Rule 42.15.318 - MONTANA NET OPERATING LOSSES(1) Net operating losses must be determined as provided in section 172 of the IRC. A taxpayer has a Montana net operating loss if their Montana taxable income, recomputed with the adjustments provided in section 172(d) of the IRC, is less than zero. In recomputing Montana taxable income, the following must be added back: (a) any net operating loss deduction;(b) any deduction for personal and dependent exemptions if the taxpayer is an individual, and the exemption provided in 15-30-2152, MCA, if the taxpayer is an estate or trust; (c) any gain excluded from the sale or exchange of qualified small business stock pursuant to section 1202 of the IRC; (d) the amount by which a deduction for losses from sales or exchanges of capital assets exceeds the amount includable for gains from sales or exchanges of capital assets; and (e) the amount by which nonbusiness deductions exceed nonbusiness income. (2) When computing the net operating loss, the carrybacks, and carryovers, and the refund limits of taxpayers whose marital or filing status has changed, the federal rules and instructions applicable to change in marital status and change in filing status must be followed. (3) A nonresident who owns a business that operates both within and without Montana must follow the provisions in 15-1-601, MCA, and the principles of allocation and apportionment located in ARM Title 42, chapter 26 to determine the amount of the business-wide loss attributable to Montana. (4) To determine the portion of a deductible expense attributable to income from a trade or business, the expense must be multiplied by the ratio of net income from the trade or business to Montana adjusted gross income. When calculating the portion of federal tax attributable to trade or business income, the ratio must be calculated using the net business income and Montana adjusted gross income for the year the federal tax was incurred.(5) The election to waive the carryback of a net operating loss on the federal return does not waive the carryback for Montana purposes and a separate election must be made. A taxpayer may elect to waive the carryback of a net operating loss even if the taxpayer has not made the election to waive the carryback on the federal return. The election to waive the carryback is made on forms provided by or authorized by the department.(6) An election to waive the carryback of the net operating loss is irrevocable. If a taxpayer elects to waive the carryback, the election must be made by the due date (including extensions of time) for filing the taxpayer's return for the tax year of the net operating loss.Mont. Admin. r. 42.15.318
NEW, 1985 MAR p. 2015, Eff. 12/27/85; AMD, 1988 MAR p. 2745, Eff. 12/23/88; AMD, 1992 MAR p. 1245, Eff. 6/12/92; AMD, 1992 MAR p. 2556, Eff. 11/26/92; AMD and TRANS, from ARM 42.15.116, 2004 MAR p. 3147, Eff. 12/17/04; AMD, 2010 MAR p. 1088, Eff. 4/30/10; AMD, 2013 MAR p. 178, Eff. 2/1/13; AMD, 2018 MAR p. 851, Eff. 4/28/2018AUTH: 15-30-2620, MCA; IMP: 15-30-2119, MCA