Administrative Rules of Montana
Department 42 - REVENUE
Chapter 42.26 - CORPORATE MULTISTATE ACTIVITIES
Subchapter 42.26.2 - Income Allocation and Apportionment
Rule 42.26.263 - SPECIAL COMPUTATIONS RELATED TO RECEIPTS FACTOR
Current through Register Vol. 6, March 22, 2024
(1) The following special criteria are established in respect to the receipts factor of the apportionment formula:
(2) For tax periods beginning before January 1, 2018, where apportionable income from intangible property cannot readily be attributed to any particular income-producing activity of the taxpayer, such income cannot be assigned to the numerator of the receipts factor for any state and shall be excluded from the denominator of the receipts factor. For example, where apportionable income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures, or government securities results from the mere holding of the intangible personal property by the taxpayer, such dividends and interest shall be excluded from the denominator of the receipts factor.
(3) Section 631 of the IRC (gains) which are attributable to internal transactions must be eliminated from the receipts factor. The ultimate sale to outsiders will be included in line 1 sales. IRC section 631(A) (log sales) and section 631(B) (gains) should be included in the factor at the gross sales price used to calculate the gain. IRC section 631(C) (gains) should be included to the extent of gross royalties received prior to the capital gains offset and prior to the netting of long-term capital gains and losses.
(4) Software transactions. A license or sale of prewritten software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights) transferred on a tangible medium is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In these cases, the receipts are in Montana as determined under the rules for the sale of tangible personal property set forth in ARM 42.26.255. In all other cases, the receipts from a license or sale of software are to be assigned to Montana as determined otherwise under [New Rule I, New Rule IV, New Rule V, or New Rule VI] (i.e., depending on the facts, as the development and sale of custom software, as a license of a marketing intangible, as a license of a production intangible, as a license of intangible property where the substance of the transaction resembles a sale of goods or services, or as a sale of intangible property).
(5) Sales of licenses of digital goods or services.
AUTH: 15-1-201, 15-31-313, 15-31-501, MCA; IMP: 15-1-601, 15-31-305, 15-31-310, 15-31-311, 15-31-312, MCA