HOUSE BILL NO. 74
INTRODUCED BY M. CAMPBELL
BY REQUEST OF THE DEPARTMENT OF REVENUE
A BILL FOR AN ACT ENTITLED: "AN ACT CREATING THE MINERAL ROYALTY BACKUP WITHHOLDING ACT; PROVIDING DEFINITIONS; REQUIRING REMITTORS TO WITHHOLD TAXES ON ROYALTY PAYMENTS MADE TO NONRESIDENT ROYALTY OWNERS; PROVIDING EXCEPTIONS TO THE WITHHOLDING TAX; MAKING REMITTORS LIABLE FOR PAYMENT OF WITHHOLDING TAXES; PROVIDING A WITHHOLDING TAX RATE AND REMITTANCE SCHEDULE; PROVIDING FOR PENALTIES AND INTEREST FOR FAILURE TO REMIT TAX; REQUIRING REMITTORS TO PROVIDE ANNUAL STATEMENTS TO ROYALTY OWNERS AND THE DEPARTMENT OF REVENUE; AND PROVIDING A DELAYED EFFECTIVE DATE AND AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
NEW SECTION. Section 1. Short title. [Sections 1 through 12] may be cited as the "Mineral Royalty Backup Withholding Act".
NEW SECTION. Section 2. Definitions. As used in [sections 1 through 12], the following definitions apply:
(1) "Mineral" has the same meaning as provided in 15-38-103.
(2) "Remittor" means an individual, entity, or trust that makes royalty payments to royalty owners.
(3) "Royalty owner" means a person or entity entitled to receive periodic payments for a nonworking interest in the production of oil or gas or in the severance of other minerals from the mineral estate.
NEW SECTION. Section 3. Withholding required on mineral royalty payments. Except as provided in [section 4], each remittor shall withhold from each royalty payment made to a royalty owner an amount equal to 6% of the net amount payable to the royalty owner.
NEW SECTION. Section 4. Withholding -- no application under certain conditions. The provisions of [sections 1 through 12] do not apply to royalty payments made to a royalty owner if:
(1) the total net amount payable to the royalty owner was less than $600 in the previous tax year; or
(2) the royalty owner is:
(a) a Montana resident;
(b) the United States or an agency of the federal government, this state or a political subdivision of this state, or another state or a political subdivision of another state;
(c) a federally recognized Indian tribe with respect to on-reservation oil and gas production pursuant to a lease entered into under the Indian Mineral Leasing Act of 1938, 25 U.S.C. 396a through 396g;
(d) the United States as trustee for individual Indians; or
(e) the same person or entity as the remittor.
NEW SECTION. Section 5. Remittor liable for withholding taxes and statements -- sufficiency of mailing address. (1) Each remittor is liable for the payment required by [section 6], the amount required to be deducted and withheld under [sections 1 through 12], and the annual statements required by [sections 8 and 9]. The payments required by [section 6] and the amounts required to be deducted and withheld, plus penalty and interest due, are a tax. With respect to the tax, the remittor is the taxpayer.
(2) The officer of a corporation whose responsibility it is to collect, truthfully account for, and pay to the state the amounts withheld from mineral royalty payments and who fails to pay the withholdings is liable to the state for the amounts withheld and the penalty and interest due on the amounts.
(3) (a) Each officer of the corporation is individually liable, along with the corporation, for filing statements, to the extent that the officer has access to the requisite records, and for unpaid taxes, penalties, and interest upon a determination that the officer:
(i) possessed the responsibility to file statements and pay taxes on behalf of the corporation; and
(ii) possessed the responsibility on behalf of the corporation for directing the filing of tax statements or the payment of other corporate obligations and exercised that responsibility, resulting in the corporation's failure to file statements required by [sections 1 through 12] or to pay taxes due as required by [sections 1 through 12].
(b) In determining which corporate officer is liable, the department is not limited to considering the elements set forth in subsection (3)(a) to establish individual liability and may consider any other available information.
(4) In the case of a corporate bankruptcy, the liability of the individual remains unaffected by the discharge of penalty and interest against the corporation. The individual remains liable for any statements and the amount of taxes, penalties, and interest unpaid by the corporation.
(5) For the purpose of determining liability for the filing of statements and the payment of taxes, penalties, and interest owed under [sections 1 through 12]:
(a) each partner of a partnership is jointly and severally liable, along with the partnership, for any statements, taxes, penalties, and interest due while a partner;
(b) each member of a limited liability company that is treated as a partnership or as a corporation for income tax purposes is jointly and severally liable, along with the limited liability company, for any statements, taxes, penalties, and interest due while a member;
(c) the member of a single-member limited liability company that is disregarded for income tax purposes is jointly and severally liable, along with the limited liability company, for any statements, taxes, penalties, and interest due while a member; and
(d) each manager of a manager-managed limited liability company is jointly and severally liable, along with the limited liability company, for any statements, taxes, penalties, and interest due while a manager.
(6) If the remittor fails to deduct and withhold the amounts specified in [section 3] and the tax, against which the deducted and withheld amounts would have been credited, is paid, the amounts required to be deducted and withheld may not be collected from the remittor.
(7) For purposes of [sections 1 through 12], the residency of a royalty owner may be established by the remittor based upon the address to which the remittor mails the royalty owner's payments. A remittor bears no liability for relying upon the royalty owner's address to establish residency.
NEW SECTION. Section 6. Royalty withholding tax remittance schedule -- alternative schedules and methods -- records. (1) Except as provided in subsection (2), each remittor is required to file a quarterly return, on a form prescribed by the department, and remit to the department the amount of tax withheld on royalty payments according to the following schedule:
(a) for royalty payments made during January, February, and March of each calendar year, the amount withheld is due on or before April 30 of the year;
(b) for royalty payments made during April, May, and June of each calendar year, the amount withheld is due on or before July 31 of the year;
(c) for royalty payments made during July, August, and September of each calendar year, the amount withheld is due on or before October 31 of the year; and
(d) for royalty payments made during October, November, and December of each calendar year, the amount withheld is due on or before January 31 of the following year.
(2) A remittor may request an alternative remittance schedule than is required by subsection (1). The department may consider situations such as administrative and taxpayer convenience and frequency of royalty payments in determining whether to approve an alternative remittance schedule.
(3) A remittor may elect to remit and file mineral backup withholding electronically in any format established and approved by the department if the remittor obtains prior approval from the department before remitting the tax by electronic fund transfer.
(4) If a remittor remits withholding taxes electronically, the remittance is considered timely if made within 5 days after the due date of the payment.
(5) If the department has reason to believe that collection of the amount of any tax withheld is in jeopardy, it may proceed as provided under 15-1-703.
(6) Each remittor shall keep accurate royalty payment and withholding records containing the information that the department may prescribe by rule. Those records must be open to inspection and audit and may be copied by the department or its authorized representative at any reasonable time and as often as may be necessary. A remittor that maintains its records outside of Montana shall furnish copies of those records to the department at the remittor's expense.
NEW SECTION. Section 7. Amount of royalty payment withheld considered taxes collected. The amounts deducted and withheld from royalty payments are considered taxes collected under the provisions of [sections 1 through 12]. A royalty owner does not have a right of action against the remittor for any amount deducted and withheld from the royalty owner's royalty and paid to the state in compliance or intended compliance with [sections 1 through 12].
NEW SECTION. Section 8. Annual withholding statement to royalty owner. Before January 31 of each year, each remittor shall furnish to each royalty owner a statement, on a form prescribed by the department, showing the total royalties paid by the remittor to the royalty owner during the preceding calendar year and showing the amount of the tax deducted and withheld from the royalty payments. The royalty owner shall file a duplicate of the statement with the royalty owner's state income tax return.
NEW SECTION. Section 9. Remittor to furnish annual statement to department. (1) On or before February 28 of each year, each remittor shall file with the department a royalty and tax statement, on a form provided by the department, that shows the total royalties paid to each royalty owner subject to withholding during the preceding calendar year or any portion of the preceding calendar year and the total amount of the tax deducted and withheld from the royalty payments under the provisions of [sections 1 through 12] for the same period.
(2) The annual statement filed by a remittor under this section complies with the requirements of 15-30-301 relating to the duties of information agents. An additional information return is not required with respect to the royalty payments.
NEW SECTION. Section 10. Withheld taxes held in trust for state. Each remittor that deducts and withholds the amounts under the provisions of [sections 1 through 12] shall hold the amounts in trust for the state.
NEW SECTION. Section 11. Violations by remittor -- penalties -- interest -- remedies. (1) The department shall, as provided in 15-1-216, add penalty and interest to the amount of all delinquent withholding taxes.
(2) A remittor that fails to furnish the royalty and tax statement required by [section 9] is subject to a penalty of $50 for each failure, with a minimum of $1,000. The penalties imposed by this subsection are in addition to the penalties imposed by 15-1-216.
(3) All remedies available to the state for the administration, enforcement, and collection of income taxes are available and apply to the tax required to be deducted and withheld under the provisions of [sections 1 through 12] unless otherwise specifically provided for in this part.
NEW SECTION. Section 12. Rulemaking authority. The department shall adopt rules that may be necessary to administer and enforce the provisions of [sections 1 through 12].
NEW SECTION. Section 13. Notification to tribal governments. The secretary of state shall send a copy of [this act] to each tribal government located on the seven Montana reservations and to the Little Shell band of Chippewa.
NEW SECTION. Section 14. Codification instruction. [Sections 1 through 12] are intended to be codified as an integral part of Title 15, chapter 30, part 2, and the provisions of Title 15, chapter 30, part 2, apply to [sections 1 through 12].
NEW SECTION. Section 15. Effective date. [This act] is effective January 1, 2008.
NEW SECTION. Section 16. Applicability. [This act] applies to royalty payments made after December 31, 2007.
- END -
Latest Version of HB 74 (HB0074.01)
Processed for the Web on December 15, 2006 (9:06am)
New language in a bill appears underlined, deleted material appears stricken.
Sponsor names are handwritten on introduced bills, hence do not appear on the bill until it is reprinted.
See the status of this bill for the bill's primary sponsor.
Status of this Bill | 2007 Legislature | Leg.
Branch Home
All versions of this bill (PDF format)
Authorized print version w/line numbers (PDF format)
[ NEW SEARCH ]
Prepared by Montana Legislative Services
(406) 444-3064