If you are an enrolled member of a tribe who lives on the reservation governed by your tribe, you can subtract the following income that can be sourced to the reservation governed by your tribe:
If you did not reside on the reservation governed by your tribe for the entire year, you can subtract only those wages or other income that your earned while you lived and worked on your own reservation. See ARM 42.15.220 for more information on tax exempt tribal income.
If you reside outside the boundaries of the reservation governed by your tribe, or if you live on another reservation that is not governed by your tribe, there is no exemption for income you earned.
If you have a filing requirement and have income that is either nonexempt or only partially exempt, you must file a Montana individual income tax return (Form 2). Income that is exempt is reported on the Enrolled Tribal Member Exempt Income Certification/Return (Form ETM) with your Form 2 and subtracted from Montana taxable income on line 8 of the Subtractions Schedule (Form 2, page 4).
Native Americans with a filing requirement that have income that is fully exempt do not need to complete a Form 2, but they must complete the Form ETM on our TransAction Portal (TAP).
Be sure to keep the documents that show your tribal source income and physical residence. We may request this information if you are selected for a state tax examination.
If you receive payments or debt relief from a settlement, you may owe Montana income tax. Consult a tax professional to help determine if your payment or relief is tax exempt.
We have provided a few general guidelines, as well as information on specific settlements, below.
Your individual, per capita share of the Tribal Trust Accounting and Management Settlement is not included in your federal gross income, but the interest is.
Montana's income tax laws closely follow the federal laws. Generally, any amount excluded from your federal adjusted gross income is also excluded from your Montana adjusted gross income.
If a portion of your payment is federally taxable, it may be exempt or taxable in Montana based on several factors.
We suggest consulting a tax professional to help determine if the federally taxable portion is taxable in Montana for your situation.
Income from the Keepseagle v Vilsack settlement, or any funds sent to the federal government on your behalf, is taxable income.
If you received debt relief instead of a payment, you may owe taxes on the amount forgiven. Because your situation is unique to you and there may be several factors to consider, we suggest consulting a tax professional to help determine if you qualify for an exemption.
With the Keepseagle settlement, payments may be considered lost farming income from alleged discrimination.
If you file a federal Schedule F and report the Keepseagle payment as other farming income, we'll assume the farm is the same as the farm where the alleged discrimination occurred. This means the farming income reported on the Schedule F is exempt from income tax if you are an enrolled tribal member living on your reservation and the farming income comes from reservation resources or from allotted or restricted trust lands on your reservation.
Your farming income is not exempt if you live outside the boundaries of your reservation, even if you live on a different reservation.
If you report Keepseagle settlement payments as other income on your federal Form 1040, we'll assume the individual is generating income on the original farm. You'll need to provide additional information demonstrating the location of the farming activity when the alleged discrimination occurred.
You should consult a tax professional to analyze factors related to the location of the farm and submit this information if you believe the income is exempt.
If you determine your income is taxable, you should consult your tax preparer or use the Montana Individual Estimated Income Tax Worksheet (found in Publication 1: Prepaying Income Tax) to see if you need to make an estimated payment or adjust the estimated payments you are currently paying.
Even if you don't need to increase your estimated payment, you may want to make a payment now to account for the additional tax you will owe when you file your Montana individual income tax return.