Montana — Corporate Income / Franchise Tax

Montana imposes a corporate income tax on corporations engaged in business in the state. A corporation must file a Montana Corporate Income Tax Return (Form CIT) and pay tax annually for the privilege of carrying on business in Montana.

Source: Mont. Code Ann. § 15-31-101(3)

Source: Montana Department of Revenue – Corporate Income Tax

## Corporations Covered

The term "corporation" is broadly defined. It includes associations, joint-stock companies, common-law trusts, business trusts that do business in an organized capacity, and all corporations created or organized under the laws of any state, country, or the United States. The definition also extends to any limited liability company, limited liability partnership, partnership, or other entity that is treated as an association for federal income tax purposes and that is not a disregarded entity.

Source: Mont. Code Ann. § 15-31-101(1)

Financial institutions are expressly covered. Every bank organized under Montana, another state, or federal law, and every savings and loan association organized under Montana or federal law, is subject to the Montana corporate income tax.

Source: Mont. Code Ann. § 15-31-101(4)

## Engaged in Business Standard

The terms "engaged in business" and "doing business" both mean actively engaging in any transaction for the purpose of financial or pecuniary gain or profit. Montana follows an economic presence income tax nexus standard; a corporation is subject to tax if it is engaged in business activity in the state, unless it qualifies for a specific exemption.

Source: Mont. Code Ann. § 15-31-101(2)

## S Corporations and Pass-Through Entities

If a corporation makes a Subchapter S election at the federal level, it must also file as an S Corporation in Montana using the Montana Pass-Through Entity Tax Return (Form PTE), not Form CIT. C corporations doing business in Montana file Form CIT.

Source: Montana Department of Revenue – Corporate Income Tax

## Exemptions

Corporations may qualify for tax-exempt status granted by the Montana Department of Revenue. Entities seeking exemption must submit a Tax-Exempt Status Request Form for Income Taxes. Even tax-exempt entities with unrelated business taxable income subject to Montana taxation must file a corporate income tax return and include a copy of their federal exempt organization business income tax return.

Source: Montana Department of Revenue – Tax-Exempt Entities

Mont. Code Ann. § 15-31-103 also provides specific exemptions, but the details of those exemptions are beyond the scope of this introductory section.

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Montana imposes a flat corporate income tax rate of 6.75% on all net income for the tax period. Corporations making a water's-edge election pay a 7% rate instead. Every corporation subject to the tax must pay a minimum tax of $50.

Source: Mont. Code Ann. § 15-31-121

Montana follows an economic presence standard for corporate income tax nexus with no specific dollar or transaction threshold. Under Mont. Code Ann. § 15-31-101(2), the terms "engaged in business" and "doing business" both mean "actively engaging in any transaction for the purpose of financial or pecuniary gain or profit." Any corporation meeting this definition is subject to Montana corporate income tax unless protected by Public Law 86-272.

Public Law 86-272 shields out-of-state corporations from income tax if their only in-state activity is solicitation of orders for sales of tangible personal property, where orders are approved and filled from outside Montana. This protection does not apply to sales of services, intangible property, or any activity beyond pure solicitation.

Source: Mont. Code Ann. § 15-31-101(2)

Source: Montana Department of Revenue – Nexus

For tax periods beginning after December 31, 2024, Montana uses a single-receipts-factor apportionment formula. The apportionable income is multiplied by a fraction: Montana receipts in the numerator and total receipts everywhere in the denominator. Prior to January 1, 2025, Montana used a three-factor formula with a double-weighted sales factor: the sum of property factor, payroll factor, and twice the receipts factor, divided by four.

Source: Mont. Code Ann. § 15-31-305

Source: Montana Department of Revenue – Corporate Income Tax

Montana corporate income tax begins with federal gross income and makes specific adjustments to determine Montana gross income and net income. This federal conformity approach means Montana adopts federal definitions of income, deductions, and accounting methods for the taxable year, with state-specific modifications.

## Starting Point: Federal Gross Income

Montana defines "gross income" as all income recognized in determining the corporation's gross income for federal income tax purposes, subject to Montana-specific additions and subtractions. Mont. Code Ann. § 15-31-113(1) establishes this starting point. The statute ties Montana's definition to the federal Internal Revenue Code in effect for the taxable year.

For corporations not subject to or liable for federal income tax but not exempt from Montana corporate income tax under Mont. Code Ann. §§ 15-31-101(3) or 15-31-102, § 15-31-113(3) requires computation of gross income in the same manner as a corporation subject to federal income tax, using the provisions for determining gross income in the federal Internal Revenue Code in effect for the taxable year.

## Montana Additions to Federal Gross Income

Mont. Code Ann. § 15-31-113(1)(a) requires corporations to add to federal gross income:

• Tax-exempt interest: Interest exempt from federal income tax and exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code (§ 15-31-113(1)(a)(i))
• Liquidation gains: Gain not recognized for federal income tax purposes as a shareholder of a liquidating corporation under Internal Revenue Code sections 331 through 337 when the gain is required to be recognized by the liquidating corporation (§ 15-31-113(1)(a)(ii))

## Montana Subtractions from Federal Gross Income

Mont. Code Ann. § 15-31-113(1)(b) allows corporations to subtract from federal gross income:

• Certain liquidation gains: Gain recognized for federal tax purposes as a shareholder of a liquidating corporation pursuant to Internal Revenue Code sections 331 through 337, when the gain is required to be recognized by the liquidating corporation under subsection (1)(a)(ii)

This subtraction prevents double taxation of the same gain at both the corporate and shareholder level.

## Net Income: Gross Income Less Federal Deductions

Montana "net income" means the corporation's gross income (as adjusted above) less the deductions set forth in Mont. Code Ann. § 15-31-114. Section 15-31-113(2) provides this definition.

The deductions allowed under § 15-31-114(1) include ordinary and necessary business expenses, charitable contributions (up to 5% of net income before the charitable deduction), depreciation, depletion, net operating losses under § 15-31-119, interest on business indebtedness, and other items. The statute generally refers to deductions allowed under federal law for the taxable year. For example, § 15-31-114(1)(c) provides that the reasonable allowance for depletion and depreciation "must be determined according to the provisions of the Internal Revenue Code in effect for the taxable year," and § 15-31-114(1)(c) requires that all elections with respect to capitalizing or expensing exploration and development costs and intangible drilling expenses "must be the same as the elections made for federal income tax purposes."

## Conformity Date and IRC Updates

Montana's conformity is tied to the Internal Revenue Code "in effect for the taxable year" under §§ 15-31-113 and 15-31-114. This means Montana uses the federal law that applies to the corporation's federal return for that tax year. Montana does not automatically adopt all federal tax law changes on a rolling basis; rather, the conformity is to the IRC version in effect for the specific taxable year at issue.

The Montana Department of Revenue has published guidance addressing Montana corporate income tax treatment of international tax provisions under the Tax Cuts and Jobs Act of 2017, indicating that Montana follows the federal treatment for those provisions to the extent the federal provisions are reflected in federal gross income for the taxable year.

## Practical Effect

This conformity structure means Montana corporate taxable income generally follows federal corporate taxable income for the same tax year, with adjustments principally for tax-exempt interest and certain liquidation transactions. Corporations whose federal gross income already reflects the federal deductions and income items will apply those same figures in computing Montana gross income, then make the limited Montana additions and subtractions.

Source: Mont. Code Ann. § 15-31-113

Source: Mont. Code Ann. § 15-31-114

Montana corporate income tax returns must be filed annually by corporations subject to tax under Mont. Code Ann. § 15-31-101. The filing deadline varies depending on whether the corporation uses a calendar year or fiscal year for tax reporting.

## Calendar-Year Corporations

For corporations reporting on a calendar-year basis, the Montana Corporate Income Tax Return (Form CIT) must be filed with the Montana Department of Revenue on or before May 15 following the close of the calendar year. This means calendar-year 2025 returns are due May 15, 2026.

Mont. Code Ann. § 15-31-111(2)(a) establishes this May 15 deadline, which differs from the federal corporate return deadline of April 15. The statute contains an exception: if the May 15 due date falls on a holiday recognized by the Internal Revenue Service that is not observed in Montana, the return may be filed on the first business day after the holiday under § 15-31-111(2)(b)(i).

## Fiscal-Year Corporations

If the corporation reports on a fiscal-year basis, the return must be filed with the department on or before the 15th day of the 5th month following the close of its fiscal year. For example, a corporation with a fiscal year ending September 30 must file by February 15 of the following year.

Source: Mont. Code Ann. § 15-31-111(2)

## Automatic Extension

Montana allows corporations an automatic extension of up to 6 months for filing their corporate income tax return. No separate extension request form is required; the extension is granted automatically under § 15-31-111(3)(a). For calendar-year corporations, this extends the filing deadline from May 15 to November 15. For fiscal-year corporations, the extended deadline is the 15th day of the 11th month following the close of the fiscal year.

The automatic extension applies only to the time to file, not the time to pay. The tax liability remains due and payable on the original deadline (the 15th day of the 5th month following the close of the tax year), as specified in Mont. Code Ann. § 15-31-101(3). Any tax not paid by the original due date is subject to penalty and interest under § 15-31-111(3)(a) and § 15-31-510(2), even if the return itself is timely filed under the extension.

The department may grant an additional extension beyond the automatic 6-month period whenever good cause exists, pursuant to § 15-31-111(3)(b).

## Disaster Relief Extensions

The Montana Department of Revenue may extend filing dates and defer or waive interest, penalties, and other effects of late filing for a period not exceeding one year for taxpayers affected by a federally declared disaster or a terroristic or military action recognized for federal tax purposes under 26 U.S.C. § 7508A. This relief is granted under Mont. Code Ann. § 15-31-111(2)(b)(ii).

## Payment Due Date Distinct from Filing Deadline

Mont. Code Ann. § 15-31-101(3) specifies that the corporate income tax is due and payable on the 15th day of the 5th month following the close of the tax year, subject to the estimated-tax provisions in § 15-31-502. This payment deadline does not change when the filing deadline is extended. The statute clarifies that the tax becomes a lien on the last day of the tax year in which the income was earned and is for the privilege of carrying on business in Montana for that tax year.

Source: Mont. Code Ann. § 15-31-111

Source: Mont. Code Ann. § 15-31-101(3)