Montana requires C corporations and pass-through entities operating in the state to comply with specific tax rules. Corporations must file annual returns, make estimated payments if liability crosses certain thresholds, and pay penalties and interest if filing or payment obligations are not met. Pass-through entities, including S corporations, partnerships, LLCs, and LLPs, pass income through to owners but must still file state returns and make estimated tax payments.
This blog breaks down Montana’s corporate income tax and pass-through entity tax framework, covering due dates, forms, extensions, estimated payments, penalties, and interest rules in detail.
Corporate Income Tax
C corporations that conduct business in Montana or derive income from state sources must file a Montana Corporate Income Tax Return.
Due Date:
- The return is due on or before the 15th day of the fifth month following the close of the tax year.
Form Used:
- Corporations use Form CIT (Corporate Income Tax Return) to report income, deductions, and tax liability.
- The return must be filed with the Montana Department of Revenue.
Extension:
- Montana allows an automatic six-month extension for filing corporate income tax returns.
- This extension applies only to filing, not to tax payments. Taxes remain due by the original deadline.
Estimated Tax Payments:
- Corporations must make estimated tax payments if their annual tax liability is expected to exceed USD 500.
- Payments are due in four equal installments on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.
Penalties:
- Late filing penalty: Greater of USD 5 or 5% of tax due per month, capped at 25% of the tax due.
- Late payment penalty: 0.5% per month on unpaid tax, up to 12% of the tax due.
These rules enforce timely compliance while giving corporations the flexibility to manage filings with extensions.
Pass through Entity Tax
Montana treats S corporations, partnerships, LLPs, and LLCs as pass-through entities (PTEs). Business income, deductions, and credits are passed to shareholders, partners, or members, who must report them on individual tax returns.
Filing Requirement:
- PTEs must file a Montana Pass-Through Entity Tax Return (Form PTE).
- This form reports the entity’s income, deductions, and credits.
- The return must be submitted to the Montana Department of Revenue.
Due Date:
- The PTE return is due by the 15th day of the third month following the end of the entity’s tax year.
Extension:
- Montana provides an automatic six-month extension for filing PTE returns.
- Like corporate extensions, this applies only to filing, not to payments.
Estimated Tax Payments:
- Pass-through entities must make estimated payments if annual liability is expected to exceed USD 500.
- Installments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year.
Penalties:
- Late filing penalty: USD 10 × number of owners at year-end × months late.
- Applied for up to five months, capped at USD 2,500.
- Late payment penalty: 0.5% per month on unpaid tax, not exceeding 12% of the tax due.
Interest:
- Interest on unpaid taxes is charged at a rate of 5% per year.
This ensures that pass-through entities maintain compliance and that individual owners pay their fair share.
Conclusion
Montana’s tax system makes compliance mandatory for both corporations and pass-through entities.
Key points include:
- C corporations: Must file Form CIT, due by the 15th day of the fifth month, with estimated payments required above USD 500.
- Pass-through entities: Must file Form PTE, due by the 15th day of the third month, and comply with estimated payment rules.
- Penalties: Corporations face up to 25% late filing penalties and 12% late payment penalties. Pass-through entities face penalties based on number of owners, capped at USD 2,500.
- Interest: 5% annually on unpaid balances applies to both entity types.
By adhering to deadlines, making estimated payments, and staying aware of penalty structures, businesses in Montana can manage their tax obligations effectively while avoiding unnecessary costs.
