Administrative Rules of Montana › Department 42 - REVENUE › Chapter 42.15 - INCOME TAX › Subchapter 42.15.1 - General Provisions › Rule 42.15.112 - NONRESIDENT MILITARY PERSONNEL

Current through Register Vol. 13, July 5, 2024
(1) A
				nonresident member of the United States armed forces who is living in this
				state solely by reason of compliance with military orders does not become a
				Montana resident solely by reason of being present in this state in compliance
				with military orders and their compensation for military service is not Montana
				source income. Starting in 2009, some nonresident spouses who move to Montana
				solely to be with that nonresident serviceperson are also allowed to retain
				their home residence or "domicile" and, subject to certain rules and
				limitations described in (6), their wage and other personal services income is
				not Montana source income.
(2)
				Nonresident military servicepersons and their spouses are, except as provided
				in (4), subject to Montana individual income tax in the same manner and to the
				same extent as any other nonresident with Montana source income.
(3) As provided in
				1-1-215, MCA, if a person claims a
				residence within Montana for any purpose, such as obtaining a resident hunting
				or fishing license, that location is their residence for all purposes,
				including Montana individual income tax, unless there is a specific statutory
				exception. The definition of "resident" in
				87-2-102, MCA, permits certain
				nonresident military personnel and their dependents to obtain resident hunting,
				fishing, and trapping licenses without subjecting them to individual income tax
				liability as residents.
(4) While
				the Montana income tax liability of nonresidents is usually determined by
				calculating the tax as if they were residents then multiplying that calculation
				by their ratio of Montana source income to total income, the Military Family
				Tax Relief Act of 2003 requires states to implement special rules when the
				nonresident is a military serviceperson. If a nonresident serviceperson with
				Montana source income or their spouse is required to file a Montana individual
				income tax return, the exempt military income must be excluded from both the
				numerator and the denominator in determining the ratio of Montana source income
				to total income.
(5) An example of
				how the tax liability would be calculated is:
(a) A nonresident serviceperson and their
				nonresident spouse who are filing a joint return have the following income:
Military compensation
$
40,000
Spouse's - Montana source income
$
30,000
Interest income - Joint
$
500
Dividend income - Joint
$
1,000
Total Income
$
71,500
(b)
				The exempt military compensation is a subtraction that reduces Montana adjusted
				gross income:
Gross income:
$
71,500
Less: Exempt military compensation
($
40,000)
Montana adjusted gross income
$
31,500
(c)
				The Montana personal and dependent exemptions and either the standard deduction
				or itemized deductions are subtracted from Montana adjusted gross income to
				determine Montana taxable income:
Montana adjusted gross income
$
31,500
Less: Deduction and exemptions
($
17,340)
Taxable income
$
14,160
(d)
				The tax, determined on the taxable income, is multiplied by the ratio of
				Montana source income to total income from all sources except the exempt
				military compensation:
Montana source income $ 30,000
Total income from all sources except military compensation
				  ($30,000 + 500 + 1,000) = $ 31,500
Ratio $30,000/$31,500 =.9523
(e) If the tax determined on the taxable
				income were $1,000, the taxpayers' Montana tax liability would be $952, the
				Montana tax liability of $1,000 multiplied by.9523, the ratio of $30,000 to
				$31,500.