No. 93-588 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

MONTANA DEPARTMENT OF REVENUE, 

Respondent and Appellant, 

v. 

ALLAN K. DRAY, 

Petitioner and Respondent. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Jeffrey Sherlock, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Lawrence G. Allen, Tax Counsel, State of Montana, 

Department of Revenue, Helena, Montana 

For Respondent: 

James P. Sites and Scott M. Heard, 

Crowley, Haughey, Hanson, Toole & Dietrich, 

Billings, Montana 

Submitted: June 28, 1994 

Decided: August 18, 1994 

Filed: 
Justice Terry N. Trieweiler delivered the opinion of the Court. 

Allan K. Dray petitioned the District Court for the First 

Judicial District in Lewis & Clark County for judicial review of an 

order of the State Tax Appeal Board which affirmed the Department 

of Revenue's (DOR) assessment of taxes, penalties, and interest 

against Dray. The District Court granted the petition for judicial 

review and reversed the decision of the State Tax Appeal Board. 

The DOR appeals the order of the District Court. We affirm the 

District Court. 

The following issue is presented on appeal: 

According to Montana's tax code, may a nonresident taxpayer 

deduct alimony payments from income earned in Montana to arrive at 

Montana adjusted gross income? 

The parties agree that there are no disputed facts in this 

case. They have stipulated to the following facts: Dray is a 

Texas resident who reported income from Montana sources, including 

royalty income and income from agricultural property located in 

Montana, for the years 1984 through 1988. In 1984, Dray and his 

wife, a nonresident of Montana, entered into a written separation 

agreement which provided for alimony payments from Dray to his wife 

of $10,000 per month commencing June 1, 1984. In tax years 1984 

through 1988, Dray claimed a deduction for alimony paid in arriving 

at his adjusted gross income for federal income tax purposes. He 

claimed a similar alimony deduction in the calculation of adjusted 

gross income for Montana income tax purposes. 
The DOR assessed deficiencies against Dray for the years 1984 

through 1988 based on its disallowance of the alimony deduction. 

Not including penalties and interest, the total amount assessed by 

the DOR was $25,745. 

We review conclusions of law to determine whether the district 

court1 s interpretation of the law is correct. Steer, Znc. v. Department of 

Revenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601, 603. 

The DOR contends that Dray is not entitled to claim an alimony 

deduction because adjusted gross income for nonresident taxpayers 

is calculated pursuant to 15-30-131, MCA (1991), and that statute 

does not expressly provide an alimony deduction for nonresidents. 

The DOR cites the general rule that deductions only exist by 

express grant of the Legislature. GBN, Znc. v. DepatWzent of Revenue 

(lggl), 249 Mont. 261, 266, 815 P.2d 595, 597; Qpm Mines Cop. v. 

MadzionCounty (1977), 172 Mont. 116, 118, 560 P.2d 1342, 1343. This 

contention is based on the DOR1s premise that § 15-30-131, MCA 

(1991), provides a method to determine adjusted gross income and 

income tax deductions for nonresident taxpayers separate from that 

provided for resident taxpayers under 15-30-111, MCA (1991). 

These statutes, in relevant parts, state the following: 

15-30-111. Adjusted gross income. (1) Adjusted gross 

income shall be the taxpayer's federal income tax 

adjusted gross income as defined in section 62 of the 

Internal Revenue Code of 1954 . . . . 

15-30-131. Nonresident and temporary resident taxpayers 

-- adjusted gross income -- deductions. (1) In the case 

of a taxpayer other than a resident of this state, 

adjusted gross income includes the entire amount of 
adjusted gross income from sources within this state but 

shall not include income from annuities, interest on bank 

deposits, interest on bonds, notes . . . . Adjusted 

gross income from sources within and without this state 

shall be allocated and apportioned under rules prescribed 

by the department. 

(3) In the case of a taxpayer other than a resident 

of this state who is a resident of a state that does not 

impose a tax on the income of natural persons residing 

within that state, the deductions allowed in computing 

net income are restricted to the greater of those 

directly relating to the production of Montana income or 

a prorated amount of those allowed under 15-30-121. For 

the purposes ofthis subsection, deductions allowed under 

15-30-121 apply only to earned income and must be 

prorated according to the ratio that the taxpayer's 

Montana earned income bears to his federal earned income. 

The DOR further argues that it is apparent from 5 15-30-131, 

MCA (1991), that the Legislature intended that deductions for 

nonresident taxpayers be proportionate to Montana income. 

While we recognize the rule that the intention of the 

Legislature controls statutory construction, State ex rel. Neuhausen v. 

Nachtsheim (l992), 253 Mont. 296, 299, 833 P.2d 201, 204, we must 

first look at the plain meaning of the statute's language. GBN, 

815 P.2d at 597. If the language is clear and unambiguous, no 

further interpretation is required. GBN, 815 P.2d at 597. Here, 

there is no reason to resort to legislative intent because the 

language of 55 15-30-111 and -131(1) and (3), MCA, as it appeared 

in 1991, is clear and unambiguous. 

As Dray points out, while the allocation language in 

subsection -131(1), MCA (1991), may indicate that "[aldjusted gross 

income from sources within and without this state shall be 
allocated and apportioned under rules prescribed by the department 

. . . ," no rules had, at any relevant time, been promulgated by 

the DOR to allocate or apportion the income to which a nonresident 

taxpayer's alimony payments are attributable or to prorate the 

alimony deduction based on the source of the taxpayer's income. 

Furthermore, the lldeductions" referred to in 5 15-30-131(3), 

MCA (1991), are "deductions allowed in computing net income." Net 

income is defined in 3 15-30-101(11), MCA (lggl), as adjusted gross 

income "less deduction^.^' These deductions are commonly referred 

to as "below-the-linen deductions. Alimony is an wabove-the-line" 

deduction, a deduction used to compute adjusted gross income 

pursuant to I.R.C. 5 62 (a) (10) (1988). 

The DOR concedes that alimony is an above-the-line deduction, 

but reasserts that such a deduction is not allowed unless 

specifically provided for by the Legislature. 

We agree, but nonetheless conclude, that an alimony deduction 

is specifically provided for by Montana's incorporation of the 

federal definition of adjusted gross income in 5 15-30-111, MCA 

(1991), and that based on the definition of "taxpayer" as used in 

that section, there is no basis for denying that deduction to 

nonresident taxpayers. See 5 15-30-101(19), MCA (1991). We have 

held in Baker Bancoporation v, Department of Revenue (1983) , 202 Mont. 94, 

657 P.2d 89, that when a statute expressly incorporates federal 

gross and net income, then the deductions allowable in federal 
taxation must also be deemed allowable for purposes of Montana 

taxation. 

We are not persuaded by the DOR1s argument that because 

5 15-30-131, MCA (1991), specifically applies to nonresidents, it 

should control over 5 15-30-111, MCA (1991) , which defines adjusted 

gross income. Despite the language in 5 15-30-131(1), MCA (1991), 

that "adjusted gross income includes the entire amount of adjusted 

gross income from sources within this state . . . ,If the only 

definition of "adjusted gross income" in the Montana tax code is 

the one found at 5 15-30-111, MCA (1991). 

Based on the foregoing, we conclude that the District Court 

correctly interpreted the provisions found at 55 15-30-111 and 

-131, MCA (1991), and therefore, affirm the judgment of the 

District Court. 

We concur: 

that the following certified order United States mail, 

THE SUPREME 

prepaid, 

COURT 

to the