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Montana Updates Apportionment Rules – Tax & Accounting Blog

Income apportionment rules have been adopted and amended by the Montana Department of Revenue. These rules affect multistate corporate taxpayers.

Finnigan Rule

The department has adopted the Finnigan rule to limit the risk of having a unitary combined group’s apportionment factors manipulated. Under this rule, taxpayers must include property, payroll, and receipts from all unitary group members, if one member has nexus.

Previously, the department followed the Joyce rule, which included a unitary group member only if that member itself had nexus.

Market-Based Sourcing

The rules also provide guidance on market-based sourcing, which was enacted earlier in the year. For example, a new rule specifies that service receipts are sourced to Montana if the service is delivered to a location in the state. Among other things, the rules also:

  • explain principles to apply when sourcing receipts from sales other than sales of tangible personal property;
  • address methods of reasonable approximation used when sourcing such receipts;
  • discuss methods used in excluding certain receipts;
  • explain provisions to be used for a change of methodology;
  • explain when receipts from the sale, rental, lease, or license of real property are sourced to Montana;
  • address when receipts from the rental, lease, or license of tangible personal property are sourced to Montana;
  • address when receipts from the sale, license, or lease of intangible property are sourced to Montana; and
  • include special receipts factor provisions for software transactions and sales or licenses of digital goods or services.

The updated rules are available at

MAR Notice No. 42-2-985, Montana Department of Revenue, effective January 1, 2018

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Author: CCHTaxGroup

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