The 67th Montana legislature enacted House Bill 53 to facilitate the reporting of federal adjustments to partnership income and the corresponding Montana source income on Montana returns. The new law can be found under Title 15, Chapter 30, Part 34 of the Montana Code Annotated (MCA).
Notable provisions of the bill regarding federal adjustments include:
- Designating a State Partnership Representative
- This representative will usually be the same person who represents the partnership for federal tax purposes. If that designation is impractical, the partnership must reach out to the DOR’s Pass-Through Unit Manager to discuss the reasonableness of appointing another representative. Partnerships may do so by emailing DORPassThrough@mt.gov and including in the subject line, “Federal Adjustment Changes to MT.”
- Filing a Federal Adjustment Report
- Partnerships must file a federal adjustment report with the department within 90 days of receiving a final federal determination. The federal adjustment report must include both a copy of the federal determination and a detailed statement explaining the change in Montana source income. The federal adjustment report must be sent to:
Pass-Through Unit Manager
Business & Income Taxes Division
P.O. Box 7149
Helena, MT 59604-7149 - Amending the Montana Tax Return
- By default, partnerships must amend their Montana tax returns and Montana Schedules K-1 for the reviewed year. This means that the partnership is responsible for the payment of additional composite and withholding taxes when applicable, and for pushing out the adjustment to its direct partners. Direct partners must then file their returns and pay the additional taxes within 180 days of the final federal determination.
- Electing to Pay—Timing and Amount
- A partnership may elect to pay an amount in lieu of its direct, indirect, or both partners’ tax. The adjusted partnership may elect to pay the imputed underpayment of Montana tax when filing the federal adjustment report, or no later than 90 days after receiving the final federal determination. In a tiered structure, any partnership may make such election no later than 90 days after the required time to provide amended MT Schedules K-1 to its partners. (Administrative rules regarding tiered structures and the calculation of the tax for the partnership-pay election are being developed.)
- Extending the Due Date
- The time to file an amended Montana return with the department following a federal adjustment is now extended to 180 days under Chapter 30 and Chapter 31, MCA.
- Additionally, claims for refunds now must be made on or before the latter of:
- The last day of the regular revision period, or
- One year from the date the federal adjustment report was due to the department.