15-30-2539. Withholding -- no application under certain conditions. (1) The provisions of 15-30-2536 through 15-30-2547 do not apply to royalty payments made to a royalty owner if the royalty owner is:

(a) the United States or an agency of the federal government, this state or a political subdivision of this state, or another state or a political subdivision of another state;

(b) a federally recognized Indian tribe with respect to on-reservation oil and gas production pursuant to a lease entered into under the Indian Mineral Leasing Act of 1938, 25 U.S.C. 396a through 396g;

(c) the United States as trustee for individual Indians;

(d) a publicly traded partnership;

(e) an organization that is exempt from taxation under 15-31-102; or

(f) the same person or entity as the remitter.

(2) (a) The provisions of 15-30-2536 through 15-30-2547 do not apply to a remitter that produces less than 100,000 barrels of oil and less than 500 million cubic feet of gas annually. The department shall determine a remitter's annual production of oil and gas based upon a 3-year rolling average of the remitter's annual production as reported by the remitter to the Montana board of oil and gas conservation.

(b) Each producer that is exempted from withholding under subsection (2)(a) shall make an annual return to report royalty payments that exceed the dollar amounts in subsection (3). The return must be made under rules adopted by the department and be as nearly identical as possible to federal rules for internal revenue service form 1099 under section 6041, et seq., of the Internal Revenue Code, 26 U.S.C. 6041, et seq.

(c) Each year, a publicly traded partnership that is exempt from withholding under subsection (1)(d) shall transmit to the department, in an electronic format approved by the department, each partner's U.S. department of the treasury schedule K-1, form 1065 or 1065-B, as applicable, filed electronically for the year with the internal revenue service.

(d) A royalty owner that is a publicly traded partnership or an organization that is exempt from taxation under 15-31-102 shall report to the remitter and department under oath, on a form prescribed by the department, all information necessary to establish that the remitter is not required under 15-30-2538 to withhold royalty payments made to the partnership or organization.

(3) If the royalty payment made to a royalty owner subject to withholding under the provisions of 15-30-2536 through 15-30-2547 is less than $166 for the current withholding period or is less than $2,000 if the payment is annualized, then the department may grant a remitter's request to forego withholding the tax from the royalty payment made to that royalty owner for the current withholding period or, if applicable, the royalty payments for the annual period.

(4) The department may, by rule, establish minimum royalty amounts subject to withholding under the provisions of 15-30-2536 through 15-30-2547, other than for oil and gas production, if the department determines that the withholding against the minimal amount of royalties is inefficient.