"I am preparing a letter of appeal to MT quoting Pro Series that nonresident passive income is not taxable to Montana only the resident state of T/P (Alabama)."

That's not what MT believes.

"Seriously T/P should not have to pay $104 for his passive income, net $2,521, in Montana"

Seriously, are you looking at the material at the link I provided? It seems the farm is in Montana = sourced in state. The MT limit for who needs to file, even as NR, is using their filing status and their Fed income for the minimum of whether their MT source income requires them to file in MT.

So far, you have not disputed anything in that paragraph. Just because they don't live here, is not an excuse.

"You must file a Montana Individual Income Tax return if:

• You were a resident or part-year resident of Montana, or
• You were a nonresident who received Montana source income, and
• Your federal gross income, excluding unemployment compensation, meets the Montana filing threshold."

• Filing Status	Under 65	65 and Older
  Single or Married Filing Separately	$5,090	$7,800
  Head of Household	$10,180	$12,890
  Married Filing Jointly	$10,180	Single spouse over 65: $12,890 Both spouses over 65: $15,600