Using the PTET's optional "resident full income" sub-election in an S corp that has both resident and nonresident shareholders. The Montana Department of Revenue itself warns on its PTET page that "such election may create a second class of stock" — and a second class of stock terminates the federal S election entirely. That converts a modest state SALT-workaround play into a catastrophic federal problem. The other common Montana error is treating the PTET election as something you can add later: it is irrevocable and cannot be made after the extended due date of Form PTE.
Recognized automaticallyPTET available
S-corp election in Montana
In short
No franchise, net-worth or minimum tax on an S corporation. Entity-level liability arises only if the entity elects the 5.9% PTET, files a composite return, or must remit pass-through withholding for nonresident owners.
Does Montana recognize the federal S election?
Montana automatically recognizes the federal S election; there is no separate Montana election. The Department of Revenue lists S corporations among the pass-through entities that file the Montana Pass-Through Entity Tax Return (Form PTE) and issue Montana Schedule K-1s. Income flows to shareholders' Montana individual returns unless the entity affirmatively elects the pass-through entity tax or files a composite return. Montana's Form PTE is due March 15, matching the federal 1120-S date.
Tax the entity still owes
Montana imposes no corporate franchise tax and no minimum tax on an S corporation filing Form PTE — the $50-style corporate minimum applies to C corporations filing the Montana Corporate Income Tax return (Form CIT), not to pass-through filers. The three ways an entity-level Montana liability can arise are: (1) the elective PTET at 5.9% of affected owners' distributive share of Montana source income; (2) composite income tax filed on behalf of consenting owners; (3) mandatory pass-through withholding on nonresident owners who have not signed a Form PT-AGR owner tax agreement. Estimated PTET payments are required when annual estimated tax exceeds $500, in four installments (15th day of the 4th, 6th, 9th and 12th months), calculated as the lesser of 100% of prior-year tax or 90% of current-year tax; several exceptions apply, including the first year of the PTET election and prior-year zero liability. Montana levies no general sales tax.
Registering for payroll
Register for a Montana withholding account with the Montana Department of Revenue (Form GenReg / TransAction Portal, TAP) and for unemployment insurance (SUTA) with the Montana Department of Labor and Industry, Unemployment Insurance Division. Montana also administers an Administrative Fund assessment alongside UI. There is no state-run paid family leave payroll tax and no state sales tax, so withholding plus UI is the full set for an owner on W-2 wages.
Annual filings
Montana Form PTE (Pass-Through Entity Tax Return) — due March 15 for calendar-year filers, extension to September 15. Montana Schedule K-1 (Form PTE) to each owner. Form PT-AGR (pass-through owner tax agreement) for nonresident owners electing out of withholding; Form DER-1 for disregarded entities; Form SB (S corporation tax payment voucher); Worksheets PTE-ESW / PTE-ESA for estimated PTET. Montana Secretary of State annual report — due April 15; per the SOS fee schedule the fee is currently WAIVED for reports filed before April 15, and $35.00 if filed after April 15. Quarterly UI wage reports to the Department of Labor and Industry and periodic withholding returns to the Department of Revenue.
Pass-through entity tax
Yes — created by Senate Bill 554 (68th Legislature). Rate is 5.9% of an affected owner's distributive share of Montana source income. The election is made ANNUALLY on a TIMELY-FILED Form PTE by a designated representative who has sole authority to act for the entity; it is IRREVOCABLE and "cannot be made after the extended due date of the return." Affected owners are individuals, estates, trusts, and pass-through entities owned directly or indirectly by them — income allocable to C corporations and tax-exempt entities is excluded from PTET. There is an optional sub-election letting Montana RESIDENT owners be assessed on their ENTIRE distributive share regardless of apportionment; a PTE with no Montana business but with Montana resident owners can also file Form PTE and elect PTET. The Department of Revenue's own page carries an explicit S-corp warning about that sub-election (see gotcha). Page fetched 2026-07-30 shows no sunset tied to the federal SALT cap.
The mistake owners make most often in Montana
Filing your federal Form 2553
Businesses operating in Montana send Form 2553 to the IRS Ogden service center — fax 855-214-7520. Full address and filing checklist for Montana.
Frequently asked questions
Does Montana require a separate S-corporation election?
No. Montana does not require a separate state election. Montana automatically recognizes the federal S election; there is no separate Montana election. The Department of Revenue lists S corporations among the pass-through entities that file the Montana Pass-Through Entity Tax Return (Form PTE) and issue Montana Schedule K-1s.
What tax does an S corporation pay in Montana?
No franchise, net-worth or minimum tax on an S corporation. Entity-level liability arises only if the entity elects the 5.9% PTET, files a composite return, or must remit pass-through withholding for nonresident owners.
Where do I file Form 2553 from Montana?
With the IRS Ogden service center. Fax 855-214-7520, or mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.
What is the most common S-corp mistake in Montana?
Using the PTET's optional "resident full income" sub-election in an S corp that has both resident and nonresident shareholders. The Montana Department of Revenue itself warns on its PTET page that "such election may create a second class of stock" — and a second class of stock terminates the federal S election entirely. That converts a modest state SALT-workaround play into a catastrophic federal problem. The other common Montana error is treating the PTET election as something you can add later: it is irrevocable and cannot be made after the extended due date of Form PTE.
Compare with other states: Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York.
Sources
File your Form 2553 correctly
Scorply completes your federal election and includes a Montana guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Montana sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.