As part of a corporate income tax "modernization program," the Montana legislature on April 22, 2021, passed Senate Bill 376 (SB 376), which would change the Corporate Income Tax apportionment formula¹ from an equally weighted three-factor formula to a double-weighted sales factor formula (i.e., property factor, plus the payroll factor, plus two times the sales factor and a denominator of four). Governor Greg Gianforte is expected to sign SB 376.

Adoption of the double-weighted sales factor apportionment formula would apply to tax years beginning after June 30, 2021.

Implications

Montana is one of a decreasing number of states that use the traditional equally-weighted three-factor apportionment formula. In a prior proposal (Senate Bill 181), the legislature considered adopting a single sales factor apportionment formula, but that proposal was tabled in committee. 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.

———————————————

———————————————
ENDNOTE

¹ Montana Code Ann. 15-1-601, Article 4, Section 9.