A partnership or S corporation may file a composite tax return and pay tax for its eligible owners. An owner included in a composite tax return does not need to file a Montana income tax return.
Partners and shareholders may be included on a composite return if:
- They are
- Nonresident individuals, estates, or trusts
- Foreign C corporations
- A pass-through entity
- They do not have any other Montana source income unless it is from another pass-through entity that also filed a composite tax return on their behalf.
- They complete a written power of attorney giving the partnership or S corporation the right to file and act on their behalf
After receiving the power of attorney, the business is responsible for:
- Remitting composite income tax to the Department of Revenue;
- Paying any additional tax, penalty and interest associated with the composite income tax return;
- Representing participants in any appeals, claims for refunds, hearings or court proceedings; and
- Making quarterly estimated payments.
Do not submit the power of attorney with your composite return. It is kept with your records for use in subsequent years.
Montana Composite Income Tax Rates
Each owner is allowed one standard deduction and one exemption to their share of Montana taxable income.
Montana composite tax rates are based on income:
|If your taxable income is more than||but not more than||Then your tax is||Minus|
|$0||$2,900||1% of your taxable income||$0|
|$2,900||$5,200||2% of your taxable income||$29|
|$5,200||$7,900||3% of your taxable income||$81|
|$7,900||$10,600||4% of your taxable income||$160|
|$10,600||$13,600||5% of your taxable income||$266|
|$13,600||$17,600||6% of your taxable income||$402|
|$17,600||6.9% of your taxable income||$560|
A partnership or S corporation must make estimated tax payments if it expects to owe at least $500 in composite income tax.
Estimated Payment Due Dates
Estimated payments are due on the 15th of the month following the end of the calendar quarter:
- First Quarter
- April 15
- Second Quarter
- June 15
- Third Quarter
- September 15
- Fourth Quarter
- January 15
Payments made with an extension do not count as estimated payments and will be subject to uniform penalties and interest.
Estimated payments must total the smaller of
- 90% of the current year’s total composite tax liability, or
- 100% of the previous year’s total composite tax liability
If the partnership or s corporation does not pay estimated payments when due, the composite tax will be subject to uniform penalties and interest.
Credits and Loss
A partnership or S corporation cannot claim credits or losses to offset its composite tax. (15-30-3312, MCA)
If an owner wishes to claim a credit or loss, they must file their own Montana individual income tax return.
If an owner files its own Montana individual income tax return, they cannot be included on a composite return.