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68th Legislature 2023 SB 550.1
1 SENATE BILL NO. 550
2 INTRODUCED BY G. HERTZ
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING INCOME TAX LAWS; REVISING
5 REFERENCES TO THE INDIVIDUAL INCOME TAX RATE TABLE EFFECTIVE JANUARY 1, 2024;
6 EXTENDING THE MEDICAL SAVINGS ACCOUNT TAX DEDUCTION; CLARIFYING THE CALCULATION OF
7 COMPOSITE TAX RETURN TAX LIABILITY; ELIMINATING THE ESTABLISHMENT OF A FIRST-TIME HOME
8 BUYER SAVINGS ACCOUNT AFTER TAX YEAR 2023; PROVIDING THAT DIRECT PRIMARY CARE FEES
9 AND HEALTH CARE SHARING MINISTRY EXPENSES ARE ELIGIBLE MEDICAL EXPENSES FOR
10 MEDICAL SAVINGS ACCOUNTS; AMENDING SECTIONS 15-30-2113, 15-30-2120, 15-30-2318, 15-30-2522,
11 15-30-3312, 15-31-1003, 15-61-102, 15-61-202, 15-63-201, AND 50-4-107, MCA; AND PROVIDING
12 EFFECTIVE DATES, AN APPLICABILITY DATE, AND A RETROACTIVE APPLICABILITY DATE.”
13
14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
15
16 Section 1. Section 15-30-2113, MCA, is amended to read:
17 "15-30-2113. (Temporary) Determination of marital status. For purposes of this chapter:
18 (1) the determination of whether an individual is married must be made as of the close of the
19 individual's tax year, except that if the individual's spouse dies during the individual's tax year, the determination
20 must be made as of the time of death; and
21 (2) an individual legally separated from the individual's spouse under a decree of divorce or of
22 separate maintenance may not be considered as married.
23 15-30-2113. (Effective January 1, 2024) Determination of status -- effect of status elections. For
24 purposes of this chapter:
25 (1) the determination of marital status, dependent status, status as an association, partnership, or
26 individual, and any other status must be made as provided in the Internal Revenue Code; and
27 (2) the status that a taxpayer claims or elects in a federal income tax return with respect to the
28 taxpayer or another individual or that the taxpayer or other individual is determined to have for federal income
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68th Legislature 2023 SB 550.1
1 tax purposes conclusively determines the status of that individual; and
2 (3) a joint Montana individual income tax return must be filed for any tax year for which a joint federal
3 income tax return is filed unless one of the individuals is a nonresident for any part of the tax year."
4
5 Section 2. Section 15-30-2120, MCA, is amended to read:
6 "15-30-2120. (Effective January 1, 2024) Adjustments to federal taxable income to determine
7 Montana taxable income. (1) The items in subsection (2) are added to and the items in subsection (3) are
8 subtracted from federal taxable income to determine Montana taxable income.
9 (2) The following are added to federal taxable income:
10 (a) to the extent that it is not exempt from taxation by Montana under federal law, interest from
11 obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
12 interest dividends attributable to that interest except to the extent already included in federal taxable income;
13 (b) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal
14 Revenue Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the
15 income;
16 (c) depreciation or amortization taken on a title plant as defined in 33-25-105;
17 (d) the recovery during the tax year of an amount deducted in any prior tax year to the extent that
18 the amount recovered reduced the taxpayer's Montana income tax in the year deducted;
19 (e) an item of income, deduction, or expense to the extent that it was used to calculate federal
20 taxable income if the item was also used to calculate a credit against a Montana income tax liability;
21 (f) a deduction for an income distribution from an estate or trust to a beneficiary that was included
22 in the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
23 Revenue Code, 26 U.S.C. 651 and 661;
24 (g) a withdrawal from a medical care savings account provided for in Title 15, chapter 61, used for
25 a purpose other than an eligible medical expense or long-term care of the employee or account holder or a
26 dependent of the employee or account holder;
27 (h) a withdrawal from a first-time home buyer savings account provided for in Title 15, chapter 63,
28 used for a purpose other than for eligible costs for the purchase of a single-family residence;
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68th Legislature 2023 SB 550.1
1 (i) for a taxpayer that deducts the qualified business income deduction pursuant to section 199A
2 of the Internal Revenue Code, 26 U.S.C. 199A, an amount equal to the qualified business income deduction
3 claimed; and
4 (j) for a an individual taxpayer that deducts state income taxes pursuant to section 164(a)(3) of
5 the Internal Revenue Code, 26 U.S.C. 164(a)(3), an additional amount equal to the state income tax deduction
6 claimed, not to exceed the amount required to reduce the federal itemized amount computed under section 161
7 of the Internal Revenue Code, 26 U.S.C. 161, to the amount of the federal standard deduction allowable under
8 section 63(c) of the Internal Revenue Code, 26 U.S.C. 63(c); and
9 (k) for a pass-through entity, estate, or trust, the amount of state income taxes deducted pursuant
10 to section 164(a)(3) of the Internal Revenue Code, 26 U.S.C 164(a)(3).
11 (3) To the extent they are included as income or gain or not already excluded as a deduction or
12 expense in determining federal taxable income, the following are subtracted from federal taxable income:
13 (a) a deduction for an income distribution from an estate or trust to a beneficiary in accordance
14 with sections 651 and 661 of the Internal Revenue Code, 26 U.S.C. 651 and 661, recalculated according to the
15 additions and subtractions in subsections (2) and (3)(b) through (3)(m);
16 (b) if exempt from taxation by Montana under federal law:
17 (i) interest from obligations of the United States government and exempt-interest dividends
18 attributable to that interest; and
19 (ii) railroad retirement benefits;
20 (c) (i) salary received from the armed forces by residents of Montana who are serving on active
21 duty in the regular armed forces and who entered into active duty from Montana;
22 (ii) the salary received by residents of Montana for active duty in the national guard. For the
23 purposes of this subsection (3)(c)(ii), "active duty" means duty performed under an order issued to a national
24 guard member pursuant to:
25 (A) Title 10, U.S.C.; or
26 (B) Title 32, U.S.C., for a homeland defense activity, as defined in 32 U.S.C. 901, or a contingency
27 operation, as defined in 10 U.S.C. 101, and the person was a member of a unit engaged in a homeland
28 defense activity or contingency operation.
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68th Legislature 2023 SB 550.1
1 (iii) the amount received pursuant to 10-1-1114 or from the federal government by a service
2 member, as defined in 10-1-1112, as reimbursement for group life insurance premiums paid;
3 (iv) the amount received by a beneficiary pursuant to 10-1-1201; and
4 (v) all payments made under the World War I bonus law, the Korean bonus law, and the veterans'
5 bonus law. Any income tax that has been or may be paid on income received from the World War I bonus law,
6 Korean bonus law, and the veterans' bonus law is considered an overpayment and must be refunded upon the
7 filing of an amended return and a verified claim for refund on forms prescribed by the department in the same
8 manner as other income tax refund claims are paid.
9 (d) interest and other income related to contributions that were made prior to January 1, 2024, that
10 are retained in a medical care savings account provided for in Title 15, chapter 61, and any withdrawal for
11 payment of eligible medical expenses or for the long-term care of the employee or account holder or a
12 dependent of the employee or account holder;
13 (d) principal and income in a medical care savings account established in accordance with 15-61-
14 201 or withdrawn from an account for eligible medical expenses, as defined in 15-61-102, including a medical
15 care savings account inherited by an immediate family member as provided in 15-61-202(6);
16 (e) contributions or earnings withdrawn from a family education savings account provided for in
17 Title 15, chapter 62, or from a qualified tuition program established and maintained by another state as
18 provided in section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), for qualified
19 education expenses, as defined in 15-62-103, of a designated beneficiary;
20 (f) interest and other income related to contributions that were made prior to January 1, 2024, that
21 are retained in a first-time home buyer savings account provided for in Title 15, chapter 63, and any withdrawal
22 for payment of eligible costs for the first-time purchase of a single-family residence;
23 (g) for each taxpayer that has attained the age of 65, an additional subtraction of $5,500;
24 (h) the amount of a scholarship to an eligible student by a student scholarship organization
25 pursuant to 15-30-3104;
26 (i) a payment received by a private landowner for providing public access to public land pursuant
27 to Title 76, chapter 17, part 1;
28 (j) the amount of any refund or credit for overpayment of income taxes imposed by this state or
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68th Legislature 2023 SB 550.1
1 any other taxing jurisdiction to the extent included in gross income for federal income tax purposes but not
2 previously allowed as a deduction for Montana income tax purposes;
3 (k) the recovery during the tax year of any amount deducted in any prior tax year to the extent that
4 the recovered amount did not reduce the taxpayer's Montana income tax in the year deducted;
5 (l) an amount equal to 30% of net-long term capital gains, as defined in section 1222 of the
6 Internal Revenue Code, 26 U.S.C. 1222, if and to the extent such gain is taken into account in computing
7 federal taxable income; and
8 (m) the amount of the gain recognized from the sale or exchange of a mobile home park as
9 provided in 15-31-163.
10 (4) (a) A taxpayer who, in determining federal taxable income, has reduced the taxpayer's
11 business deductions:
12 (i) by an amount for wages and salaries for which a federal tax credit was elected under sections
13 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
14 wages and salaries paid regardless of the credit taken; or
15 (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to
16 deduct the amount of the business expense paid when there is no corresponding state income tax credit or
17 deduction, regardless of the credit taken.
18 (b) The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
19 business expenses were used to compute the credit. In the case of a partnership or small business corporation,
20 the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
21 or small business corporation.
22 (5) (a) An individual who contributes to one or more accounts established under the Montana
23 family education savings program or to a qualified tuition program established and maintained by another state
24 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
25 taxable income by the lesser of $3,000 or the amount of the contribution. In the case of married taxpayers, each
26 spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the accounts.
27 Spouses may jointly elect to treat half of the total contributions made by the spouses as being made by each
28 spouse. The reduction in taxable income under this subsection (5)(a) applies only with respect to contributions
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68th Legislature 2023 SB 550.1
1 to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's child or
2 stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (2)(d) do not
3 apply with respect to withdrawals of contributions that reduced federal taxable income.
4 (b) Contributions made pursuant to this subsection (5) are subject to the recapture tax provided for
5 in 15-62-208.
6 (6) (a) An individual who contributes to one or more accounts established under the Montana
7 achieving a better life experience program or to a qualified program established and maintained by another
8 state may reduce taxable income by the lesser of $3,000 or the amount of the contribution. In the case of
9 married taxpayers, each spouse is entitled to a reduction, not to exceed $3,000, for the spouses' contributions
10 to the accounts. Spouses may jointly elect to treat one-half of the total contributions made by the spouses as
11 being made by each spouse. The reduction in taxable income under this subsection (6)(a) applies only with
12 respect to contributions to an account for which the account owner is the taxpayer, the taxpayer's spouse, or
13 the taxpayer's child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of
14 subsection (2)(d) do not apply with respect to withdrawals of contributions that reduced taxable income.
15 (b) Contributions made pursuant to this subsection (6) are subject to the recapture tax provided in
16 53-25-118.
17 (7) By November 1 of each year, the department shall multiply the subtraction from federal taxable
18 income for a taxpayer that has attained the age of 65 contained in subsection (3)(g) by the inflation factor for
19 that tax year, rounding the result to the nearest $10. The resulting amount is effective for that tax year and must
20 be used as the basis for the subtraction from federal taxable income determined under subsection (3)(g)."
21
22 Section 3. Section 15-30-2318, MCA, is amended to read:
23 "15-30-2318. Earned income tax credit. (1) Except as provided in subsection (3), a resident
24 taxpayer is allowed as a credit against the tax imposed by 15-30-2103 a percentage of the credit allowed for the
25 federal earned income credit for which the individual taxpayer is eligible for the tax year under section 32 of the
26 Internal Revenue Code, 26 U.S.C. 32.
27 (2) The amount of the credit allowed under subsection (1) is 3% of the amount of the credit
28 determined for the tax year under section 32 of the Internal Revenue Code, 26 U.S.C. 32.
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1 (3) (a) Except for married taxpayers living apart who are treated as single under section 7703(b)
2 of the Internal Revenue Code, 26 U.S.C. 7703(b), the credit is not allowed to married taxpayers if the spouses
3 report their income on separate tax forms. Married taxpayers filing separately on the same form may allocate
4 the credit between spouses.
5 (b) The credit is not allowed on earned income that is treated as a dividend received by a member of
6 an agricultural organization provided for in section 501(d) of the Internal Revenue Code, 26 U.S.C. 501(d). For
7 the purpose of this subsection (3)(b), the amount of the state tax credit provided for in subsection (2) is reduced
8 by the reduction percentage.
9 (4) The taxpayer is entitled to a refund equal to the amount by which the credit exceeds the
10 taxpayer's tax liability or, if the taxpayer has no tax liability under this chapter, a refund equal to the amount of
11 the credit. The credit may be claimed by filing a Montana income tax return.
12 (5) For the purpose of this section, the following definitio