When the Montana Department of Revenue institutes an audit to determine if a taxpayer is a resident of the state of Montana for Montana income tax purposes, the Montana Department of Revenue sends the putative resident the residency questionnaire. A copy of the residency questionnaire follows at the end of this article.
Recipients of the residency questionnaire are urged to take great care in answering the questionnaire to portray the answers in the best light. Further, taxpayers may take this opportunity to highlight facts that are favorable to the taxpayer. A taxpayer may also wish to include favorable documents with the letter.
The recent Montana Supreme Court case Greenwood v. Montana Department of Revenue[1] specifically focused on the Montana drivers licence, Montana hunting and fishing license, Montana concealed weapons permit, and Montana voting when the court ruled that the taxpayer was a resident of Montana. Thus, if the taxpayer possesses any of those items, he or she must be prepared to account for why those items do not support Montana residency.
Practice Point: Recipients who live in states with no state income tax such as Wyoming, Texas, Florida or Washington may be more likely to receive the questionnaire or are subject to a more searching audit. Recipients who already pay state income tax to another state are typically entitled to a credit for taxes paid in the other state if the Montana Department of Revenue determines that the recipient is a resident of Montana and must pay Montana income tax.
Taxpayers who receive the Montana Department of Revenue Residency questionnaire are urged to contact Jared Le Fevre before submitting the questionnaire. The taxpayer must make a thorough showing of factors that will make a residency determination more or less likely.
About the author: Jared M. Le Fevre is a tax attorney and partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal and state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.
[1] 465 P.3d 205, 209 (Mont 2020).