House Bill No. 561

Introduced By kasten, raney, devlin, benedict, simon, van valkenburg, stang, bartlett, foster, halligan, thomas, harp, mercer, keating, feland, story, jergeson, christiaens, franklin, hibbard



A Bill for an Act entitled: "An Act furthering the renewal of state government by harmonizing the definitions of "wages" and "employment"; by reengineering, restructuring, and combining the reporting and remittance of employer taxes; by coordinating the administration of the state's income tax and old fund liability tax withholding, unemployment insurance tax, and the employers' share of the old fund liability tax so that all reports and remittances must be made to the department of revenue thereby providing an employer the convenience of dealing with only one state agency; and amending sections 15-1-302, 15-2-302, 15-30-201, 15-30-202, 15-30-203, 15-30-204, 15-30-207, 15-30-208, 15-30-209, 37-31-101, 39-51-201, 39-51-204, 39-51-301, 39-51-1109, 39-51-1110, 39-51-1301, 39-51-1303, 39-51-2108, 39-51-2402, 39-71-123, 39-71-401, 39-71-2501, 39-71-2503, and 39-71-2505, MCA."



Be it enacted by the Legislature of the State of Montana:



NEW SECTION. Section 1.  Confidentiality. Reports and returns required to be filed under this part are confidential, subject to the limitations contained in 39-51-603(3) and (4).



NEW SECTION. Section 2.  Application and distribution of payments. (1) Except as provided by rule, tax payments including delinquent tax, penalty, and interest must be applied to the taxpayer's account, prorated on the basis of the amount of each tax due to the amount of the total tax due, and distributed to the appropriate fund accounts as required by law.

(2) Payment of a penalty assessed for late filing of a report for which there is no tax due for the period must be applied to the employer's liability for the penalties and equally distributed to the fund accounts specified by law among the tax types the report covers.



NEW SECTION. Section 3.  Statute of limitations. (1) In the case of a nonfiled return, the department may, at any time, audit the employer or estimate the tax due from any information in its possession and issue an assessment for the amount of the tax, penalty, and interest the department determines to be due.

(2) If the department determines, pursuant to a review conducted pursuant to 15-30-145, that any return is incorrect, it may revise the return within 5 years of the due date of the original return, within 5 years of the date the return was filed, or 1 year from the date an amended return was filed, whichever is later.

(3) Notwithstanding the provisions of subsection (2), if an employer purposely or knowingly files a false or fraudulent return, with intent to evade the tax, the amount of tax, penalty, and interest due may be determined at any time after the return is filed and collected at any time after it becomes due.

(4) For the purposes of this section, a return filed before the due date is considered to be filed on the due date.

(5) The statute of limitations is suspended during any time in which an employer-employee relationship determination has been appealed as provided in 15-1-211, and the time for assessment extends for an additional 1 year from the date the decision becomes final.



NEW SECTION. Section 4.  Credits and refunds -- period of limitations. (1) If the department determines by examination of an employer's account, or upon claim filed by an employer, that the employer has overpaid the amount of tax, penalty, or interest, the amount of the overpayment may be refunded to the employer or applied to current or future obligations of any tax, penalty, or interest for any tax contained in this title at the discretion of the taxpayer.

(2) A credit or refund may be allowed only if the claim is filed or the determination is made within 5 years of the due date prescribed for filing a report or 1 year from the date of the notification of the overpayment by the department.

(3) The department shall notify the employer of the overpayment and the credit or refund options available to the employer. A credit must be applied to the employer account unless directed otherwise by the employer.

(4) If a claim is disallowed, the department shall notify the employer. The decision disallowing the claim is subject to review as provided in 15-1-211.

(5) Interest is:

(a) allowed on an overpayment at the same rate as charged for late tax payments under this part;

(b) payable from the due date of the payment or the date overpayment was verified, whichever is later;

(c) not payable if the overpayment is applied to current or future obligations with the department.

(6) Interest is not allowed if the overpayment is refunded within 45 days from the date the employer directs the department to refund the overpayment.

(7) If additional information is required to verify the amount of the overpayment, the 45-day period in subsection (6) does not begin until the information is provided.



NEW SECTION. Section 5.  Employment defined and exclusions from definition of employment. (1) As used in this part "employment", subject to the provisions of subsection (2), means the service by an employee for an employer.

(2) The term "employment" does not include:

(a) household and domestic service in a private home, local college club, or local chapter of a college fraternity or sorority, except as provided in 15-30-201(4)(c);

(b) service performed by a dependent, as defined in 26 U.S.C. 152, of a sole proprietor for whom an exemption may be claimed by the employer under the Internal Revenue Code or service performed by a sole proprietor's spouse for whom an exemption based on marital status may be claimed by the sole proprietor pursuant to 26 U.S.C. 7703;

(c) service performed as a freelance correspondent or newspaper carrier if the person performing the service, or a parent or guardian of the person performing the service in the case of a minor, has previously acknowledged or acknowledges in writing that the person performing the service and the service are not covered for unemployment insurance purposes. As used in this subsection:

(i) "freelance correspondent" is a person who submits articles or photographs for publication and is paid by the article or by the photograph; and

(ii) "newspaper carrier" means a person who provides a newspaper with the service of delivering newspapers singly or in bundles. The term does not include an employee of the paper who, incidentally to the employee's main duties, carries or delivers papers.

(d) service performed as a licensed real estate broker or salesperson under Title 37, chapter 51;

(e) service performed by a cosmetologist who is licensed under Title 37, chapter 31, or a barber who is licensed under Title 37, chapter 30, and:

(i) who has acknowledged in writing that the cosmetologist or barber working under contract is not covered by unemployment insurance and workers' compensation;

(ii) who contracts with a cosmetology salon, as defined in 37-31-101, or a barbershop, as defined in 37-30-101, which contract must show that the cosmetologist or barber:

(A) is free from all control and direction of the owner in the contract;

(B) receives payment for service from individual clientele; and

(C) leases, rents, or furnishes all of the cosmetologist's or barber's own equipment, skills, or knowledge; and

(iii) whose contract gives rise to an action for breach of contract in the event of contract termination. The existence of a single license for the cosmetology salon or barbershop may not be construed as a lack of freedom from control or direction under this subsection.

(f) casual labor not in the course of an employer's trade or business performed in any calendar quarter, unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. "Regularly employed" means that the service is performed during at least 24 days in the same quarter.

(g) service performed by sole proprietors, working members of a partnership or a limited liability partnership, or members of a member-managed limited liability company that has filed articles of organization with the secretary of state;

(h) service performed for the installation of floor coverings if the installer:

(i) bids or negotiates a contract price based upon work performed by the yard or by the job;

(ii) is paid upon completion of an agreed-upon portion of the job or after the job is completed;

(iii) may perform service for anyone without limitation;

(iv) may accept or reject any job;

(v) furnishes substantially all tools and equipment necessary to provide the service; and

(vi) works under a written contract that:

(A) gives rise to a breach of contract action if the installer or any other party fails to perform the contract obligations;

(B) states that the installer is not covered by unemployment insurance; and

(C) requires the installer to provide a current workers' compensation policy or to obtain an exemption from workers' compensation requirements;

(i) service performed by a direct seller. As used in this subsection, "direct seller" means a person:

(i) who sells, or offers for sale, a tangible consumer product, including but not limited to cosmetics, vacuum cleaners, and cleaning products at the home of the consumer;

(ii) whose pay is determined by the quantity of product sold; and

(iii) who works under a written contract that states the person will not be treated as an employee;

(j) service performed by a petroleum land professional. As used in this subsection, "petroleum land professional" means a person who:

(i) is engaged primarily in negotiating for the acquisition or divestiture of mineral rights or in negotiating a business agreement for the exploration or development of minerals;

(ii) is paid for service that is directly related to the completion of a contracted specific task rather than on an hourly wage basis; and

(iii) performs all service as an independent contractor pursuant to a written contract;

(k) service performed by an ordained, commissioned, or licensed minister of a church in the exercise of the church's ministry or by a member of a religious order in the exercise of duties required by the order;

(l) service performed by an individual receiving rehabilitation or remunerative work in a facility conducted for the purpose of carrying out a program of rehabilitation for those individuals whose earning capacity is impaired by age or physical or mental deficiency or injury or providing remunerative work for individuals who, because of impaired physical or mental capacity, cannot be readily absorbed in the competitive labor market;

(m) service performed as part of an unemployment work-relief or work-training program assisted or financed in whole or in part by a federal agency or any agency of a state or political subdivision of the state by an individual receiving work relief or work training;

(n) service performed by an inmate of a state prison or other state correctional or custodial institution;

(o) service by an individual who is sentenced to perform court-ordered community service or similar work;

(p) service performed for aid or sustenance only;

(q) active service as members of the regular armed forces of the United States, as defined in 10 U.S.C. 101(33);

(r) agricultural labor; or

(s) service performed by an independent contractor.



NEW SECTION. Section 6.  Employment defined and exclusions from definition of employment. (1) As used in this part "employment", subject to the provisions of subsection (2), means the service by an employee for an employer.

(2) The term "employment" does not include:

(a) household and domestic service in a private home, local college club, or local chapter of a college fraternity or sorority, except as provided in 39-71-2501(4)(c);

(b) service performed by a dependent, as defined in 26 U.S.C. 152, of a sole proprietor for whom an exemption may be claimed by the employer under the Internal Revenue Code or service performed by a sole proprietor's spouse for whom an exemption based on marital status may be claimed by the sole proprietor under 26 U.S.C. 7703;

(c) service performed as a freelance correspondent or newspaper carrier if the person performing the service, or a parent or guardian of the person performing the service in the case of a minor, has previously acknowledged or acknowledges in writing that the person performing the service and the service are not covered for unemployment insurance purposes. As used in this subsection:

(i) "freelance correspondent" is a person who submits articles or photographs for publication and is paid by the article or by the photograph; and

(ii) "newspaper carrier" means a person who provides a newspaper with the service of delivering newspapers singly or in bundles. The term does not include an employee of the paper who, incidentally to the employee's main duties, carries or delivers papers.

(d) service performed as a licensed real estate broker or salesperson under Title 37, chapter 51;

(e) service performed by a cosmetologist who is licensed under Title 37, chapter 31, or a barber who is licensed under Title 37, chapter 30, and:

(i) who has acknowledged in writing that the cosmetologist or barber who is working under contract is not covered by unemployment insurance and workers' compensation;

(ii) who contracts with a cosmetology salon, as defined in 37-31-101, or a barbershop, as defined in 37-30-101, which contract must show that the cosmetologist or barber:

(A) is free from all control and direction of the owner in the contract;

(B) receives payment for service from individual clientele; and

(C) leases, rents, or furnishes all of the cosmetologist's or barber's own equipment, skills, or knowledge; and

(iii) whose contract gives rise to an action for breach of contract in the event of contract termination. The existence of a single license for the cosmetology salon or barbershop may not be construed as a lack of freedom from control or direction under this subsection.

(f) casual labor not in the course of an employer's trade or business performed in any calendar quarter, unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. "Regularly employed" means that the service is performed during at least 24 days in the same quarter.

(g) service performed by sole proprietors, working members of a partnership or a limited liability partnership, or members of a member-managed limited liability company that has filed articles of organization with the secretary of state;

(h) service performed for the installation of floor coverings if the installer:

(i) bids or negotiates a contract price based upon work performed by the yard or by the job;

(ii) is paid upon completion of an agreed-upon portion of the job or after the job is completed;

(iii) may perform service for anyone without limitation;

(iv) may accept or reject any job;

(v) furnishes substantially all tools and equipment necessary to provide the service; and

(vi) works under a written contract that:

(A) gives rise to a breach of contract action if the installer or any other party fails to perform the contract obligations;

(B) states that the installer is not covered by unemployment insurance; and

(C) requires the installer to provide a current workers' compensation policy or to obtain an exemption from workers' compensation requirements;

(i) service performed by a direct seller. As used in this subsection, "direct seller" means a person:

(i) who sells, or offers for sale, a tangible consumer product, including but not limited to cosmetics, vacuum cleaners, and cleaning products at the home of the consumer;

(ii) whose pay is determined by the quantity of product sold; and

(iii) who works under a written contract that states the person will not be treated as an employee;

(j) service performed by a petroleum land professional. As used in this subsection, "petroleum land professional" means a person who:

(i) is engaged primarily in negotiating for the acquisition or divestiture of mineral rights or in negotiating a business agreement for the exploration or development of minerals;

(ii) is paid for service that is directly related to the completion of a contracted specific task rather than on an hourly wage basis; and

(iii) performs all service as an independent contractor pursuant to a written contract;

(k) service performed by an ordained, commissioned, or licensed minister of a church in the exercise of the church's ministry or by a member of a religious order in the exercise of duties required by the order;

(l) service performed by an individual receiving rehabilitation or remunerative work in a facility conducted for the purpose of carrying out a program of rehabilitation for those individuals whose earning capacity is impaired by age or physical or mental deficiency or injury or providing remunerative work for individuals who, because of impaired physical or mental capacity, cannot be readily absorbed in the competitive labor market;

(m) service performed as part of an unemployment work-relief or work-training program assisted or financed in whole or in part by a federal agency or any agency of a state or political subdivision of the state by an individual receiving work relief or work training;

(n) service performed by an inmate of a state prison or other state correctional or custodial institution;

(o) service by an individual who is sentenced to perform court-ordered community service or similar work;

(p) service performed for aid or sustenance only; or

(q) service performed by an independent contractor.



NEW SECTION. Section 7.  Special review procedure for certain tax issues that involve unemployment insurance benefit claim -- notice -- appeal. (1) As used in this section, the following definitions apply:

(a) "Administrator" means the administrator of the income and miscellaneous tax division, department of revenue.

(b) "Board" means the state tax appeal board established by 15-2-101.

(c) "Claimant" means an individual who has filed a claim for unemployment insurance benefits under Title 39, chapter 51, and has asserted that the individual's employer inaccurately or incompletely reported the individual's wages.

(d) "Employer" means an employer as defined in 39-51-202, that has a potential tax liability arising from the inaccurate or incomplete reporting of a claimant's wages.

(e) "Interested party" means the claimant, the employer, or the department of labor and industry.

(2) (a) The department shall promptly investigate whether wages earned by the claimant were properly reported by the employer. Upon completion of the investigation, the department shall issue a written determination stating whether the wages were properly reported and, if not, the correct amount of reportable wages earned by the claimant. A copy of the determination must be mailed to each interested party at the last-known address of each party.

(b) The determination is final unless an interested party, within 10 calendar days of the mailing of the determination, makes a written application for reconsideration of the determination or makes a written appeal of the determination. A late-filed application for reconsideration may be accepted by the department upon a showing of good cause in writing.

(c) The written application or appeal must specify the reasons for the application or appeal and provide any other information relevant to the application or appeal.

(d) An interested party may appeal the reconsideration of a determination by making a written appeal within 10 calendar days of the mailing of the notice of the redetermination. A late-filed application for reconsideration may be accepted by the department upon a showing of good cause in writing.

(3) (a) Upon appeal of a determination or redetermination, the administrator or a person appointed by the administrator shall hold an informal hearing that may be conducted by telephone or video conference. After the hearing, the administrator or a designee shall promptly make findings of fact and conclusions of law and affirm, modify, reverse, or remand the determination or redetermination. A copy of the decision, with supporting findings of fact and conclusions of law, must be mailed to each interested party at the last-known address of each party.

(b) (i) The decision is binding on the interested parties unless a written appeal is made to the board. The appeal must be filed with the board within 10 calendar days after notice of the decision was mailed. A late-filed application for reconsideration may be accepted by the board upon a showing of good cause in writing.

(ii) If the decision becomes final, the department shall proceed as provided in subsection (5).

(4) (a) An appeal to the board, pursuant to 15-2-302, is initiated by filing a complaint with the board. The board shall promptly mail a copy of the complaint to each interested party at the last-known address of each party.

(b) Any interested party who wants to file an answer must do so within 10 calendar days after the board mails a copy of the complaint. An answer up to 10 days late may be accepted by the board upon a showing of good cause in writing.

(c) The decision of the board is final and binding upon all interested parties unless reversed or modified by judicial review. Proceedings for judicial review under this section are subject to the provisions of the Montana Administrative Procedure Act.

(5) When the department's decision becomes final, whether as the result of appeal, judicial review, or the lapse of time during which to take an appeal, the interested parties are bound by the decision and may not contest any issue that was decided as part of the decision either administratively or judicially. An employer who is determined to have inaccurately or incompletely reported wages may not contest the issue of whether wages should have been reported, or the amount of the wages that should have been reported, once the department assesses taxes on those wages.



Section 8.  Section 15-1-302, MCA, is amended to read:

"15-1-302.   Witnesses -- oaths, contempt, and fees. (1) Oaths to witnesses in any investigation by the department may be administered by the director of revenue or his the director's agent.

(2) (a)  In case any If a witness shall fail fails to obey any a summons to appear before the department or shall refuse refuses to testify or answer any material question or to produce records, books, papers, or documents when required to do so, such failure or refusal shall be reported to the attorney general, who the department shall thereupon institute proceedings in the proper district court to compel obedience to any a summons or order of the board or to punish the witness for such neglect or refusal to obey the summons.

(b) As required by 15-30-209, the department, in addition to instituting proceedings to compel obedience to a summons or order shall, as a part of the proceedings, request the court to issue an order requiring the payment of all penalties assessed for the employer's failure to report.

(3)  Any A person who shall testify testifies falsely in any material matter under consideration by the department shall be is guilty of perjury and shall be punished accordingly.

(4)  Witnesses attending an investigation by the department shall must receive like the same compensation as witnesses in the district court. Such The compensation shall must be charged to the proper appropriation for the department."



Section 9.  Section 15-2-302, MCA, is amended to read:

"15-2-302.   Direct appeal from department decision to state tax appeal board -- hearing. (1) A person may appeal to the state tax appeal board a final decision of the department of revenue involving:

(a)  property centrally assessed under chapter 23 of this title;

(b)  classification of property as new industrial property;

(c)  any other tax, (other than the property tax), imposed under this title; or

(d)  any other matter in which the appeal is provided by law.

(2) (a)  The Except as provided in subsection (2)(b), the appeal is made by filing a complaint with the board within 30 days following receipt of notice of the department's final decision. The complaint must set forth the grounds for relief and the nature of relief demanded. The board shall immediately transmit a copy of the complaint to the department.

(b) An appeal from the department's determination of whether wages earned by an unemployment insurance benefit claimant were properly reported to the department is initiated by filing a complaint with the board within 10 days following receipt of notice of the department's final determination. The board shall promptly mail a copy of the complaint to each interested party at the last-known address of each party.

(3)  The department shall file with the board an answer within 30 days following filing of a complaint, or in cases involving a determination of whether wages earned by an unemployment insurance benefit claimant were properly reported to the department, any interested party as defined in [section 7(1)(e)] and the department may file an answer with the board within 10 days after receipt of a copy of the complaint filed with the board, and at that time mail a copy to the complainant. The answer must set forth the department's response to each ground for and type of relief demanded in the complaint.

(4) (a)  The Except as provided in subsection (4)(b), the board shall conduct the appeal in accordance with the contested case provisions of the Montana Administrative Procedure Act.

(b) (i) An appeal regarding the determination of whether wages earned by an unemployment insurance claimant were properly reported to the department, the appeal must be conducted informally and may, in the discretion of the board, be conducted by telephone or other electronic means. The appeal is not a contested case under provisions of the Montana Administrative Procedure Act. The board, in conducting the hearing or making its decision, is not bound by the Montana Rules of Evidence.

(ii) The board shall make its final decision within 45 days of the date the appeal is received by the board.

(5)  The decision of the state tax appeal board is final and binding upon all interested parties unless reversed or modified by judicial review. Proceedings for judicial review of a decision of the state tax appeal board under this section are subject to the provisions of 15-2-303 and the Montana Administrative Procedure Act to the extent that it does not conflict with 15-2-303."



Section 10.  Section 15-30-201, MCA, is amended to read:

"15-30-201.   Definitions. When used in 15-30-201 through 15-30-209, the following definitions apply:

(1)  "Agricultural labor" means all services performed on a farm or ranch in connection with cultivating the soil or in connection with raising or harvesting any agricultural or horticultural commodity, including the raising, shearing, feeding, caring for, training, and management of livestock, bees, poultry, and fur-bearing animals and wildlife.

(2) "Domestic or household service" means employment of persons other than members of the household for the purpose of tending to the aid and comfort of the employer or members of the employer's family, including but not limited to housecleaning and yard work but does not include employment beyond the scope of normal household or domestic duties such as home health care or domiciliary care.

(2)(3)  "Employee" means:

(a) an officer, employee, or elected public official of the United States, the state of Montana, or any political subdivision of the United States or Montana or any agency or instrumentality of the United States, the state of Montana, or a political subdivision of the United States or Montana. The term also includes;

(b) an officer of a corporation.;

(c) any individual who performs services for another individual or organization having the right to control the employee as to the services to be performed and as to the manner of performance;

(d) all classes, grades, or types of employees including minors and aliens, superintendents, managers, and other supervisory personnel.

(3)(4)  "Employer" means:

(a) the person for whom an individual performs or performed any service, of whatever nature, as an employee of the person. However, if the person for whom the individual performs or performed the service does not have control of the payment of the wages for the service, the term means the person who has control of the payment of wages.;

(b) a person who pays $1,000 or more in wages within the current calendar year;

(c) a person who pays $1,000 or more in cash for domestic or household service in any quarter during the current calendar year;

(d) any individual or organization, including state government and any of its political subdivisions or instrumentalities, partnership, association, trust, estate, joint-stock company, insurance company, limited liability company or a limited liability partnership that has filed with the secretary of state, or domestic or foreign corporation or the receiver, trustee in bankruptcy, trustee or the trustee's successor, or legal representative of a deceased person who has or had in its employ one or more individuals performing services for it within this state; or

(e) any person found to be an employer under Title 39, chapter 51, for unemployment insurance purposes is considered an employer for state income tax withholding purposes.

(4)(5)  "Independent contractor" means an individual who renders service in the course of an occupation and:

(a)  has been and will continue to be free from control or direction over the performance of the services, both under contract and in fact; and

(b)  is engaged in an independently established trade, occupation, profession, or business.

(5)(6)  "Lookback period" means the 12-month period ending the preceding June 30.

(6)(7) (a) "Wages", unless specifically exempted under subsection (7)(b) means all remuneration, other than fees paid to a public official, for services performed by an employee for the employer, including the cash value of all remuneration paid in any medium other than cash, except that the term does not include remuneration paid: and includes but is not limited to the following:

(i) commissions, bonuses, and remuneration paid for overtime work, holidays, vacations and sickness periods;

(ii) severance or continuation pay, back pay, and any similar pay made for or in regard to previous service by the employee for the employer, other than retirement or pension benefits from a qualified plan; and

(iii) except those tips that are exempted in subsection (7)(b)(v), tips or other gratuities received by the employee, to the extent that the tips or gratuities are:

(A) documented by the employee to the employer for tax purposes;

(B) disbursed by the employer from a tip pool; or

(C) added to the customer's bill by the employer.

(a)  for active service as a member of the regular armed forces of the United States, as defined in 10 U.S.C. 101(33);

(b)  for agricultural labor;

(c)  for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority;

(d)  for casual labor not in the course of the employer's trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. For purposes of this subsection (d), an individual is considered to be regularly employed by an employer during a calendar quarter only if:

(i)  on each of 24 days during a quarter, the individual performs service not in the course of the employer's trade or business for the employer for some portion of the day; and

(ii) the individual was regularly employed, as determined under subsection (6)(d)(i), by the employer in the performance of service during the preceding calendar quarter.

(e)  for services by a citizen or resident of the United States for a foreign government or an international organization;

(f)  for services performed by an ordained, commissioned, or licensed minister of a church in the exercise of the ministry or by a member of a religious order in the exercise of duties required by the order;

(g)  (i) for services performed by an individual under 18 years of age in the delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution; or

(ii) for services performed by an individual in and at the time of the sale of newspapers or magazines to ultimate consumers under an arrangement under which the newspapers or magazines are to be sold by the individual at a fixed price, with the individual's compensation based on the retention of the excess of the price over the amount at which the newspapers or magazines are charged to the individual, whether or not the individual is guaranteed a minimum amount of compensation for the service or is entitled to be credited with the unsold newspapers or magazines turned back;

(h)  for services not in the course of the employer's trade or business to the extent paid in any medium other than cash when the payments are in the form of lodgings or meals and the services are received by the employee at the request of and for the convenience of the employer;

(i)  to or for an employee as a payment for or a contribution toward the cost of any group plan or program that benefits the employee, including but not limited to life insurance, hospitalization insurance for the employee or dependents, and employees' club activities;

(j)  as tips or gratuities that are in accordance with section 3402(k) or service charges that are covered by section 3401 of the Internal Revenue Code of 1954, as amended and applicable on January 1, 1983, received by persons for services rendered by them to patrons of premises licensed to provide food, beverage, or lodging;

(k)  by an employer for dependent care assistance actually provided to or on behalf of an employee and for which a credit is allowed under 15-30-186 or 15-31-131, subject to the limitations provided in section 129(b) of the Internal Revenue Code as it read on January 1, 1989. (Subsection (6)(j) terminates on occurrence of contingency--sec. 3, Ch. 634, L. 1983.)

(b) The term "wages" does not include:

(i) the amount of any payment made by the employer FOR EMPLOYEES, if the payment was made pursuant to a qualified plan as defined under the provisions of the Internal Revenue Code established for employees for:

(A) retirement or pension PURSUANT TO A QUALIFIED PLAN AS DEFINED UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE;

(B) sickness or accident disability under a workers' compensation policy;

(C) medical or hospitalization expenses in connection with sickness or accident disability, including health insurance for the employee or the employee's immediate family; or

(D) death, including life insurance for the employee or the employee's immediate family;

(ii) compensation in the form of meals and lodging, provided the compensation is not includable in gross income for state individual income tax purposes;

(iii) distributions from a multiple employer welfare arrangement, as defined in 29 U.S.C. 1002(40)(A), to a qualified individual employee;

(iv) payments made by an employee to any group plan or program to the extent that the payments are not taxable for state income tax purposes;

(v) tips or gratuities that are in accordance with 26 U.S.C. 3402(k) or service charges that are covered by 26 U.S.C. 3401 of the Internal Revenue Code, as amended and applicable on January 1, 1983, received by persons for services rendered by them to patrons of premises licensed to provide food, beverage, or lodging; or

(vi) payments that may not be taxed under federal law."



Section 11.  Section 15-30-202, MCA, is amended to read:

"15-30-202.   Withholding of tax from wages. (1) Each employer making payment of wages for employment as defined in [section 5] shall withhold from wages a tax determined in accordance with the withholding tax tables prepared and issued by the department. Persons on active service as members of the regular armed forces of the United States, as defined in 10 U.S.C. 101(33), are not subject to the provisions of this section.

(2) An employer who maintains two or more separate establishments within this state is considered to be a single employer for the purposes of this part."



Section 12.  Section 15-30-203, MCA, is amended to read:

"15-30-203.   Employer liable for withholding employment taxes. (1) Each employer is liable for the reports and payments required by 15-30-204, the amounts required to be deducted and withheld under this part, and the amounts plus interest due on the amounts are a tax. With respect to the tax, the employer is the taxpayer.

(2)  The officer or employee of a corporation whose duty it is to collect, truthfully account for, and pay to the state the amounts withheld from the corporation's employees 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 or employee of the corporation is individually liable along with the corporation for filing reports to the extent that the officer or employee has access to the requisite records and for unpaid taxes, penalties, and interest upon a determination that the officer or employee:

(i) possessed the authority, duty, and responsibility to file reports and pay taxes on behalf of the corporation;

(ii) possessed the authority on behalf of the corporation to direct the filing of reports and payment of taxes by other employees or agents of the corporation; or

(iii) possessed the authority on behalf of the corporation for directing the filing of tax reports or the payment of other corporate obligations and exercised that authority resulting in the corporation's failure to file reports required by this part or pay taxes due as required by this part.

(b) 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 reports and the amount of taxes, penalties, and interest unpaid by the corporation.

(5) For the purpose of determining liability for the filing of reports and the remittance of taxes, penalties, and interest owed under this part, a member-managed limited liability company must be treated as a partnership with liability for filing reports and remitting taxes, penalties, and interest owed extending to each member who was a member at the time the report or taxes were due.

(6) For determining personal liability for the failure to file reports and remit taxes, penalties, and interest owed by a manager-managed limited liability company, the managers of the limited liability company are jointly and severally liable along with the limited liability company for reports and any taxes, penalties, and interest owed.

(7) For determining personal liability for the failure to file reports and remit taxes, penalties, and interest owed by a limited liability partnership, the partners of the limited liability partnership are jointly and severally liable, along with the limited liability partnership, for reports and any taxes, penalties, and interest due.

(3)(8)  If the employer fails to deduct and withhold the amounts specified in 15-30-202 and thereafter 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 employer."



Section 13.  Section 15-30-204, MCA, is amended to read:

"15-30-204.   Weekly, monthly, or annual payment Reporting and remittance requirements. (1) An employer subject to the provisions of 15-30-202 and 15-30-203 whose total liability for withholdings during the preceding lookback period was $12,000 or greater shall file a return in the form and containing the information that may be required by the department and shall pay the amount required by 15-30-202 to be deducted and withheld by the employer from wages paid during the preceding payroll period. The payment must be submitted on or before the date on which federal income tax weekly withholding payments are due. On or before the last day of April, July, October, and January, the employer shall file a return in the form and containing the information required by the department. The quarterly returns for employers subject to this subsection must be used to summarize and adjust payments and to request refunds of overpayments. The employer shall also file the annual statement as required by 15-30-207.

(2)  An employer subject to the provisions of 15-30-202 and 15-30-203 whose total liability for withholdings during the preceding lookback period was less than $12,000 but greater than $1,199 shall remit a monthly payment to the department for the amount required by 15-30-202 to be deducted and withheld by the employer from wages paid during the preceding month. The monthly payment must be submitted on or before the 15th day of the month following the payment of the wages. The employer subject to this subsection shall, on or before February 28 of the year following payment of the wages, file an annual return in the form and containing the information required by the department and the annual statement required by 15-30-207. The annual returns for employers subject to this subsection must be used to summarize and adjust payments and to request refunds of overpayments.

(1) For the purposes of this section, employers shall remit their taxes in accordance with the appropriate remittance schedule as follows:

(a) Employers whose total liability for state income tax withholding during the preceding lookback period was $12,000 or more shall remit on an "accelerated schedule", which is the same as the employer's federal due dates for federal tax deposits.

(b) Employers whose total liability for state income tax withholding during the preceding lookback period was less than $12,000 but more than $1,199 shall remit on a "monthly schedule" for which the remittance due date is on or before the 15th day of the month following the payment of wages.

(c) Employers whose total liability for state income tax withholding during the preceding lookback period was less than $1,200 shall remit on a "quarterly schedule" for which the remittance due date is on or before the last day of the month following the close of each calendar quarter.

(d) Employers who are not subject under Title 39, chapter 51, for unemployment insurance and whose total liability for state income tax withholding, or if state income tax withholding is not required, whose total liability for old fund liability tax during the preceding lookback period was less than $1,200, may remit on an "annual schedule" for which the remittance is due on or before February 28 of the year following payment of wages.

(2) (a) Every employer is required to file a report quarterly in the form required by the department.

(b) The report is due on or before the last day of the month following the close of the calendar quarter.

(c) An employer who is not subject under Title 39, chapter 51, to unemployment insurance may elect to file an annual report on or before February 28 for the preceding calendar year.

(d) An employer who has no payroll during a quarter may elect to report "no wages paid this quarter" using alternative reporting methods provided in department rules.

(e) An employer, in addition to the scheduled reports and remittances, must file the annual report and wage statements as required by 15-30-207.

(3)  (a) If the total amount of the tax withheld by an employer under the provisions of 15-30-202 upon the wages of all employees of any employer is less than $1,200 for the preceding lookback period, the employer shall, on or before February 28 of the year succeeding that in which the wages were paid, file an annual return in the form required by the department, together with the annual statement required by 15-30-207, and shall at the same time pay the amount required to be deducted and withheld by the employer from all wages paid during the preceding calendar year.

(b)  An employer subject to the provisions of this subsection (3) may elect to remit monthly payments. If an employer elects to make monthly payments, the employer shall remit monthly payments during the entire year and is subject to the same interest and penalty provisions as employers subject to the provisions of subsection (2).

(3) (a) Except as provided in subsection (3)(g), payments are due as required according to the remittance schedule for each employer.

(c)(b)  If an employer subject to the provisions of this subsection (3) (1)(d) does not file the annual return required by subsection (3)(a), comply with the requirements of this section, the employer is may be subject to the payment and filing provisions of quarterly reporting schedule provided in subsection (2)(a) and to the quarterly remittance schedule provided in subsection (1)(c) until the department determines from the employer's subsequent filing and payment history that the employer will file and remit in a timely fashion.

(4)(a)(c)  On or before November 1 of each year, the department shall notify the employers subject to the provisions of this section of the employers' remittance schedules for the following calendar year based upon the department's review of the preceding lookback period.

(b)(d)  A Except as provided in subsection (3)(g), a new employer or an employer with no filing history is subject to the provisions of subsection (2) the quarterly remittance schedule in subsection (1)(c) until the department is able to determine the employer's proper remittance schedule by a review of the employer's first complete lookback period.

(e) An employer who is subject to the quarterly schedule in subsection (1)(c) may elect to remit payments on a more frequent basis. An employer who is on an annual schedule may elect to remit monthly or quarterly payments.

(f) An employer who exceeds either threshold as defined in 15-30-201(4)(b) and (4)(c), must begin withholding state income tax on or before the last day of the month following the quarter in which the wages paid exceeded the threshold requirements. The employer is subject to the quarterly remittance schedule until the department is able to determine the employer's proper remittance schedule by a review of the employer's first complete lookback period.

(g) An employer who is not subject to unemployment insurance under Title 39, chapter 51, and whose estimated annual state income tax withholding, or if state income tax withholding is not required, whose estimated old fund liability tax, is not expected to exceed $1,199 for the calendar year may remit according to the annual schedule and report annually on or before February 28.

(h) An employer may use alternative remittance methods in conjunction with the department's electronic remittance program in accordance with department rules.

(5)(4) If the department has reason to believe that collection of the amount of any tax withheld is in jeopardy, it may proceed as provided for under 15-30-312 with respect to jeopardy assessments of income tax 15-1-703.

(5) Each employer shall keep true and accurate payroll 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. An employer who maintains its records outside Montana shall furnish copies of those records to the department at the employer's expense."



Section 14.  Section 15-30-207, MCA, is amended to read:

"15-30-207.   Annual statement by employer. (1) Every employer shall, on or before February 28 in each year, file with the department a wage and tax statement for each employee in such the form and summarizing such information as the department requires, including the total wages paid to the employee during the preceding calendar year or any part thereof of the calendar year and showing the total amount of the federal income tax deducted and withheld from such the wages and the total amount of the tax deducted and withheld therefrom from the wages under the provisions of 15-30-201 through 15-30-209 and 39-71-2503.

(2)  The annual statement filed by an employer with respect to the wage payments reported constitutes full compliance with the requirements of 15-30-301 relating to the duties of information agents, and no additional information return is not required with respect to such the wage payments.

(3)  In addition to any other penalty provided by law, the failure of an employer to furnish a statement as required by subsection (1) subjects the employer to a penalty of $5 for each failure, provided that the minimum penalty for failure to file the statements required on or before February 28 of each year shall be $50. This penalty may be abated by the department upon a showing of good cause by the employer. The penalty may be collected in the same manner as are other tax debts."



Section 15.  Section 15-30-208, MCA, is amended to read:

"15-30-208.   Withheld taxes held in trust for state -- warrants to collect. (1) Every employer who deducts and withholds any amounts under the provisions of 15-30-201 through 15-30-209 shall hold the same amounts in trust for the state of Montana.

(2)  If any tax imposed by 15-30-201 through 15-30-209 or any portion of such tax is not paid when due, the department may issue a warrant for distraint as provided in Title 15, chapter 1, part 7. The priority date of the tax lien created by filing the warrant for distraint is the date the tax was due as indicated on the warrant for distraint.

(3)  The tax lien provided for in subsection (2) is not valid against any third party owning an interest in the real or personal property whose interest is recorded prior to the filing of the warrant for distraint if the third party receives from the most recent grantor of the interest an affidavit stating that all taxes, assessments, penalties, and interest due from the grantor have been paid.

(4)  A grantor who signs and delivers to the third party an affidavit as provided in subsection (3) is subject to the penalties imposed by 15-30-321(3) if any part of the affidavit is untrue. Notwithstanding the provisions of 15-30-321(3), the department may bring an action as provided for in that subsection in the name of the state to recover the civil penalty and any delinquent taxes."



Section 16.  Section 15-30-209, MCA, is amended to read:

"15-30-209.   Violations by employer -- penalties, interest, and remedies. (1) If any employer shall fail to pay over to the state the tax deducted and withheld under the provisions of 15-30-201 through 15-30-208 or shall fail to file or furnish any statement provided for within the time prescribed therefor, the same additions to the amount of such tax shall be imposed and added as those specified in 15-30-321 with respect to failure to make a return of income or to pay any income tax, and any individual, corporation, or partnership or any officer or employee thereof who, with intent to evade any tax or any requirement of 15-30-201 through 15-30-208, or who, with like intent, files or supplies any false or fraudulent statement or information shall be liable to the same penalties as those imposed by 15-30-321 with respect to filing or supplying any false or fraudulent statement or information with respect to income taxes The first time in any consecutive 3-year period that an employer files a report or remits a tax after the due date, the department shall issue a warning notice explaining to the employer that the employer failed to file a report on the due date as required by law and, if applicable, that the employer failed to remit the tax on the due date as required by law and the department shall notify the employer of the consequences of any further subsequent late reporting or late remittance.

(2) (a) A late report penalty may not be assessed if an employer files the late report prior to the issuance of a notice of delinquent report.

(b) If the report is not received prior to the issuance of a notice of delinquent report, a $50 penalty must be assessed at the same time the notice is issued.

(3) (a) Taxes unpaid on the date on which they are due and payable are subject to a penalty of 2% per month, or any portion of a month, on the late paid tax with a maximum penalty of 24%.

(b) A late payment penalty may be suspended if an acceptable payment agreement is made between the department and the employer. An employer's failure to meet the terms of the payment agreement voids the suspension and the penalty must be recomputed from the due date on the unpaid tax.

(4) An employer must be assessed interest at the rate of 18% a year, computed at 1 1/2% a month or fraction of a month, on any remaining unpaid tax required to be paid.

(5) (a) A subpoena penalty of $50 must be assessed whenever, as the result of a refusal of an employer to furnish wage information or pay taxes on time, the department issues a subpoena pursuant to 15-1-302, to obtain wage information or make a summary or jeopardy assessment pursuant to 15-1-703.

(b) If an employer fails to honor the subpoena provided in subsection (5)(a), an additional $100 penalty must be added to the liability.

(6) In addition to any other penalty provided by law, the failure of an employer to furnish a wage and tax statement as required by 15-30-207(1) subjects the employer to a penalty of $5 for each failure with a minimum of $50.

(7) Penalties may be waived by the department upon a showing of good cause by the employer. The penalty may be collected in the same manner as are other tax debts including a tax lien.

(8) If any tax imposed by this chapter or any portion of the tax is not paid when due, the department may issue a warrant for distraint as provided in Title 15, chapter 1, part 7. The priority date of the tax lien created by filing the warrant for distraint is the date the tax was due as indicated on the warrant for distraint.

(9) The tax lien provided for in subsection (8) is not valid against any third party owning an interest in the real or personal property whose interest is recorded prior to the filing of the warrant for distraint if the third party receives from the most recent grantor of the interest an affidavit stating that all taxes, assessments, penalties, and interest due from the grantor have been paid.

(10) A grantor who signs and delivers to the third party an affidavit as provided in subsection (9) is subject to the penalties imposed by 15-30-321(3) if any part of the affidavit is untrue. Notwithstanding the provisions of 15-30-321(3), the department may bring an action as provided in that subsection in the name of the state to recover the civil penalty and any delinquent taxes.

(2)(11)  All of the remedies available to the state for the administration, enforcement, and collection of income taxes shall be are available and shall apply to the tax required to be deducted and withheld under the provisions of 15-30-201 through 15-30-208 unless otherwise specifically addressed in this part."



Section 17.  Section 37-31-101, MCA, is amended to read:

"37-31-101.   Definitions. Unless the context requires otherwise, in this chapter, the following definitions apply:

(1)  "Board" means the board of cosmetologists provided for in 2-15-1857.

(2)  "Booth" means any part of a cosmetology salon or manicuring salon that is rented or leased for the performance of cosmetologist services, as specified in 39-51-204(1)(l)(1)(e).

(3)  "Cosmetology salon" means premises, building, or part of a building in which is practiced a branch or combination of branches of cosmetology or the occupation of a hairdresser and cosmetician or cosmetologist and that must have a manager-operator in charge.

(4)  "Department" means the department of commerce provided for in Title 2, chapter 15, part 18.

(5)  "Manicuring" includes nail care of the hands and feet and the application and maintenance of artificial nails.

(6)  "Manicuring salon" means premises, a building, or part of a building in which the art of manicuring is practiced.

(7)  "Practice and teaching of cosmetology" means work included in the terms "hairdressing", "manicuring", and "beauty culture" and performed in cosmetology salons, in booths, or by itinerant cosmetologists, which work is done for the embellishment, cleanliness, and beautification of the hair, scalp, face, arms, feet, or hands. The practice and teaching of cosmetology may not be construed to include itinerant cosmetologists who perform their services without compensation for demonstration purposes in any regularly established store or place of business holding a license from the state of Montana as a store or place of business."



Section 18.  Section 39-51-201, MCA, is amended to read:

"39-51-201.   General definitions. As used in this chapter, unless the context clearly requires otherwise, the following definitions apply:

(1)  "Annual payroll" means the total amount of wages paid by an employer, regardless of the time of payment, for employment during a calendar year.

(2)  "Base period" means the first 4 of the last 5 completed calendar quarters immediately preceding the first day of an individual's benefit year. However, in the case of a combined-wage claim pursuant to the arrangement approved by the secretary of labor of the United States, the base period is the period applicable under the unemployment law of the paying state. For an individual who fails to meet the qualifications of 39-51-2105 or a similar statute of another state because of a temporary total disability, as defined in 39-71-116, or a similar statute of another state or the United States, the base period means the first 4 quarters of the last 5 quarters preceding the disability if a claim for unemployment benefits is filed within 24 months of the date on which the individual's disability was incurred.

(3)  "Benefits" means the money payments payable to an individual, as provided in this chapter, with respect to the individual's unemployment.

(4)  "Benefit year", with respect to any individual, means the 52-consecutive-week period beginning with the first day of the calendar week in which the individual files a valid claim for benefits, except that the benefit year is 53 weeks if filing a new valid claim would result in overlapping any quarter of the base year of a previously filed new claim. A subsequent benefit year may not be established until the expiration of the current benefit year. However, in the case of a combined-wage claim pursuant to the arrangement approved by the secretary of labor of the United States, the base period is the period applicable under the unemployment law of the paying state.

(5)  "Board" means the board of labor appeals provided for in Title 2, chapter 15, part 17.

(6)  "Calendar quarter" means the period of 3 consecutive calendar months ending on March 31, June 30, September 30, or December 31.

(7)  "Contributions" means the money payments to the state unemployment insurance fund required by this chapter but does not include assessments under 39-51-404(4).

(8)  "Department" means the department of labor and industry provided for in Title 2, chapter 15, part 17.

(9) "Domestic or household service" means employment of persons other than members of the household for the purpose of tending to the aid and comfort of the employer or members of the employer's family, including but not limited to housecleaning and yard work but does not include employment beyond the scope of normal household or domestic duties such as home health care or domiciliary care.

(9)(10)  "Employing unit" means any individual or organization (including the state government and any of its political subdivisions or instrumentalities), partnership, association, trust, estate, joint-stock company, insurance company, limited liability company that has filed with the secretary of state, or corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee or the trustee's successor, or legal representative of a deceased person that has or had in its employ one or more individuals performing services for it within this state, except as provided under 39-51-204(1)(a) and (1)(b)(1)(A) and (1)(q). All individuals performing services within this state for any employing unit that maintains two or more separate establishments within this state are considered to be employed by a single employing unit for all the purposes of this chapter. Each individual employed to perform or assist in performing the work of any agent or employee of an employing unit is considered to be employed by the employing unit for the purposes of this chapter, whether the individual was hired or paid directly by the employing unit or by the agent or employee, provided that the employing unit has actual or constructive knowledge of the work.

(10)(11) "Employment office" means a free public employment office or branch of an office operated by this state or maintained as a part of a state-controlled system of public employment offices or such other free public employment offices operated and maintained by the United States government or its instrumentalities as the department may approve.

(11)(12) "Fund" means the unemployment insurance fund established by this chapter to which all contributions and payments in lieu of contributions are required to be paid and from which all benefits provided under this chapter must be paid.

(12)(13) "Gross misconduct" means a criminal act, other than a violation of a motor vehicle traffic law, for which an individual has been convicted in a criminal court or has admitted or conduct that demonstrates a flagrant and wanton disregard of and for the rights or title or interest of a fellow employee or the employer.

(13)(14) "Hospital" means an institution that has been licensed, certified, or approved by the state as a hospital.

(14)(15) "Independent contractor" means an individual who renders service in the course of an occupation and:

(a)  has been and will continue to be free from control or direction over the performance of the services, both under a contract and in fact; and

(b)  is engaged in an independently established trade, occupation, profession, or business.

(15)(16) (a) "Institution of higher education", for the purposes of this part, means an educational institution that:

(i)  admits as regular students only individuals having a certificate of graduation from a high school or the recognized equivalent of a certificate;

(ii) is legally authorized in this state to provide a program of education beyond high school;

(iii) provides an educational program for which it awards a bachelor's or higher degree or provides a program that is acceptable for full credit toward a bachelor's or higher degree, a program of postgraduate or postdoctoral studies, or a program of training to prepare students for gainful employment in a recognized occupation; and

(iv) is a public or other nonprofit institution.

(b)  Notwithstanding subsection (15)(a) (16)(a), all universities in this state are institutions of higher education for purposes of this part.

(16)(17) "State" includes, in addition to the states of the United States of America, the District of Columbia, Puerto Rico, the Virgin Islands, and the Dominion of Canada.

(17)(18) "Taxes" means contributions and assessments required under this chapter but does not include penalties or interest for past-due or unpaid contributions or assessments.

(18)(19) "Unemployment insurance administration fund" means the unemployment insurance administration fund established by this chapter from which administrative expenses under this chapter must be paid.

(19)(20) (a) "Wages", unless specifically exempted under subsection (20)(b), means all remuneration payable for personal services, including commissions and bonuses, the cash value of all remuneration payable paid in any medium other than cash, and backpay received pursuant to a dispute related to employment. The reasonable cash value of remuneration payable in any medium other than cash must be estimated and determined pursuant to rules prescribed by the department. The term includes but is not limited to:

(i) commissions, bonuses, and remuneration paid for overtime work, holidays, vacations and sickness periods;

(ii) severance or continuation pay, back pay, and any similar pay made for or in regard to previous service by the employee for the employer, other than retirement or pension benefits from a qualified plan; and

(iii) tips or other gratuities received by the employee, to the extent that the tips or gratuities are:

(A) documented by the employee to the employer for tax purposes;

(B) disbursed by the employer from a tip pool; or

(C) added to the customer's bill by the employer.

(b)  The term "wages" does not include:

(i)  the amount of any payment made by the employer FOR EMPLOYEES, if the payment was made under a qualified plan as defined under the provisions of the Internal Revenue Code, established for the employees in general or for a specific class or classes of employees, to or on behalf of the employee for:

(A)  retirement or pension PURSUANT TO A QUALIFIED PLAN AS DEFINED UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE;

(B)  sickness or accident disability under a workers' compensation law policy;

(C)  medical and or hospitalization expenses in connection with sickness or accident disability including health insurance for the employee or the employee's immediate family; or

(D)  death;, including life insurance for the employee or the employee's immediate family; or

(ii) remuneration paid by a county welfare office from public assistance funds for services performed at the direction and request of the county welfare office; or

(iii) employee expense reimbursements or allowances for meals, lodging, travel, subsistence, or other expenses, as set forth in department rules.

(20)(21) "Week" means a period of 7 consecutive calendar days ending at midnight on Saturday.

(21)(22) An individual's "weekly benefit amount" means the amount of benefits that the individual would be entitled to receive for 1 week of total unemployment."



Section 19.  Section 39-51-204, MCA, is amended to read:

"39-51-204.   Exclusions from definition of employment. (1) The term "employment" does not include:

(a)  agricultural labor, except as provided in 39-51-202(2). If an employer is otherwise subject to this chapter and has agricultural employment, all employees engaged in agricultural labor must be excluded from coverage under this chapter if the employer:

(i)  in any quarter or calendar year, as applicable, does not meet either of the tests relating to the monetary amount or number of employees and days worked, for the subject wages attributable to agricultural labor; and

(ii)  keeps separate books and records to account for the employment of persons in agricultural labor.

(b)  household and domestic domestic or household service in a private home, local college club, or local chapter of a college fraternity or sorority, except as provided in 39-51-202(3). If an employer is otherwise subject to this chapter and has domestic or household service employment, all employees engaged in domestic or household service must be excluded from coverage under this chapter if the employer:

(i)  does not meet the monetary payment test in any quarter or calendar year, as applicable, for the subject wages attributable to domestic or household service; and

(ii)  keeps separate books and records to account for the employment of persons in domestic or household service.

(c)  service performed as an officer or member of the crew of a vessel on the navigable waters of the United States;

(d)(b)  service performed by an individual in the employ of that individual's son, daughter, or spouse and service performed by a child under the age of 21 in the employ of the child's father or mother a dependent member of a sole proprietor for whom an exemption may be claimed under 26 U.S.C. 152 or service performed by a sole proprietor's spouse for whom an exemption based on marital status may be claimed by the sole proprietor under 26 U.S.C. 7703;

(e)  service performed in the employ of any other state or its political subdivisions or of the United States government or of an instrumentality of any other state or states or their political subdivisions or of the United States, except that national banks organized under the national banking law may not be entitled to exemption under this subsection and are subject to this chapter the same as state banks, provided that the service is excluded from employment as defined in section 3306(c)(7) of the Federal Unemployment Tax Act (26 U.S.C. 3306(c)(7));

(f)  service in which unemployment insurance is payable under an unemployment insurance system established by an act of congress if the department enters into agreements with the proper agencies under an act of congress and those agreements become effective in the manner prescribed in the Montana Administrative Procedure Act for the adoption of rules, to provide reciprocal treatment to individuals who have, after acquiring potential rights to benefits under this chapter, acquired rights to unemployment insurance under an act of congress or who have, after acquiring potential rights to unemployment insurance under the act of congress, acquired rights to benefits under this chapter;

(g)(c)  services service performed as a freelance correspondent or newspaper carrier or free-lance correspondent if the person performing the services service, or a parent or guardian of the person performing the services service in the case of a minor, has acknowledged in writing that the person performing the services service and the services service are not covered. As used in this subsection:

(i)  "free-lance "freelance correspondent" is a person who submits articles or photographs for publication and is paid by the article or by the photograph; and

(ii)  "newspaper carrier" means a person who provides a newspaper with the service of delivering newspapers singly or in bundles. The term does not include an employee of the paper who, incidentally to the employee's main duties, carries or delivers papers.

(h)(d)  services service performed by as a real estate, securities, and insurance salespeople paid solely by commissions and without guarantee of minimum earnings broker or salesperson who is licensed pursuant to Title 37, chapter 51;

(i)  service performed in the employ of a school or university if the service is performed by a student who is enrolled and is regularly attending classes at a school or university or by the spouse of a student if the spouse is advised, at the time that the spouse commences to perform the service, that the employment of the spouse to perform the service is provided under a program to provide financial assistance to the student by the school or university and that the employment will not be covered by any program of unemployment insurance;

(j)  service performed by an individual who is enrolled at a nonprofit or public educational institution, which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on, as a student in a full-time program taken for credit at an institution that combines academic instruction with work experience if the service is an integral part of the program and the institution has certified that fact to the employer, except that this subsection does not apply to service performed in a program established for or on behalf of an employer or group of employers;

(k)  service performed in the employ of a hospital if the service is performed by a patient of the hospital;

(l)(e)  services service performed by a cosmetologist who is licensed under Title 37, chapter 31, or a barber who is licensed under Title 37, chapter 30, and:

(i)  who has acknowledged in writing that the cosmetologist or barber is not covered by unemployment insurance and workers' compensation;

(ii)  who contracts with a cosmetology salon, as defined in 37-31-101, or a barbershop, as defined in 37-30-101, which contract must show that the cosmetologist or barber:

(A)  is free from all control and direction of the owner in the contract;

(B)  receives payment for services service from individual clientele; and

(C)  leases, rents, or furnishes all of the cosmetologist's or barber's own equipment, skills, or knowledge; and

(iii)  whose contract gives rise to an action for breach of contract in the event of contract termination. (the The existence of a single license for the cosmetology salon or barbershop may not be construed as a lack of freedom from control or direction under this subsection);.

(m)(f)  casual labor not in the course of an employer's trade or business performed in any calendar quarter, unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. "Regularly employed" means that the services are service is performed during at least 24 days in the same quarter.

(n)(g)  employment of service performed by sole proprietors, working members of a partnership, or members of a member-managed limited liability company that has filed with the secretary of state or partners in a limited liability partnership that has filed with the secretary of state;

(o)(h)  services service performed for the installation of floor coverings if the installer:

(i)  bids or negotiates a contract price based upon work performed by the yard or by the job;

(ii)  is paid upon completion of an agreed-upon portion of the job or after the job is completed;

(iii)  may perform services service for anyone without limitation;

(iv)  may accept or reject any job;

(v)  furnishes substantially all tools and equipment necessary to provide the services service; and

(vi)  works under a written contract that:

(A)  gives rise to a breach of contract action if the installer or any other party fails to perform the contract obligations;

(B)  states that the installer is not covered by unemployment insurance; and

(C)  requires the installer to provide a current workers' compensation policy or to obtain an exemption from workers' compensation requirements;

(p)(i)  employment of service performed as a direct seller. as defined in 26 U.S.C. 3508 As used in this section, "direct seller" means a person:

(i) who sells, or offers for sale, a tangible consumer product, including but not limited to cosmetics, vacuum cleaners, and cleaning products at the home of the consumer;

(ii) whose pay is determined by the quantity of product sold; and

(iii) who works under a written contract that states the person will not be treated as an employee;

(q)(j)  services service performed by a petroleum land professional. As used in this subsection, "petroleum land professional" means a person who:

(i)  is engaged primarily in negotiating for the acquisition or divestiture of mineral rights or in negotiating a business agreement for the exploration or development of minerals;

(ii) is paid for services service that are is directly related to the completion of a contracted specific task rather than on an hourly wage basis; and

(iii) performs all services as an independent contractor pursuant to a written contract.

(2)  Employment does not include elected public officials.

(3)  For the purposes of 39-51-203(6), the term "employment" does not apply to service performed:

(a)  in the employ of a church or convention or association of churches or an organization that is operated primarily for religious purposes and that is operated, supervised, controlled, or principally supported by a church or convention or association of churches;

(b)(k)  service performed by an ordained, commissioned, or licensed minister of a church in the exercise of the church's ministry or by a member of a religious order in the exercise of duties required by the order;

(c)(l)  service performed by an individual receiving rehabilitation or remunerative work in a facility conducted for the purpose of carrying out a program of rehabilitation for individuals whose earning capacity is impaired by age or physical or mental deficiency or injury or providing remunerative work for individuals who, because of impaired physical or mental capacity, cannot be readily absorbed in the competitive labor market by an individual receiving rehabilitation or remunerative work;

(d)(m) service performed as part of an unemployment work-relief or work-training program assisted or financed in whole or in part by a federal agency or any agency of a state or political subdivision of the state by an individual receiving work relief or work training; or

(e)(n) service performed for a state prison or other state correctional or custodial institution by an inmate of that institution.;

(o) service performed by an individual who is sentenced to perform court-ordered community service or similar work;

(p) service performed by elected public officials;

(q) agricultural labor, except as provided in 39-51-202(2). If an employer is otherwise subject to this chapter and has agricultural employment, all employees engaged in agricultural labor must be excluded from coverage under this chapter if the employer:

(i) in any quarter or calendar year, as applicable, does not meet either of the tests relating to the monetary amount or number of employees and days worked for the subject wages attributable to agricultural labor; and

(ii) keeps separate books and records to account for the employment of persons in agricultural labor.

(r) service performed in the employ of any other state or its political subdivisions or of the United States government or of an instrumentality of any other state or states or their political subdivisions or of the United States, except that national banks organized under the national banking law are not entitled to exemption under this subsection and are subject to this chapter the same as state banks, if the service is excluded from employment as defined in section 3306(c)(7) of the Federal Unemployment Tax Act;

(s) service in which unemployment insurance is payable under an unemployment insurance system established by an act of congress if the department enters into agreements with the proper agencies under an act of congress and those agreements become effective in the manner prescribed in the Montana Administrative Procedure Act for the adoption of rules, to provide reciprocal treatment to individuals who have, after acquiring potential rights to benefits under this chapter, acquired rights to unemployment insurance under an act of congress or who have, after acquiring potential rights to unemployment insurance under the act of congress, acquired rights to benefits under this chapter;

(t) service performed in the employ of a school or university if the service is performed by a student who is enrolled and is regularly attending classes at a school or university or by the spouse of a student if the spouse is advised, at the time that the spouse commences to perform the service, that the employment of the spouse to perform the service is provided under a program to provide financial assistance to the student by the school or university and that the employment is not covered by any program of unemployment insurance;

(u) service performed by an individual who is enrolled at a nonprofit or public educational institution that normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on, as a student in a full-time program taken for credit at an institution that combines academic instruction with work experience if the service is an integral part of the program and the institution has certified that fact to the employer, except that this subsection (1)(u) does not apply to service performed in a program established for or on behalf of an employer or group of employers;

(v) service performed as an officer or member of the crew of a vessel on the navigable waters of the United States; or

(w) service performed by an alien admitted to the United States to perform agricultural labor pursuant to sections 214(c) and 1101(a)(H)(ii)(a) of the Immigration and Nationality Act.

(4)(2)  An individual found to be an independent contractor by the department under the terms of 39-71-401(3) is considered an independent contractor for the purposes of this chapter. An independent contractor is not precluded from filing a claim for benefits and receiving a determination pursuant to 39-51-2402.

(5)(3)  This section does not apply to a state or local governmental entity or a nonprofit organization defined under section 501(c)(3) of the Internal Revenue Code unless the service is excluded from employment as defined in the Federal Unemployment Tax Act."



Section 20.  Section 39-51-301, MCA, is amended to read:

"39-51-301.   Administration -- duties and powers of department. (1) It shall be is the duty of the department to administer this chapter and it shall have power and authority to may adopt, amend, or rescind such rules, to employ such persons, make such expenditures, require such reports, make such investigations, and take such other action as it deems considers necessary or suitable to that end in administering this chapter.

(2)  The department shall determine its own organization and methods of procedure in accordance with the provisions of this chapter and shall have an official seal, which shall be is judicially noticed.

(3)  Whenever the department believes that a change in contribution or benefit rates will become necessary to protect the solvency of the fund, it shall promptly so inform the governor and the legislature and make recommendations with respect thereto to the change.

(4)  The department and the board may issue subpoenas and compel testimony and the production of evidence, including books and records, in regard to any investigation or proceeding under this chapter.

(5) The department shall delegate to the department of revenue duties associated with the administration of unemployment insurance contributions and the employment security account so long as the duties are carried out in conformity with the requirements of the program budget plan with the United States department of labor. The delegated duties do not include oversight duties such as revenue quality control, risk management, and trust fund management. The department of revenue must receive funds from the department for the performance of the delegated duties.

(6) Employees transferring from the department to the department of revenue as a result of a delegation of duties in subsection (5), are entitled to all rights including those under 2-15-131, possessed as a state officer or employee before transferring, including rights to tenure in office and of rank or grade, rights to vacation and sick pay and leave, rights under any retirement or personnel plan or labor union contract, rights to compensatory time earned, and any other rights under any law or administrative policy including the State Employee Protection Act. Employees transferring must be considered internal applicants by the department of revenue for recruitment purposes for the period from July 1, 1997, through June 30, 1998.

(7) The department of revenue shall succeed the department in its rights to property relating to the delegation of duties in subsection (5) to the extent that is consistent with federal property transfer policy. The property includes real property, records, office equipment, forms, supplies, and contracts other than the program budget plan with the United States department of labor.

(8) (a) The delegation of duties in subsection (5) does not affect the validity of any pending judicial or administrative proceeding.

(b) Appeals that were filed with the board of labor appeals or the department's hearings bureau before July 1, 1997, must follow the procedures and processes in effect when the appeal was first taken. An appeal that is filed on or after July 1, 1997, must be taken in accordance with the procedures and processes in effect on the date the appeal is filed.

(c) The department of revenue must be substituted for the department and succeed to all audits, determinations, and other actions that have not been appealed to the board of labor appeals or the department's hearings bureau prior to July 1, 1997.

(9) The rights, privileges, and duties of the holders of bonds and other obligations issued and of the parties to contracts, leases, indentures, and other transactions entered into before the delegation of duties in subsection (5) remain in effect, and none of those rights, privileges, duties, covenants, or agreements are impaired or diminished by reason of the delegation of duties. The department of revenue is substituted for the department and subject to the provisions of subsection (5), succeeds to the rights and duties under the provisions of those bonds, contracts, leases, indentures, and other transactions. The provisions of this subsection (9) do not apply to the program budget plan agreement between the department and the United States department of labor."



Section 21.  Section 39-51-1109, MCA, is amended to read:

"39-51-1109.   Tax appeals -- procedure. (1) A decision, determination, or redetermination of the department involving contribution liability, contribution rate, application for refund, employment status, an employer-employee relationship or the charging of benefit payments to employers making payment in lieu of contributions is final unless an interested party entitled to notification submits a written appeal of the decision, determination, or redetermination. The appeal must be made in the same manner as provided in 39-51-2402 for the appeal of a decision relating to a claim for unemployment insurance benefits. Statutory rules of evidence and civil procedure do not apply to a hearing on the appeal. A hearing may be conducted by telephone or by videoconference. The decision of the appeals referee and any subsequent appeal must be made in the same manner as prescribed in 39-51-2403 through 39-51-2410.

(2) A decision, determination, or redetermination involving contribution liability, contribution rate, application for refund, subject wages, or other tax-related issues must be issued by the department of revenue as provided in Title 15, chapter 1, part 2 and [section 7], if applicable. The decision is final unless an interested party entitled to notification follows the uniform tax review procedures as prescribed in 15-1-211 and [section 7], if applicable."



Section 22.  Section 39-51-1110, MCA, is amended to read:

"39-51-1110.   Refunds to employers. (1) If not later than 3 years after the date on which any taxes or interest thereon became due or not later than 1 year from the date on which payment was made, whichever is later, an employer who has paid such taxes or interest thereon shall make application for an adjustment thereof in connection with subsequent tax payments or for a refund thereof because such adjustment cannot be made and the department shall determine that such taxes or interest or any portion thereof was erroneously collected, the department shall allow such employer to make an adjustment thereof, without interest, in connection with subsequent tax payments by him or, if such adjustment cannot be made, the department shall refund said amount, without interest, from the fund. For like cause and within the same period, adjustment or refund may be so made on the department's own initiative. If an employer claims an adjustment or the department or its delegate, as provided in 39-51-301, determines through an examination of the employer's account that the employer has overpaid the amount due, the amount of the overpayment must be applied to future unemployment insurance obligations or must be refunded to the employer. The credit or refund may be allowed only if the claim is filed, or the determination is made, within a 5-year period after the date on which any taxes, penalty, or interest became due or within one year from the date the payment is made, whichever is later. The department or its delegate pursuant to 39-51-301(5), shall credit or refund the amount to the employer, without interest.

(2)  If the department shall determine or its delegate pursuant to 39-51-301(5), determines that an employer has paid taxes to this state under this chapter when such but the taxes should have been paid to another state under a similar act of such the other state, a transfer of such the taxes to such the other state shall must be made upon discovery or, upon proof of payment that such the other state has been fully paid, then a refund to such the employer shall must be made at any time upon application without limitation of time.

(3)  In the event that If this chapter is not certified by the secretary of labor under 26 U.S.C. 3304 section 1603 of the Internal Revenue Code, as amended, 1939, for any year, then and in that event refunds shall must be made of all taxes required under this chapter from employers for that year."



Section 23.  Section 39-51-1301, MCA, is amended to read:

"39-51-1301.   Penalty and interest on past-due reports and taxes. (1) Taxes unpaid on the date on which they are due and payable, as provided by 39-51-1103(1) and (2) and 39-51-1125, that are paid by the end of the month following the due date are subject to a penalty assessment of $10 or 10% of the taxes due, whichever is greater. If the taxes are not paid by the end of the month following the due date, the employer is subject to a penalty assessment of $15 or 15% of the taxes due, whichever is greater. All past-due taxes bear interest at the rate of 18% a year, to be prorated on a daily basis.

(2)  A penalty of $40 must be assessed whenever, as the result of a willful refusal of an employer to furnish wage information or pay taxes on time, the department issues a subpoena to obtain wage information or makes a summary or jeopardy assessment pursuant to 39-51-1302. Failure to file reports and payments in a timely manner, as required under 39-51-603, 39-51-1103, and 39-51-1125, may subject an employer to penalty and interest, as provided by 15-30-209.

(3)(2)  There is an account in the federal special revenue fund. Penalties and interest collected under this section for unemployment insurance obligations are distributed as provided in [section 2], and must be deposited in that account. Money deposited in that account and appropriated to the department or transferred by the department to its delegate, pursuant to 39-51-301(5), may only be used by the department or its delegate to administer this chapter, including the detection and collection of unpaid taxes and overpayments of benefits to the extent that federal grant revenue is less than amounts appropriated for this purpose. Money in the account not appropriated for these purposes must be transferred by the department to the unemployment insurance trust fund at the end of each fiscal year.

(4)  When failure to pay taxes on time was not caused by willful intent of the employer, the department may abate the penalty and interest.

(5)(3)  All money accruing to the unemployment insurance trust fund from interest and penalties collected on past-due unemployment insurance taxes must be used solely for the payment of unemployment insurance benefits and may not be used for any other purpose."



Section 24.  Section 39-51-1303, MCA, is amended to read:

"39-51-1303.   Collection of unpaid taxes by civil action. (1) The department, or its delegate pursuant to 39-51-301(5), has authority to enter into payment agreements with an employer to resolve unpaid taxes, penalty, and interest. Penalty or interest, or both penalty and interest may be abated if an acceptable payment agreement is entered into and adhered to. Failure to meet the terms of the payment agreement voids the penalty and interest abatement and penalty and interest must be recomputed from the due date of the unpaid tax.

(2) If, after due notice, any employer, liable corporate officer or employee, or liable member or manager of a limited liability company referred to in 39-51-1105 or partner in a limited liability partnership defaults in any payment of taxes, penalties, or interest on the taxes and penalties, the department, or its delegate pursuant to 39-51-301(5), may initiate a civil action in the name of the department state to collect the amount due, and the employer, liable corporate officer or employee, or liable member or manager of a limited liability company referred to in 39-51-1105, or partner in a limited liability partnership adjudged in default shall pay the costs of the action.

(2)(3)  An action for the collection of taxes due must be brought within 5 years after from the due date of the original or amended report was filed or assessment became due, whichever is later, taxes or it is barred.

(3)(4)  The department, or its delegate pursuant to 39-51-301(5), may pursue its remedy under either 39-51-1304 or this section, or both."



Section 25.  Section 39-51-2108, MCA, is amended to read:

"39-51-2108.   Payment of benefits based on service in public, charitable, or educational organizations. (1) Benefits based on service in employment defined in subsections (5) and (6) of 39-51-203(5) and (6) and subsections (2) and (3) of 39-51-204 are payable in the same amount, on the same terms, and subject to the same conditions as compensation payable on the basis of other service subject to this chapter, except that benefits based on service in an instructional, research, or principal administrative capacity for an educational institution may not be paid to an individual for any week of unemployment which begins during the period between two successive academic years or during a similar period between two regular terms, whether or not successive, or during a period of paid sabbatical leave provided for in the individual's contract if the individual has a contract or reasonable assurance of a contract to perform services in any such INSTRUCTIONAL, RESEARCH, OR PRINCIPAL ADMINISTRATIVE capacity for any such the educational institution for both such academic years or both such terms.

(2)  Benefits based on services in any other capacity for an educational institution shall must be denied to any individual for any week which commences during a period between 2 successive academic years or terms if the individual performs such the services in the first of such the academic years or terms and there is a reasonable assurance that the individual will perform such the services in the second of such the academic years or terms. If any individual is denied benefits and was not offered an opportunity to perform such the service for the educational institution for the second of such the academic years or terms, such the individual shall be is entitled to a retroactive payment of the benefits for each week for which the individual filed a timely claim for benefits and for which benefits were denied solely by reason of the denial provided for in this section.

(3)  Benefits based on services described in subsections (1) and (2) of this section shall must be denied to any individual for any week which that commences during an established and customary vacation period or holiday recess if such the individual performs such the services in the period immediately before such the vacation period or holiday recess and there is reasonable assurance that such the individual will perform such the service in the period immediately following such the vacation period or holiday recess.

(4)  Benefits based on services described in subsections (1) and (2) of this section to an individual who performed such the services for an educational institution while in the employ of an educational service agency shall must be denied as specified in subsections (1), (2), and through (3) of this section. The term "educational service agency" means a governmental agency or governmental entity which is established and operated exclusively for the purpose of providing such the service to one or more educational institutions."



Section 26.  Section 39-51-2402, MCA, is amended to read:

"39-51-2402.   Initial determination -- redetermination. (1) A representative designated by the department and hereinafter referred to as a deputy shall promptly examine the claim and, on the basis of the facts the deputy has found, by the deputy, shall either determine whether or not such the claim is valid. and, if If the claim is valid, the deputy will determine the week with respect to which the benefits shall commence, the weekly benefit amount payable, and the maximum benefit amount. or shall The deputy may refer such the claim or any question involved therein in the claim to an appeals referee who shall make the decision with respect thereto on the claim in accordance with the procedure prescribed in 39-51-2403. With respect to a determination, redetermination, or appeal by a claimant involving wages, the issue must be resolved in accordance with procedures for unemployment insurance benefit claimant appeals as prescribed in [section 7] and 15-2-302. The deputy shall promptly notify the claimant and any other interested party of the decision and the reasons therefor for reaching the decision.

(2)  The deputy may for good cause reconsider the decision and shall promptly notify the claimant and such other interested parties of the amended decision and the reasons therefor for the decision.

(3)  No A determination or redetermination of an initial or additional claim may not be made under this section unless 5 days' notice of the time and place of the claimant's interview for examination of the claim is mailed to each interested party.

(4)  A determination or redetermination shall be deemed is final unless an interested party entitled to notice thereof of the decision applies for reconsideration of the determination or appeals therefrom the decision within 10 days after such the notification was mailed to the interested party's last-known address,. provided that such The 10-day period may be extended for good cause.

(5)  Except as provided in subsection (6), no a redetermination of a claim for benefits may not be made after 2 years from the date of the initial determination.

(6)  A redetermination may be made within 3 years from the date of the initial determination of a claim if the initial determination was based on a false claim, misrepresentation, or failure to disclose a material fact by the claimant or the employer."



Section 27.  Section 39-71-123, MCA, is amended to read:

"39-71-123.   Wages defined. (1) "Wages" means the gross all remuneration paid in money, or in a substitute for money, for services rendered performed by an employee for an employer, or income provided for in subsection (1)(d). Wages include the cash value of all remuneration paid in any medium other than cash. The term includes but are is not limited to:

(a)  commissions, bonuses, and remuneration at the regular hourly rate for overtime work, holidays, vacations, and sickness periods;

(b)  board, lodging, rent, or housing if it constitutes a part of the employee's remuneration and is based on its actual value severance or continuation pay, back pay, and OR any similar pay made for or in regards to previous service by the employee for the employer, other than retirement or pension benefits from a qualified plan;

(c)  payments made to an employee on any basis other than time worked, including but not limited to piecework, an incentive plan, or profit-sharing arrangement tips or other gratuities received by the employee, to the extent that tips or gratuities are:

(i) documented by the employee to the employer for tax purposes;

(ii) disbursed by the employer from a tip pool; or

(iii) added to the customer's bill by the employer.; and

(d)  income or payment in the form of a draw, wage, net profit, or substitute for money received or taken by a sole proprietor or partner, regardless of whether the sole proprietor or partner has performed work or provided services for that remuneration.;

(e) board, lodging, rent, or housing if it constitutes a part of the employee's remuneration and is based on its actual value; and

(f) payments made to an employee on any basis other than time worked, including but not limited to piecework, an incentive plan, or profit-sharing arrangement.

(2)  Wages do The term "wages" does not include any of the following:

(a)  employee expense reimbursements or allowances for meals, lodging, travel, subsistence, and other expenses, as set forth in department rules;

(b)  special rewards for individual invention or discovery the amount of the payment made by the employer FOR EMPLOYEES, if the payment was made under a qualified plan, established for the employees for the purpose of providing for:

(i) retirement or pension PURSUANT TO A QUALIFIED PLAN AS DEFINED UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE;

(ii) sickness or accident disability under a workers' compensation policy;

(iii) medical or hospitalization expenses in connection with sickness or accident disability, including health insurance for the employee or the employee's immediate family; or

(iv) death, including life insurance for the employee or the employee's immediate family;

(c)  tips and other gratuities received by the employee in excess of those documented to the employer for tax purposes;

(d)  contributions made by the employer to a group insurance or pension plan; or

(e)(c)  vacation or sick leave benefits accrued but not paid; or

(d) special rewards for individual invention or discovery.

(3)  (a) Except as provided in subsection (3)(b), for compensation benefit purposes, the average actual earnings for the four pay periods immediately preceding the injury are the employee's wages, except that if the term of employment for the same employer is less than four pay periods, the employee's wages are the hourly rate times the number of hours in a week for which the employee was hired to work.

(b)  For good cause shown, if the use of the last four pay periods does not accurately reflect the claimant's employment history with the employer, the wage may be calculated by dividing the total earnings for an additional period of time, not to exceed 1 year prior to the date of injury, by the number of weeks in that period, including periods of idleness or seasonal fluctuations.

(4)  (a) For the purpose of calculating compensation benefits for an employee working concurrent employments, the average actual wages must be calculated as provided in subsection (3). As used in this subsection, "concurrent employment" means employment in which the employee was actually employed at the time of the injury and would have continued to be employed without a break in the term of employment if not for the injury.

(b)  The compensation benefits for a covered volunteer must be based on the average actual wages in the volunteer's regular employment, except self-employment as a sole proprietor or partner who elected not to be covered, from which the volunteer is disabled by the injury incurred.

(c)  The compensation benefits for an employee working at two or more concurrent remunerated employments must be based on the aggregate of average actual wages of all employments, except self-employment as a sole proprietor or partner who elected not to be covered, from which the employee is disabled by the injury incurred."



Section 28.  Section 39-71-401, MCA, is amended to read:

"39-71-401.   Employments covered and employments exempted. (1) Except as provided in subsection (2), the Workers' Compensation Act applies to all employers, as defined in 39-71-117, and to all employees, as defined in 39-71-118. An employer who has any employee in service under any appointment or contract of hire, expressed or implied, oral or written, shall elect to be bound by the provisions of compensation plan No. 1, 2, or 3. Each employee whose employer is bound by the Workers' Compensation Act is subject to and bound by the compensation plan that has been elected by the employer.

(2)  Unless the employer elects coverage for these employments under this chapter and an insurer allows an election, the Workers' Compensation Act does not apply to any of the following employments:

(a)  household and domestic employment;

(b)  casual employment as defined in 39-71-116;

(c)  employment of a dependent member of an employer's family for whom an exemption may be claimed by the employer under the federal Internal Revenue Code;

(d)  employment of sole proprietors, working members of a partnership, or working members of a member-managed limited liability company, except as provided in subsection (3);

(e)  employment of a broker or salesman performing under a license issued by the board of realty regulation;

(f)  employment of as a direct seller. as defined in 26 U.S.C. 3508 As used in this section, "direct seller" means a person:

(i) who sells, or offers for sale, a tangible consumer product, including but not limited to cosmetics, vacuum cleaners, and cleaning products at the home of the consumer;

(ii) whose pay is determined by the quantity of product sold; and

(iii) who works under a written contract that states the person will not be treated as an employee;

(g)  employment for which a rule of liability for injury, occupational disease, or death is provided under the laws of the United States;

(h)  employment of a person performing services in return for aid or sustenance only, except employment of a volunteer under 67-2-105;

(i)  employment with a railroad engaged in interstate commerce, except that railroad construction work is included in and subject to the provisions of this chapter;

(j)  employment as an official, including a timer, referee, or judge, at a school amateur athletic event, unless the person is otherwise employed by a school district;

(k)  employment of a person performing services as a newspaper carrier or free-lance freelance correspondent if the person performing the services or a parent or guardian of the person performing the services in the case of a minor has acknowledged in writing that the person performing the services and the services are not covered. As used in this subsection, "free-lance "freelance correspondent" is a person who submits articles or photographs for publication and is paid by the article or by the photograph. As used in this subsection, "newspaper carrier":

(i)  is a person who provides a newspaper with the service of delivering newspapers singly or in bundles; but

(ii) does not include an employee of the paper who, incidentally to the employee's main duties, carries or delivers papers.

(l)  cosmetologist's services and barber's services as defined in 39-51-204(1)(l)(1)(e);

(m)  a person who is employed by an enrolled tribal member or an association, business, corporation, or other entity that is at least 51% owned by an enrolled tribal member or members, whose business is conducted solely within the exterior boundaries of an Indian reservation;

(n)  employment of a jockey performing under a license issued by the board of horseracing from the time the jockey reports to the scale room prior to a race through the time the jockey is weighed out after a race if the jockey has acknowledged in writing, as a condition of licensing by the board of horseracing, that the jockey is not covered under the Workers' Compensation Act while performing services as a jockey;

(o)  employment of an employer's spouse for whom an exemption based on marital status may be claimed by the employer under 26 U.S.C. 7703;

(p)  a person who performs services as a petroleum land professional. As used in this subsection, a "petroleum land professional" is a person who:

(i)  is engaged primarily in negotiating for the acquisition or divestiture of mineral rights or in negotiating a business agreement for the exploration or development of minerals;

(ii) is paid for services that are directly related to the completion of a contracted specific task rather than on an hourly wage basis; and

(iii) performs all services as an independent contractor pursuant to a written contract.

(q)  an officer of a quasi-public or a private corporation or manager of a manager-managed limited liability company who qualifies under one or more of the following provisions:

(i)  the officer or manager is engaged in the ordinary duties of a worker for the corporation or the limited liability company and does not receive any pay from the corporation or the limited liability company for performance of the duties;

(ii) the officer or manager is engaged primarily in household employment for the corporation or the limited liability company;

(iii) the officer or manager owns 20% or more of the number of shares of stock in the corporation or owns 20% or more of the limited liability company; or

(iv) the officer or manager is the spouse, child, adopted child, stepchild, mother, father, son-in-law, daughter-in-law, nephew, niece, brother, or sister of a corporate officer who owns 20% or more of the number of shares of stock in the corporation or who owns 20% or more of the limited liability company.

(r) service performed by an ordained, commissioned, or licensed minister of a church in the exercise of the church's ministry or by a member of a religious order in the exercise of duties required by the order.

(3)  (a) A sole proprietor, a working member of a partnership, or a working member of a member-managed limited liability company who represents to the public that the person is an independent contractor shall elect to be bound personally and individually by the provisions of compensation plan No. 1, 2, or 3 but may apply to the department for an exemption from the Workers' Compensation Act.

(b)  The application must be made in accordance with the rules adopted by the department. There is no fee for the initial application. Any subsequent application must be accompanied by a $25 application fee. The application fee must be deposited in the administration fund established in 39-71-201 to offset the costs of administering the program.

(c)  When an application is approved by the department, it is conclusive as to the status of an independent contractor and precludes the applicant from obtaining benefits under this chapter.

(d)  The exemption, if approved, remains in effect for 1 year following the date of the department's approval. To maintain the independent contractor status, an independent contractor shall annually submit a renewal application. A renewal application must be submitted for all independent contractor exemptions approved as of July 1, 1995, or thereafter. The renewal application and the $25 renewal application fee must be received by the department at least 30 days prior to the anniversary date of the previously approved exemption.

(e)  A person who makes a false statement or misrepresentation concerning that person's status as an exempt independent contractor is subject to a civil penalty of $1,000. The department may impose the penalty for each false statement or misrepresentation. The penalty must be paid to the uninsured employers' fund. The lien provisions of 39-71-506 apply to the penalty imposed by this section.

(f)  If the department denies the application for exemption, the applicant may contest the denial by petitioning for review of the decision by an appeals referee in the manner provided for in 39-51-1109. An applicant dissatisfied with the decision of the appeals referee may appeal the decision in accordance with the procedure established in 39-51-2403 and 39-51-2404.

(4)  (a) A corporation or a manager-managed limited liability company shall provide coverage for its employees under the provisions of compensation plan No. 1, 2, or 3. A quasi-public corporation, a private corporation, or a manager-managed limited liability company may elect coverage for its corporate officers or managers, who are otherwise exempt under subsection (2), by giving a written notice in the following manner:

(i)  if the employer has elected to be bound by the provisions of compensation plan No. 1, by delivering the notice to the board of directors of the corporation or to the management organization of the manager-managed limited liability company; or

(ii) if the employer has elected to be bound by the provisions of compensation plan No. 2 or 3, by delivering the notice to the board of directors of the corporation or to the management organization of the manager-managed limited liability company and to the insurer.

(b)  If the employer changes plans or insurers, the employer's previous election is not effective and the employer shall again serve notice to its insurer and to its board of directors or the management organization of the manager-managed limited liability company if the employer elects to be bound.

(5)  The appointment or election of an employee as an officer of a corporation, a partner in a partnership, or a member in or a manager of a limited liability company for the purpose of exempting the employee from coverage under this chapter does not entitle the officer, partner, member, or manager to exemption from coverage.

(6)  Each employer shall post a sign in the workplace at the locations where notices to employees are normally posted, informing employees about the employer's current provision of workers' compensation insurance. A workplace is any location where an employee performs any work-related act in the course of employment, regardless of whether the location is temporary or permanent, and includes the place of business or property of a third person while the employer has access to or control over the place of business or property for the purpose of carrying on the employer's usual trade, business, or occupation. The sign must be provided by the department, distributed through insurers or directly by the department, and posted by employers in accordance with rules adopted by the department. An employer who purposely or knowingly fails to post a sign as provided in this subsection is subject to a $50 fine for each citation."



Section 29.  Section 39-71-2501, MCA, is amended to read:

"39-71-2501.   Definitions. As used in this part, the following definitions apply:

(1)  "Account" means the workers' compensation bond repayment account established in 39-71-2504.

(2)  "Department" means the department of revenue provided for in 2-15-1301.

(3) "Domestic or household service" means employment of persons other than members of the household for the purpose of tending to the aid and comfort of the employer or members of the employer's family, including but not limited to housecleaning and yard work but does not include employment beyond the scope of normal household or domestic duties, such as home health care or domiciliary care.

(3)(4)  "Employee" includes:

(a) an officer, employee, or elected public official of the United States, the state of Montana, or any political subdivision of the United States or the state of Montana or any agency or instrumentality of the United States, the state of Montana, or a political subdivision of the United States or the state of Montana. The term "employee" also includes;

(b) an officer of a corporation;

(c) any individual who performs services for another individual or organization having the right to control the employee as to the services to be performed and as to the manner of performance; and

(d) all classes, grades or types of employees, including minors and aliens, superintendents, managers, and other supervisory personnel.

(4)(a)(5) (a) "Employer" means,:

(i) except as provided in subsection (4)(b), the person for whom an individual performs or performed any service, of whatever nature, as an employee of the person.;

(b)  If the person for whom the individual performs or performed the service does not have control of the payment of the wages for the service, the term "employer" means the person who has control of the payment of wages.

(ii) a person who pays $1,000 or more in wages within the current calendar year;

(iii) a person who pays $1,000 or more in cash for domestic service in any quarter during the current calendar year; or

(iv) any individual or organization, including state government and any of its political subdivision or instrumentalities, partnership, association, trust, estate, joint-stock company, insurance company, limited liability company or a limited liability partnership that has filed or registered with the secretary of state, corporation, whether domestic or foreign, or the receiver, trustee in bankruptcy, trustee or the trustee's successor, or legal representative of a deceased person that has or had in its employ one or more individuals performing services for it within this state.

(b) Any person found to be an employer under Title 39, chapter 51, for unemployment insurance purposes is considered an employer for old fund liability tax purposes.

(5)(6)  "Federal workers' compensation legislation" means federal legislation that provides an employee with compensation or remuneration for accidental injury or death. This legislation includes but is not limited to the Federal Employers' Liability Act, the Federal Employees' Compensation Act, and the Defense Base Act.

(6)(7)  "Ongoing activities" means obligations or occurrences that are continuous, rather than intermittent or occasional, that exist for a definite period of time during the year, or that are intended to cover or apply to successive and similar obligations or occurrences.

(7)(8)  "Publicly traded limited partnership" means a business entity that issues shares or similar ownership interests that are sold or purchased by persons through certified stockbrokers or licensed traders on a public exchange recognized by the securities exchange commission.

(8)(9)  "State fund" means the state compensation insurance fund.

(9)(10)  "Tax" or "old fund liability tax" means the workers' compensation old fund liability tax provided for in 39-71-2503, created to address the unfunded liability for claims for injuries resulting from accidents that occurred before July 1, 1990.

(10)(11) (a)  "Wages" means all remuneration for services performed in the state of Montana by an employee for an employer, including the cash value of all remuneration paid in any medium other than cash. The term does not include remuneration paid includes but is not limited to the following:

(i) commissions, bonuses, and remuneration paid for overtime work, holidays, vacations, and sickness periods;

(ii) severance or continuation pay, back pay, and any similar pay made for or in regard to previous service by the employee for the employer, other than retirement or pension benefits from a qualified plan; and

(iii) tips or other gratuities received by the employee, to the extent that the tips or gratuities are:

(A) documented by the employee to the employer for tax purposes;

(B) disbursed by the employer from a tip pool; or

(C) added to the customer's bill by the employer.

(a)  for casual labor not in the course of the employer's trade or business performed in any calendar quarter by an employee unless the cash remuneration paid for the service is $50 or more and the service is performed by an individual who is regularly employed by the employer to perform the service. For purposes of this subsection (10)(a), an individual is considered to be regularly employed by an employer during a calendar quarter only if:

(i)  on each of 24 days during the calendar quarter, the individual performs service not in the course of the employer's trade or business for the employer for some portion of the day; and

(ii) the individual was regularly employed, as determined under subsection (10)(a)(i), by the employer in the performance of service during the preceding calendar quarter.

(b)  for services not in the course of the employer's trade or business, to the extent that remuneration is paid in any medium other than cash, when the payments are in the form of lodging or meals and the payments are received by the employee at the request of and for the convenience of the employer;

(c)  to or for an employee as a payment for or a contribution toward the cost of any group plan or program that benefits the employee, including but not limited to life insurance, hospitalization insurance for the employee or the employee's dependents, and employees' club activities;

(b) The term "wages" does not include:

(i) the amount of any payment made by the employer FOR EMPLOYEES, if the payment was made under a qualified plan as defined under the provisions of the Internal Revenue Code established for employees for:

(A) retirement or pension PURSUANT TO A QUALIFIED PLAN AS DEFINED UNDER THE PROVISIONS OF THE INTERNAL REVENUE CODE;

(B) sickness or accident disability under a workers' compensation policy;

(C) medical or hospitalization expenses in connection with sickness or accident disability, including health insurance for the employee or the employee's immediate family; or

(D) death, including life insurance for the employee or the employee's immediate family;

(ii) compensation in the form of meals and lodging, provided the compensation is not includable in gross income for state individual income tax purposes;

(d)(iii) as payments distributions from a multiple employer welfare arrangement, as defined in 29 U.S.C. 1002, to a qualified individual employee;

(e)(iv)  as wages or compensation, the taxation of which is prohibited by payments that may not be taxed under federal law; or

(f)(v)  as wages or compensation for services performed by Montana residents outside the borders of the state of Montana."



Section 30.  Section 39-71-2503, MCA, is amended to read:

"39-71-2503.  Workers' compensation old fund liability tax. (1)  (a) There is imposed on each employer, except an employer whose employees are covered by federal workers' compensation legislation, a workers' compensation old fund liability tax in an amount equal to 0.28%, plus the additional amount of old fund liability tax provided in 39-71-2505, of the wages paid for employment as defined in this part by the employer in the preceding payroll period subject to reporting and remittance requirements contained in 15-30-204.:

(i)  for the preceding payroll period for employers subject to the payment schedule contained in 15-30-204(1);

(ii) for the preceding month for employers subject to the payment schedule contained in 15-30-204(2); and

(iii) for the preceding year for employers subject to the payment schedule contained in 15-30-204(3)(a).

(b)  There is imposed on each employee, except an employee who is covered by federal workers' compensation legislation, an old fund liability tax, as provided in 39-71-2505, on the employee's wages paid for employment, as defined in this part. An employer paying wages for services performed employment, as defined in this part, in Montana shall deduct and withhold the tax from the wages.

(c)  (i) There is imposed on each business of a sole proprietor, on each subchapter S. corporation shareholder, on each partner of a partnership, and on each member or manager of a limited liability company a workers' compensation old fund liability tax, as provided in 39-71-2505, on the profit of each separate business of a sole proprietor and on the distributive share of ordinary income of each shareholder, partner, or member or manager derived from ongoing activities.

(ii)  The tax imposed in this subsection (1)(c) applies only to the ordinary income of a shareholder, partner, member, or manager as the term "ordinary income" is defined in the Internal Revenue Code.

(iii) Partners of a publicly traded limited partnership are not subject to the tax imposed in this subsection (1)(c).

(d)  A corporate officer of a subchapter S. corporation who receives wages as an employee of the corporation shall pay the old fund liability tax on both the wages and any distributive share of ordinary income at the employee rate. The subchapter S. corporation is not liable for the tax on the corporate officer's wages.

(e)  A corporate officer of a closely held corporation who owns stock in a closely held corporation that meets the stock ownership test under section 542(a)(2) of the Internal Revenue Code and receives wages as an employee of the corporation is required to pay the old fund liability tax only on the wages received. The corporation is not liable for the tax on the corporate officer's wages.

(f)  This old fund liability tax must be used to reduce the unfunded liability in the state fund incurred for claims for injuries resulting from accidents that occurred before July 1, 1990. If one or more loans or bonds are outstanding, the legislature may not reduce the security for repayment of the outstanding loans or bonds, except that the legislature may forgive payment of a tax or reduce a tax rate for any 12-month period if the workers' compensation bond repayment account contains on the first day of that period an amount, regardless of the source, that is in excess of the reserve maintained in the account and that is equal to the amount needed to pay and dedicated to the payment of the principal, premium, and interest that must be paid during that period on the outstanding loans or bonds.

(g)  Each employer shall maintain the records that the department requires concerning the old fund liability tax. The records are subject to inspection by the department and its employees and agents during regular business hours.

(h)  An employee does not have any right of action against an employer for any money deducted and withheld from the employee's wages and paid to the state in compliance or intended compliance with this section.

(i)  The employer is liable to the state for any amount of old fund liability taxes, plus interest and penalty, when the employer fails to withhold from an employee's wages or fails to remit to the state the old fund liability tax required by this section.

(j)  A sole proprietor, subchapter S. corporation shareholder, partner of a partnership, or member or manager of a limited liability company is liable to the state for the old fund liability tax, plus interest and penalty, when the sole proprietor, shareholder, partner, or member or manager fails to remit to the state the old fund liability tax required by this section.

(2)  All collections of the tax must be deposited as received in the account. The tax is in addition to any other tax or fee assessed against persons subject to the tax.

(3)  (a) Tax payments and returns required by subsections (1)(a) and (1)(b) must be made pursuant to 15-30-204. The department shall first credit a payment to the liability under 15-30-202 and credit any remainder to the account provided for in 39-71-2504.

(b)  Tax payments due from sole proprietors, subchapter S. corporation shareholders, partners of partnerships, and members or managers of limited liability companies must be made with and at the same time as the returns filed pursuant to 15-30-144 and 15-30-241. The department shall first credit a payment to the liability under 15-30-103 or 15-30-202 and shall then credit any remainder to the account provided for in 39-71-2504.

(c) An employer who exceeds either threshold, as defined in 39-71-2501(5)(a)(ii) or (5)(a)(iii), shall begin withholding old fund liability tax on or before the last day of the month following the quarter in which the wages paid exceed the threshold requirement. The employer shall begin reporting and remitting the employer and employee portions of the old fund liability tax. The report and remittance are due the last day of the month of the subsequent quarter following the quarter in which the wages paid exceeded the threshold requirement. The employer is subject to the quarterly remittance schedule until the department is able to determine the employer's proper remittance schedule by a review of the employer's first complete lookback period.

(4)  An employer's officer or employee with the duty to collect, account for, and pay to the department the amounts due under this section who fails to pay an amount is liable to the state for the unpaid amount and any penalty and interest relating to that amount.

(5)  Returns and remittances under subsection (3) and any information obtained by the department during an audit are subject to the provisions of 15-30-303, [section 1] but the department may disclose the information to the department of labor and industry for the purpose of investigation and prevention of noncompliance, tax evasion, fraud, and abuse under the unemployment insurance laws, under circumstances and conditions that ensure the continued confidentiality of the information.

(6)  The department of labor and industry and the state fund shall give the department a list of all employers having coverage under any plan administered or regulated by the department of labor and industry and the state fund. The department of labor and industry and the state fund shall update the lists weekly. The department of labor and industry and the state fund shall provide the department with access to their computer data bases and paper files and records for the purpose of the department's administration of the tax imposed by this section.

(7)  The provisions of Title 15, chapter 30, that are not in conflict with the provisions of this part regarding administration, remedies, enforcement, collections, hearings, interest, deficiency assessments, credits for overpayment, statute of limitations, penalties, estimated taxes, and department rulemaking authority apply to the tax, to employers, to employees, to sole proprietors, to subchapter S. corporation shareholders, to partners of partnerships, to members or managers of limited liability companies, and to the department."



Section 31.  Section 39-71-2503, MCA, is amended to read:

"39-71-2503.   Workers' compensation old fund liability tax. (1)  (a) There is imposed on each employer, except an employer whose employees are covered by federal workers' compensation legislation, a workers' compensation old fund liability tax in an amount equal to 0.28%, plus the additional amount of old fund liability tax provided in 39-71-2505, of the wages paid for employment as defined in this part by the employer in the preceding payroll period, subject to reporting and remittance requirements contained in 15-30-204:.

(i)  for the preceding payroll period for employers subject to the payment schedule contained in 15-30-204(1);

(ii) for the preceding month for employers subject to the payment schedule contained in 15-30-204(2); and

(iii) for the preceding year for employers subject to the payment schedule contained in 15-30-204(3)(a).

(b)  There is imposed on each employee, except an employee who is covered by federal workers' compensation legislation, an old fund liability tax, as provided in 39-71-2505, on the employee's wages paid for employment, as defined in this part. An employer paying wages for services performed employment, as defined in this part, in Montana shall deduct and withhold the tax from the wages.

(c)  (i) There is imposed on each business of a sole proprietor, on each subchapter S. corporation shareholder, on each partner of a partnership, and on each member or manager of a limited liability company a workers' compensation old fund liability tax, as provided in 39-71-2505, on the profit of each separate business of a sole proprietor and on the distributive share of ordinary income of each shareholder, partner, or member or manager derived from ongoing activities.

(ii)  The tax imposed in this subsection (1)(c) applies only to the ordinary income of a shareholder, partner, member, or manager as the term "ordinary income" is defined in the Internal Revenue Code.

(iii) Partners of a publicly traded limited partnership are not subject to the tax imposed in this subsection (1)(c).

(d)  A corporate officer of a subchapter S. corporation who receives wages as an employee of the corporation shall pay the old fund liability tax on both the wages and any distributive share of ordinary income at the employee rate. The subchapter S. corporation is not liable for the tax on the corporate officer's wages.

(e)  A corporate officer of a closely held corporation who owns stock in a closely held corporation that meets the stock ownership test under section 542(a)(2) of the Internal Revenue Code and receives wages as an employee of the corporation is required to pay the old fund liability tax only on the wages received. The corporation is not liable for the tax on the corporate officer's wages.

(f)  This old fund liability tax must be used to reduce the unfunded liability in the state fund incurred for claims for injuries resulting from accidents that occurred before July 1, 1990. If one or more loans or bonds are outstanding, the legislature may not reduce the security for repayment of the outstanding loans or bonds, except that the legislature may forgive payment of a tax or reduce a tax rate for any 12-month period if the workers' compensation bond repayment account contains on the first day of that period an amount, regardless of the source, that is in excess of the reserve maintained in the account and that is equal to the amount needed to pay and dedicated to the payment of the principal, premium, and interest that must be paid during that period on the outstanding loans or bonds.

(g)  Each employer shall maintain the records that the department requires concerning the old fund liability tax. The records are subject to inspection by the department and its employees and agents during regular business hours.

(h)  An employee does not have any right of action against an employer for any money deducted and withheld from the employee's wages and paid to the state in compliance or intended compliance with this section.

(i)  The employer is liable to the state for any amount of old fund liability taxes, plus interest and penalty, when the employer fails to withhold from an employee's wages or fails to remit to the state the old fund liability tax required by this section.

(j)  A sole proprietor, subchapter S. corporation shareholder, partner of a partnership, or member or manager of a limited liability company is liable to the state for the old fund liability tax, plus interest and penalty, when the sole proprietor, shareholder, partner, or member or manager fails to remit to the state the old fund liability tax required by this section.

(2)  All collections of the tax must be deposited as received in the account. The tax is in addition to any other tax or fee assessed against persons subject to the tax.

(3)  (a) Tax payments and returns required by subsections (1)(a) and (1)(b) are due on or before the last day of the month following the close of each calendar quarter and must be made pursuant to 15-30-204. The department shall first credit a payment to the liability under 15-30-202 and credit any remainder to the account provided for in 39-71-2504 payments as provided for in [section 2].

(b)  Tax payments due from sole proprietors, subchapter S. corporation shareholders, partners of partnerships, and members or managers of limited liability companies must be made with and at the same time as the returns filed pursuant to 15-30-144 and 15-30-241. The department shall first credit a payment to the liability under 15-30-103 or 15-30-202 and shall then credit any remainder to the account provided for in 39-71-2504.

(c) An employer who exceeds either threshold, as defined in 39-71-2501(5)(a)(ii) or (5)(a)(iii), shall begin withholding old fund liability tax on or before the last day of the month following the quarter in which the wages paid exceed the threshold requirement. The employer shall begin reporting and remitting the employer and employee portions of the old fund liability tax. The report and remittance are due the last day of the month of the subsequent quarter following the quarter in which the wages paid exceeded the threshold requirement. The employer is subject to the quarterly remittance schedule until the department is able to determine the employer's proper remittance schedule by a review of the employer's first complete lookback period.

(4)  An employer's officer or employee with the duty to collect, account for, and pay to the department the amounts due under this section who fails to pay an amount is liable to the state for the unpaid amount and any penalty and interest relating to that amount.

(5)  Returns and remittances under subsection (3) and any information obtained by the department during an audit are subject to the provisions of 15-30-303 [section 1], but the department may disclose the information to the department of labor and industry for the purpose of investigation and prevention of noncompliance, tax evasion, fraud, and abuse under the unemployment insurance laws, under circumstances and conditions that ensure the continued confidentiality of the information.

(6)  The department of labor and industry and the state fund shall give the department a list of all employers having coverage under any plan administered or regulated by the department of labor and industry and the state fund. The department of labor and industry and the state fund shall update the lists weekly. The department of labor and industry and the state fund shall provide the department with access to their computer data bases and paper files and records for the purpose of the department's administration of the tax imposed by this section.

(7)  The provisions of Title 15, chapter 30, that are not in conflict with the provisions of this part regarding administration, remedies, enforcement, collections, hearings, interest, deficiency assessments, credits for overpayment, statute of limitations, penalties, estimated taxes, and department rulemaking authority apply to the tax, to employers, to employees, to sole proprietors, to subchapter S. corporation shareholders, to partners of partnerships, to members or managers of limited liability companies, and to the department."



Section 32.  Section 39-71-2505, MCA, is amended to read:

"39-71-2505.   Payment of unfunded liability for injuries resulting from accidents occurring before July 1, 1990. (1) The state fund shall pay for the cost of administering and paying claims for injuries resulting from accidents that occurred before July 1, 1990, not covered by any other funding source, by borrowing from the reserves accumulated from premiums paid to the state fund, based upon wages payable on or after July 1, 1990, and invested by the board of investments, from time to time, the amount that the state fund determines and that the budget director certifies, as provided in 39-71-2354, will be needed to pay for administering and paying the claims for the ensuing year.

(2)  (a) In January of each year, prior to the start of the following fiscal year, the state fund shall forward to the budget director information pertaining to the amount that the state fund will borrow for the ensuing fiscal year to pay for the cost of administering and paying claims for the injuries provided for in subsection (1). In addition, the state fund shall forward to the budget director the schedule of projected liability payments and cash needs on which the amount to be borrowed is based. The schedule must include but is not limited to total projected liability payments, loans and bond debt payments, revenue from the old fund liability tax provided for in 39-71-2503, projected fiscal yearend cash, and the projected fiscal yearend cash for the year 2007.

(b)  (i) There is imposed on each employer a workers' compensation old fund liability tax as provided in 39-71-2503. The employer old fund liability tax is an amount equal to 0.5% of the employer's payroll for wages paid in the preceding calendar quarter payroll period for wages paid for employment, as defined in this part.

(ii) The employee old fund liability tax is an amount equal to 0.2% of the employee's wages in the preceding calendar quarter payroll period for wages paid for employment, as defined in this part.

(iii) The old fund liability tax is an amount equal to 0.2% on the profit of each separate business of a sole proprietor and on the distributive share of ordinary income of each subchapter S. corporation shareholder, partner of a partnership, or member or manager of a limited liability company.

(iv) The rate of the employer old fund liability tax determined by this section includes the 0.28% employer old fund liability tax provided for in 39-71-2503.

(v)  (A) The employer old fund liability tax that is in excess of the 0.28% tax provided for in 39-71-2503 terminates at the end of fiscal year 2007.

(B)  If the debt service account has sufficient funds to pay outstanding bonds or if no bonds are outstanding, the old fund liability tax may not be imposed after the end of fiscal year 2007.

(vi) The old fund liability tax described in this section must be collected and deposited as provided in 39-71-2503 and 39-71-2504.

(3)  If in any January the cumulative projected amount to be borrowed by the state fund from reserves accumulated from premiums paid to the state fund based on wages payable on or after July 1, 1990, to administer and pay claims for injuries resulting from accidents that occurred before July 1, 1990, not including any outstanding bonds as of May 13, 1993, exceeds $80 million for the following fiscal year, the tax rate on the persons subject to the old fund liability tax must be increased by 0.05% for the following fiscal year over the current tax rate. If in any January the projected fiscal yearend cash balance for the current fiscal year exceeds $25 million, the tax rate on the persons subject to the old fund liability tax must be reduced by 0.05% from the current tax rate for the following fiscal year.

(4)  The total tax on the persons subject to the old fund liability tax may not exceed 0.75%.

(5)  The budget director shall certify the cash flow projections of the state fund required by this section and shall notify the department of revenue no later than April 1 of the rate of tax to be collected pursuant to this section."



NEW SECTION. Section 33.  Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.



NEW SECTION. Section 34.  Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].



NEW SECTION. Section 35. Codification instruction. (1) [Sections 1 through 5 and 7] 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 5 and 7].

(2) [Section 6] is intended to be codified as an integral part of Title 39, chapter 71, part 25, and the provisions of Title 39, chapter 71, part 25, apply to [section 6].



NEW SECTION. Section 36.  Coordination instruction. If Senate Bill No. 119 is passed and approved, then [section 4], amending 15-30-204, [section 5], amending 39-71-2503, and [section 6], amending 39-71-2505 in Senate Bill No. 119, are void.



NEW SECTION. Section 37. Effective dates. (1) [Sections 1, 20 and 33 through 36 and this section] are effective July 1, 1997.

(2) [Sections 3 through 7, 9 through 12, 17 through 19, 21, 22, 24 through 30, and 32 are effective January 1, 1998.

(3) [Sections 2, 8, 13 through 16, 23, and 31] are effective January 1, 1999.

-END-