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1 HOUSE BILL NO. 440
2 INTRODUCED BY J. WEBER, J. REAVIS, B. EDWARDS, M. NIKOLAKAKOS, S. KLAKKEN, J. SECKINGER,
3 C. NEUMANN, D. POWERS, S. ROSENZWEIG, E. TILLEMAN, W. MCKAMEY, D. FERN, B. CARTER, G.
4 NIKOLAKAKOS, C. POPE, D. JOY
5
6 A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING TAX INCENTIVES FOR THE SALE OF MONTANA-
7 PRODUCED FOOD; PROVIDING A SUBTRACTION FROM INDIVIDUAL INCOME AND CORPORATE
8 INCOME TAXES FOR THE INCOME FROM THE SALE OF MONTANA-PRODUCED FOOD; AMENDING
9 SECTIONS 15-30-2120 AND 15-31-113, MCA; AND PROVIDING A DELAYED EFFECTIVE DATE AND AN
10 APPLICABILITY DATE.”
11
12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
13
14 Section 15-30-2120, MCA, is amended to read:
15 "15-30-2120. (1)
16 The items in subsection (2) are added to and the items in subsection (3) are subtracted from federal taxable
17 income to determine Montana taxable income.
18 (2) The following are added to federal taxable income:
19 (a) to the extent that it is not exempt from taxation by Montana under federal law, interest from
20 obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
21 interest dividends attributable to that interest except to the extent already included in federal taxable income;
22 (b) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal
23 Revenue Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the
24 income;
25 (c) depreciation or amortization taken on a title plant as defined in 33-25-105;
26 (d) the recovery during the tax year of an amount deducted in any prior tax year to the extent that
27 the amount recovered reduced the taxpayer's Montana income tax in the year deducted;
28 (e) an item of income, deduction, or expense to the extent that it was used to calculate federal ****
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1 taxable income if the item was also used to calculate a credit against a Montana income tax liability;
2 (f) a deduction for an income distribution from an estate or trust to a beneficiary that was included
3 in the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
4 Revenue Code, 26 U.S.C. 651 and 661;
5 (g) a withdrawal from a medical care savings account provided for in Title 15, chapter 61, used for
6 a purpose other than an eligible medical expense or long-term care of the employee or account holder or a
7 dependent of the employee or account holder;
8 (h) a withdrawal from a first-time home buyer savings account provided for in Title 15, chapter 63,
9 used for a purpose other than for eligible costs for the purchase of a single-family residence;
10 (i) for a taxpayer that deducts the qualified business income deduction pursuant to section 199A
11 of the Internal Revenue Code, 26 U.S.C. 199A, an amount equal to the qualified business income deduction
12 claimed;
13 (j) for an individual taxpayer that deducts state income taxes pursuant to section 164(a)(3) of the
14 Internal Revenue Code, 26 U.S.C. 164(a)(3), an additional amount equal to the state income tax deduction
15 claimed, not to exceed the amount required to reduce the federal itemized amount computed under section 161
16 of the Internal Revenue Code, 26 U.S.C. 161, to the amount of the federal standard deduction allowable under
17 section 63(c) of the Internal Revenue Code, 26 U.S.C. 63(c); and
18 (k) for a pass-through entity, estate, or trust, the amount of state income taxes deducted pursuant
19 to section 164(a)(3) of the Internal Revenue Code, 26 U.S.C 164(a)(3).
20 (3) To the extent they are included as income or gain or not already excluded as a deduction or
21 expense in determining federal taxable income, the following are subtracted from federal taxable income:
22 (a) a deduction for an income distribution from an estate or trust to a beneficiary in accordance
23 with sections 651 and 661 of the Internal Revenue Code, 26 U.S.C. 651 and 661, recalculated according to the
24 additions and subtractions in subsections (2) and (3)(b) through (3)(o)(p);
25 (b) if exempt from taxation by Montana under federal law:
26 (i) interest from obligations of the United States government and exempt-interest dividends
27 attributable to that interest; and
28 (ii) railroad retirement benefits; ****
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1 (c) (i) salary received from the armed forces by residents of Montana who are serving on active
2 duty in the regular armed forces and who entered into active duty from Montana;
3 (ii) the salary received by residents of Montana for active duty in the national guard. For the
4 purposes of this subsection (3)(c)(ii), "active duty" means duty performed under an order issued to a national
5 guard member pursuant to:
6 (A) Title 10, U.S.C.; or
7 (B) Title 32, U.S.C., for a homeland defense activity, as defined in 32 U.S.C. 901, or a contingency
8 operation, as defined in 10 U.S.C. 101, and the person was a member of a unit engaged in a homeland
9 defense activity or contingency operation.
10 (iii) the amount received by a beneficiary pursuant to 10-1-1201; and
11 (iv) all payments made under the World War I bonus law, the Korean bonus law, and the veterans'
12 bonus law. Any income tax that has been or may be paid on income received from the World War I bonus law,
13 Korean bonus law, and the veterans' bonus law is considered an overpayment and must be refunded upon the
14 filing of an amended return and a verified claim for refund on forms prescribed by the department in the same
15 manner as other income tax refund claims are paid.
16 (d) annual contributions and income in a medical care savings account provided for in Title 15,
17 chapter 61, and any withdrawal for payment of eligible medical expenses or for the long-term care of the
18 employee or account holder or a dependent of the employee or account holder;
19 (e) contributions or earnings withdrawn from a family education savings account provided for in
20 Title 15, chapter 62, or from a qualified tuition program established and maintained by another state as
21 provided in section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), for qualified
22 education expenses, as defined in 15-62-103, of a designated beneficiary;
23 (f) interest and other income related to contributions that were made prior to January 1, 2024, that
24 are retained in a first-time home buyer savings account provided for in Title 15, chapter 63, and any withdrawal
25 for payment of eligible costs for the first-time purchase of a single-family residence;
26 (g) for each taxpayer that has attained the age of 65, an additional subtraction of $5,500;
27 (h) the amount of a scholarship to an eligible student by a student scholarship organization
28 pursuant to 15-30-3104; ****
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1 (i) a payment received by a private landowner for providing public access to public land pursuant
2 to Title 76, chapter 17, part 1;
3 (j) the amount of any refund or credit for overpayment of income taxes imposed by this state or
4 any other taxing jurisdiction to the extent included in gross income for federal income tax purposes but not
5 previously allowed as a deduction for Montana income tax purposes;
6 (k) the recovery during the tax year of any amount deducted in any prior tax year to the extent that
7 the recovered amount did not reduce the taxpayer's Montana income tax in the year deducted;
8 (l) the amount of the gain recognized from the sale or exchange of a mobile home park as
9 provided in 15-31-163;
10 (m) payments from the Montana end of watch trust as provided in 2-15-2041;
11 (n) (i) subject to subsection (9), a portion of military pensions or military retirement income as
12 calculated pursuant to subsection (8) that is received by a retired member of:
13 (A) the armed forces of the United States, as defined in 10 U.S.C. 101;
14 (B) the Montana army national guard or the army national guard of other states;
15 (C) the Montana air national guard or the air national guard of other states; or
16 (D) a reserve component, as defined in 38 U.S.C. 101, of the United States armed forces; and
17 (ii) subject to subsection (9), up to 50% of all income received as survivor benefits for military
18 service provided for in subsection (3)(n)(i)(A) through (3)(n)(i)(D); and
19 (o) the amount of the property tax rebate received under 15-1-2302. ; and
20 (p) 50% of the net income from the sale of Montana-produced food as defined in 15-31-113 that
21 was generated at the point of sale by the retailer to the ultimate consumer.
22 (4) (a) A taxpayer who, in determining federal taxable income, has reduced the taxpayer's
23 business deductions:
24 (i) by an amount for wages and salaries for which a federal tax credit was elected under sections
25 38 and 51(a) of the Internal Revenue Code, 26 U.S.C. 38 and 51(a), is allowed to deduct the amount of the
26 wages and salaries paid regardless of the credit taken; or
27 (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to
28 deduct the amount of the business expense paid when there is no corresponding state income tax credit or ****
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1 deduction, regardless of the credit taken.
2 (b) The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
3 business expenses were used to compute the credit. In the case of a partnership or small business corporation,
4 the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
5 or small business corporation.
6 (5) (a) An individual who contributes to one or more accounts established under the Montana
7 family education savings program or to a qualified tuition program established and maintained by another state
8 as provided in section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), may reduce
9 taxable income by the lesser of $3,000 or the amount of the contribution. In the case of married taxpayers, each
10 spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the accounts.
11 Spouses may jointly elect to treat half of the total contributions made by the spouses as being made by each
12 spouse. The reduction in taxable income under this subsection (5)(a) applies only with respect to contributions
13 to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's child or
14 stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (2)(d) do not
15 apply with respect to withdrawals of contributions that reduced federal taxable income.
16 (b) Contributions made pursuant to this subsection (5) are subject to the recapture tax provided for
17 in 15-62-208.
18 (6) (a) An individual who contributes to one or more accounts established under the Montana
19 achieving a better life experience program or to a qualified program established and maintained by another
20 state may reduce taxable income by the lesser of $3,000 or the amount of the contribution. In the case of
21 married taxpayers, each spouse is entitled to a reduction, not to exceed $3,000, for the spouses' contributions
22 to the accounts. Spouses may jointly elect to treat one-half of the total contributions made by the spouses as
23 being made by each spouse. The reduction in taxable income under this subsection (6)(a) applies only with
24 respect to contributions to an account for which the account owner is the taxpayer, the taxpayer's spouse, or
25 the taxpayer's child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of
26 subsection (2)(d) do not apply with respect to withdrawals of contributions that reduced taxable income.
27 (b) Contributions made pursuant to this subsection (6) are subject to the recapture tax provided in
28 53-25-118. ****
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1 (7) By November 1 of each year, the department shall multiply the subtraction from federal taxable
2 income for a taxpayer that has attained the age of 65 contained in subsection (3)(g) by the inflation factor for
3 that tax year, rounding the result to the nearest $10. The resulting amount is effective for that tax year and must
4 be used as the basis for the subtraction from federal taxable income determined under subsection (3)(g).
5 (8) (a) Subject to subsection (9), the subtraction in subsection (3)(n)(i) is equal to the lesser of:
6 (i) the amount of Montana source wage income on the return; or
7 (ii) 50% of the taxpayer's military pension or military retirement income.
8 (b) For the purposes of subsection (8)(a)(i), "Montana source wage income" means:
9 (i) wages, salary, tips, and other compensation for services performed in the state;
10 (ii) net income from a trade, business, profession, or occupation carried on in the state; and
11 (iii) net income from farming activities carried on in the state.
12 (9) The subtractions in subsection (3)(n):
13 (a) may only be claimed by a person who:
14 (i) becomes a resident of the state after June 30, 2023; or
15 (ii) was a resident of the state before receiving military pension or military retirement income and
16 remained a resident after receiving military pension or military retirement income;
17 (b) may only be claimed for 5 consecutive years after satisfying the provisions of subsection (9)(a);
18 and
19 (c) are not available if a taxpayer claimed the exemption before becoming a nonresident.
20 (10) For the subtractions provided for in subsection (3)(p), the taxpayer shall report the net income
21 from food identified by the vendor as Montana-produced food as defined in 15-31-113. (Subsection (3)(o)
22 terminates June 30, 2025--sec. 10, Ch. 47, L. 2023; subsections (3)(n), (8), and (9) terminate December 31,
23 2033--sec. 4, Ch. 650, L. 2023.)"
24
25 Section 15-31-113, MCA, is amended to read:
26 "15-31-113. (1) The term "gross income" means all income
27 recognized in determining the corporation's gross income for federal income tax purposes and:
28 (a) including: ****
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1 (i) interest exempt from federal income tax and exempt-interest dividends as defined in section
2 852(b)(5) of the Internal Revenue Code of 1986, as that section may be amended or renumbered;
3 (ii) the portion of gain from a liquidation of the reporting corporation not recognized for federal
4 corporate income tax purposes pursuant to sections 331 through 337 of the Internal Revenue Code, as those
5 sections may be amended or renumbered, attributable to stockholders, either individual or corporate, not
6 subject to Montana income or corporate income tax under Title 15, chapter 30 or chapter 31, as appropriate, on
7 the gain passing through to the stockholders pursuant to federal law; and
8 (b) excluding:
9 (i) gain recognized for federal tax purposes as a shareholder of a liquidating corporation pursuant
10 to sections 331 through 337 of the Internal Revenue Code, as those sections may be amended or renumbered,
11 when the gain is required to be recognized by the liquidating corporation pursuant to subsection (1)(a)(ii) of this
12 section. ; and
13 (ii) 50% of the net income from the sale of Montana-produced food that was generated at the point
14 of sale by the retailer to the ultimate consumer.
15 (2) The term "net income" means the gross income of the corporation less the deductions set forth
16 in 15-31-114.
17 (3) A corporation is not exempt from the corporate income tax unless specifically provided for
18 under 15-31-101(3) or 15-31-102. Any corporation not subject to or liable for federal income tax but not exempt
19 from the corporate income tax under 15-31-101(3) or 15-31-102 shall compute gross income for corporate
20 income tax purposes in the same manner as a corporation that is subject to or liable for federal income tax
21 according to the provisions for determining gross income in the federal Internal Revenue Code in effect for the
22 taxable year.
23 (4) For the exclusion provided for in subsection (1)(b)(ii), the taxpayer shall report the net income
24 from Montana-produced food identified by the vendor.
25 (5) (a) For the purposes of this section, "Montana-produced food" means articles normally used by
26 humans as food or drink, including alcoholic and nonalcoholic beverages, and articles used for components of
27 articles normally used by humans as food or drink that are planted, cultivated, grown, harvested, raised,
28 collected, processed, or manufactured in the state. ****
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1 (b) The term does not include food or drink prepared for onsite consumption."
2
3 NEW SECTION. Section 3. [This act] is effective January 1, 2026.
4
5 NEW SECTION. Section 4. [This act] applies to income tax years beginning after
6 December 31, 2025.
7 - END -