Montana Form PTE Pass-Through Entity Return: Filing, Schedules, and PTET

Montana Form PTE is the annual information return that partnerships, S corporations, and disregarded entities with Montana-source income file with the Montana Department of Revenue. It reports the entity’s income, deductions, and credits, produces a Montana Schedule K-1 for each owner, and is also where the entity makes elections such as the pass-through entity tax (PTET) or composite filing. For calendar-year entities the return is due March 15, and it can be filed electronically through the TransAction Portal (TAP) or on paper.

Who Has to File

Any pass-through entity with Montana-source income files Form PTE, even when the entity itself owes no tax. Montana does not tax partnerships, S corporations, or disregarded entities at the entity level; income flows through to the owners, and the return exists so the Department of Revenue can track those distributions.¹

The filing obligation covers:

General and limited partnerships with Montana-source income.
S corporations with Montana-source income.
Single-member LLCs and other disregarded entities with Montana-source income, on forms the department prescribes.

An LLC that has elected federal treatment as a partnership or S corporation files Form PTE in that capacity. Entities based outside Montana still have to file when they have Montana resident owners or earn revenue from activities performed in the state.¹

Deadline, Extension, and Late Penalty

Form PTE is due on the 15th day of the third month after the close of the entity’s tax year. For calendar-year filers, that’s March 15. Weekend and holiday shifts apply; the tax year 2025 return is due March 16, 2026.²

An automatic six-month extension moves the filing deadline to September 15. The extension covers only the paperwork. Any composite tax, PTET, or withholding is still due by the original March deadline, and interest and penalties run on unpaid amounts from that date.³

Miss the deadline (including any extension) and the entity owes $10 per owner for each month or partial month the return is late, up to five months, capped at $2,500 for the tax period. The penalty applies even when the return shows zero net income.¹

What to Have Ready Before You Start

Most of Form PTE pulls directly from the entity’s completed federal return, so have that finished first. For a partnership, that’s federal Form 1065; for an S corporation, Form 1120-S. Bring the federal Schedules K-1 with you. Paper filers must attach a complete copy of the federal return with all schedules and statements.³

You’ll also need:

The entity’s federal employer identification number (FEIN).
For each partner, shareholder, or member: name, mailing address, SSN or FEIN, residency status, profit-and-loss percentage, and capital or ownership percentage.
Montana-source income figures. Multistate entities compute the Montana portion using the receipts factor on Schedule I.
Decisions on elections. Whether the entity will elect PTET, file a composite return, withhold for nonresidents, or accept owner agreements (Form PT-AGR) determines which schedules you fill out.

Working Through the Return

The instructions recommend that multistate entities start with Schedule I (Receipts Factor), then complete the Apportionable Income Schedule and the Montana Adjustments Schedule before turning to the main form.³ The entity uses the same tax year for Montana as for federal purposes. Enter the FEIN, entity name, address, and entity type at the top.

Lines 1 Through 14: Distributive Share Items

These lines mirror federal Schedule K. Copy across ordinary business income or loss, rental income, interest, dividends, royalties, capital gains, and the other income items from the federal return. Line 4 (guaranteed payments) is a partnership line only; S corporations leave it blank. Attach a detailed statement supporting the deduction items on lines 13d and 13e.³

Lines 15 Through 18: Montana Adjustments and Apportionment

Line 15 reports Montana additions that increase Montana income beyond the federal figure. Line 16a reports Montana subtractions, and lines 16b through 16d handle income flowing in from other pass-through entities, disregarded entities, and nonapportionable income. Line 18 applies the apportionment percentage from Schedule I, line 9 to the total on line 17. Single-state Montana entities report 100% on line 18.³

Montana Schedule K-1 for Each Owner

Prepare a Montana Schedule K-1 for every owner and include all copies with the return. Each K-1 shows the owner’s name, SSN or FEIN, address, residency status, ownership percentages, and their share of Montana-source income, deductions, and credits. It also flags whether the owner is covered by a PTET election, included in a composite return, or has filed a Form PT-AGR.

Which Supporting Schedules Apply

Depending on the entity’s circumstances, complete any of these that fit:

Schedule I: Receipts Factor for multistate entities.
Schedule II: Pass-through entity tax credits.
Schedule IV: Composite income tax calculation.
Schedule VI: Special transactions reporting.
Schedule VII: List of disregarded entities.
Schedule DE: Disregarded entity Montana-source income.
Montana Adjustments Schedule: Required when the entity reports any Montana additions or subtractions.

Handling Nonresident Owners

When a nonresident owner has $1,000 or more in Montana-source income from the entity, the entity has to address that tax through one of three methods: a composite return, pass-through withholding, or an owner agreement.⁴

Composite Return on Schedule IV

A composite return lets the entity calculate and pay Montana tax on behalf of qualifying nonresident owners. To be included, an owner must have no other Montana-source income (apart from income from another entity also filing a composite return for them) and must give the entity written authorization.⁵

The composite tax is computed on Schedule IV. For each participating owner, take their share of entity income for Montana purposes, subtract the federal standard deduction for a single taxpayer, multiply by the Montana tax rate, then multiply by the ratio of Montana-source income to total income.⁶ Owners included in the composite return don’t have to file their own Montana nonresident returns.

Pass-Through Withholding

Instead of a composite return, the entity can withhold from each nonresident owner’s share of Montana-source income. The withheld amount then becomes a credit on the owner’s personal Montana return. Rates for tax year 2025:⁷

Nonresident individuals, estates, trusts, and second-tier pass-through entities: 5.9% of Montana-source income.
Foreign C corporations and tax-exempt entities administered outside Montana: 6.75%.

For tax year 2026, HB 337 lowers the individual rate to 5.65%.⁸ Confirm the current rate on the Department of Revenue website before remitting.

Owner Agreement on Form PT-AGR

A nonresident owner who doesn’t want to be included in a composite return, PTET election, or withholding can file Form PT-AGR agreeing to file their own Montana return and pay directly. Eligible owner types are nonresident individuals, nonresident estates and trusts, domestic second-tier pass-through entities, and foreign C corporations.⁹

The agreement is due at the same time as the entity’s return (including any extension). It doesn’t need to be refiled every year unless ownership changes, though a domestic second-tier pass-through entity must file a new agreement each year the ownership structure changes. The owner must send the entity a copy.⁹

Electing the Pass-Through Entity Tax (PTET)

Montana offers an elective pass-through entity tax that moves the tax obligation from the individual owners to the entity. It was created as a workaround to the federal $10,000 cap on state and local tax deductions: because the tax is paid at the entity level, it may be deductible as a business expense on the federal return rather than an itemized deduction subject to the cap.

The PTET is calculated at the highest marginal individual rate on each affected owner’s share of Montana-source income. That rate is 5.9% for tax year 2025 and drops to 5.65% for tax year 2026 under HB 337.⁸

You make the election on the timely-filed Form PTE itself; there is no separate election form. A designated representative makes the election on the entity’s behalf and has sole authority to act on PTET matters for the tax year. Once made, the election is irrevocable and cannot be submitted after the extended due date.¹⁰

PTET applies only to “affected owners” — individuals, estates, trusts, and pass-through entities whose ultimate owners are individuals, estates, or trusts. Income attributable to C corporations and tax-exempt entities is excluded from the PTET calculation. An entity not doing business in Montana but with Montana resident owners can still file Form PTE and elect PTET, and it may choose to have resident owners assessed on their entire distributive share rather than only the apportioned Montana-source amount.¹¹

Individual owners for whom PTET was paid claim the credit on Montana Form 2. For tax years beginning after December 31, 2023, the credit is reported on Form 2, Schedule III, Part II.¹¹

Estimated Payments

Entities expecting to owe more than $500 in pass-through entity tax or composite tax have to make quarterly estimated payments.¹² One exception worth noting: estimated payments are not required in the first year an entity elects PTET.¹¹

Calendar-year due dates:

April 15 (first installment).
June 15 (second).
September 15 (third).
January 15 of the following year (fourth).

Fiscal-year entities pay on the 15th day of the 4th, 6th, and 9th months of their fiscal year, plus the 15th of the 1st month of the following fiscal year. Weekend and holiday shifts apply.¹²

How to Submit the Return

Electronically Through TAP

The Department of Revenue encourages e-filing through the Montana TransAction Portal (TAP) or through a tax professional using department-approved, IRS-authorized software. Montana and federal returns can be filed together or separately.³ TAP is free, and filing through it generates a confirmation number worth saving with your records.¹³

By Paper

If you file on paper, include a complete copy of the federal return (Form 1065 or 1120-S) with all federal Schedules K-1, statements, and supporting documents. Mail to:¹⁴

Montana Department of Revenue
PO Box 8021
Helena, MT 59604-8021

Paper returns take substantially longer to process than electronic filings.

Recordkeeping

Montana administrative rules require that records and supporting data used to prepare the return be kept for five years from the due date of the return or five years from the date of payment, whichever is later.¹⁵ Keep the filed Form PTE, all schedules, every Montana Schedule K-1, any Form PT-AGR agreements, and the underlying federal return for at least that long. PT-AGR agreements must be retained until the end of the fourth year after the agreement is revoked or the owner leaves the entity.⁹

1
Montana Code Annotated. Montana Code Annotated 2025 – 15-30-3302 – Income or License Tax Involving Pass-Through Entities — Information Returns Required
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Montana Department of Revenue. Pass-Through Entities
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Montana Department of Revenue. 2025 Montana Form PTE Instructions Booklet
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Montana Code Annotated. Montana Code 15-30-3313 – Consent or Withholding — Rulemaking
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Montana Department of Revenue. Composite Income Tax
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Montana State Legislature. Montana Code 15-30-3312 – Composite Returns and Tax
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Montana Department of Revenue. Pass-Through Withholding in Montana
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Montana Department of Revenue. HB337: 2026-2027 Montana Individual Income Tax Changes
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Montana Department of Revenue. Montana Pass-Through Owner Tax Agreements
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Montana Code Annotated. Montana Code Annotated 2025 – 15-30-3327 – Making Pass-Through Entity Tax Election
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Montana Department of Revenue. Montana Pass-Through Entity Tax: How to Elect and Pay
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Montana Department of Revenue. Making Estimated Tax Payments
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Montana Department of Revenue. TransAction Portal
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Montana Department of Revenue. Department of Revenue Mailing Addresses
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Montana Secretary of State. 42.2.305 Availability and Retention of Taxpayer Records