Senate Bill 376 Revised Montana’s Income Apportionment Formula

February 7, 2022

Senate Bill 376

SB 376 (2021) revised Montana’s income apportionment formula for multistate businesses. When a business operates in Montana and other states, it must determine the portion of its income that is sourced to Montana. Generally, to do so, the business must apply the apportionment factor to income that is deemed apportionable.

In Montana, the apportionment formula is comprised of three factors. Each factor represents the fraction of the business’s Montana property, payroll, and receipts over its everywhere property, payroll, and receipts, respectively. The factors are then combined and divided by the total number of factors included in the calculation.

Pursuant to SB 376 (2021), for tax years beginning after June 30, 2021, all multistate businesses operating in Montana will use a new calculation that double-weights the receipts factor.

Previously, taxpayers in Montana used an equally-weighted three-factor apportionment formula, comprised of a business’s property, payroll, and receipts in an equal 1:1:1 ratio with three factors.

The new calculation includes a 1:1:2 (property : payroll : receipts x 2) ratio and increases the number of factors in the apportionment calculation to four.

2021 Legislative Roundup

The 67th Montana Legislature made several changes to Montana’s tax laws. To help you sort out the changes, we have created a series explaining the new laws called the 2021 Legislative Roundup.

This article is a part of our 2021 Legislative Roundup series.