Administrative Rules of Montana
Department 42 - REVENUE
Chapter 42.26 - CORPORATE MULTISTATE ACTIVITIES
Subchapter 42.26.9 - Special Rules for Construction Contracts
Rule 42.26.903 - APPORTIONMENT OF APPORTIONABLE INCOME
Current through Register Vol. 6, March 22, 2024
(1) Apportionable income, in general, is apportioned to this state by a three-factor formula consisting of property, payroll, and receipts regardless of the method of accounting for long-term contracts elected by the taxpayer. The total of the property, payroll, and receipts percentages is divided by three to determine the apportionment percentage. The apportionment percentage is then applied to apportionable income to determine the amount apportioned to this state.
(2) Under the percentage of completion method of accounting for long-term contracts, the amount to be included each year as apportionable income from each contract is the amount by which the gross contract price that corresponds to the percentage of the entire contract that has been completed during the income years exceeds all expenditures made during the income year in connection with the contract. In so doing, the account must be made of the material and supplies on hand at the beginning and end of the income year for use in each such contract.
(3) Under the completed contract method of accounting, apportionable income derived from long-term contracts is reported for the income year in which the contract is finally completed and accepted. Therefore, a special computation is required to compute the amount of apportionable income attributable to this state from each completed contract. Thus, all receipts and expenditures applicable to such contracts, whether complete or incomplete as of the end of the income year, are excluded from apportionable income derived from other sources. For example, short-term contracts, interest, rents, royalties, etc., which are apportioned by the regular three-factor formula of property, payroll, and receipts.
(4) In general the numerator and denominator of the property factor shall be determined as set forth in ARM 42.26.231 through 42.26.237 and 42.26.262. However, the following special rules are also applicable:
(5) In general the numerator and denominator of the payroll factor shall be determined as set forth in ARM 42.26.243 and 42.26.244. However, the following special criteria are also applicable:
(6) In general the numerator and denominator of the receipts factor shall be determined as set forth in ARM 42.26.253 and 42.26.254. However, the following special criteria are also applicable:
(7) The total of the property, payroll, and receipts percentages is divided by three to determine the apportionment percentage. The apportionment percentage is then applied to apportionable income to establish the amount apportioned to this state.
AUTH: 15-31-313, 15-31-501, MCA; IMP: 15-31-301, 15-31-312, MCA