us if you have questions.”
If property owners disagree with the department’s determination, they may submit a Request for Informal Classification and Appraisal Review (called Form AB-26) within 30 days of the date on their notice. Owners can electronically submit the form, download it, and find more information on our website.
Owners of Older Mobile Homes May See Property Tax Relief
Property tax changes are coming for some owners of older mobile homes, and the Montana Department of Revenue wants residents to know what that means for you starting in 2020.
Senate Bill 204, passed this year by the Montana Legislature and signed into law, creates an exemption starting in property tax year 2020 for mobile homes that are:
- At least 28 years old; and
- Valued at less than $10,000 per their most recent assessment; and
- Not an improvement to real property.
A mobile home could be considered an improvement to real property, and therefore ineligible for the exemption, if it is attached to a permanent foundation and its running gear is removed.
Units that are not permanently attached to a foundation, including many units within mobile home parks or other rented lots, are not considered permanent improvements and may qualify for the exemption. However, permanent structures associated with a mobile home, such as carports, sheds, decks, garages, and porches, will still qualify as real property and would be subject to local property taxes.
Owners of the exempt mobile homes will be notified when they receive their 2020 property classification and appraisal notices in the spring of 2020. Qualified mobile homes will be exempt from personal property taxes starting with the payments due to their county treasurer in May and November 2020.
An owner of multiple mobile homes may only qualify for the exemption for his or her two mobile homes with the lowest assessed values.
Owners of exempted mobile homes still may be subject to their local government’s special assessments and fees such as solid waste and street lighting and maintenance.
Learn more about Mobile and Manufactured Homes.
