Montana Revises the Apportionment Formula for Multistate Businesses
Senate Bill 376 revised Montana’s income apportionment formula for multistate businesses. In Montana, the apportionment formula comprises three factors. Each factor represents the fraction of the business’s Montana property, payroll, and receipts over its everywhere property, payroll, and receipts. The factors are then combined and divided by the total number of factors included in the calculation.
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. 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.
Montana is one of a decreasing number of states that use the traditional equally weighted three-factor apportionment formula. The move to a double-weighted sales factor would put Montana in line with the large majority of states that have weighted the sales factor more heavily. Taxpayers, particularly fiscal-year taxpayers, should consider the application of this new law for tax years beginning after June 30, 2021.
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