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68th Legislature 2023 SB 104.1
1 SENATE BILL NO. 104
2 INTRODUCED BY J. FULLER
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT REVISING STATE INCOME TAXATION FOR MILITARY
5 PENSIONS, RETIREMENT, AND SURVIVOR BENEFITS; EXEMPTING A PORTION OF MILITARY
6 PENSIONS OR RETIREMENT INCOME AND SURVIVOR BENEFITS FROM INCOME TAXATION;
7 PROVIDING THE EXEMPTION TO RETIRED MEMBERS OF THE ARMED FORCES, A RESERVE
8 COMPONENT, OR THE NATIONAL GUARD; PROVIDING RULEMAKING AUTHORITY; AMENDING
9 SECTION 15-30-2120, MCA; AND PROVIDING EFFECTIVE DATES AND AN APPLICABILITY DATE.”
10
11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
12
13 Section 1. Section 15-30-2120, MCA, is amended to read:
14 "15-30-2120. (Effective January 1, 2024) Adjustments to federal taxable income to determine
15 Montana taxable income. (1) The items in subsection (2) are added to and the items in subsection (3) are
16 subtracted from federal taxable income to determine Montana taxable income.
17 (2) The following are added to federal taxable income:
18 (a) to the extent that it is not exempt from taxation by Montana under federal law, interest from
19 obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
20 interest dividends attributable to that interest except to the extent already included in federal taxable income;
21 (b) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal
22 Revenue Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the
23 income;
24 (c) depreciation or amortization taken on a title plant as defined in 33-25-105;
25 (d) the recovery during the tax year of an amount deducted in any prior tax year to the extent that
26 the amount recovered reduced the taxpayer's Montana income tax in the year deducted;
27 (e) an item of income, deduction, or expense to the extent that it was used to calculate federal
28 taxable income if the item was also used to calculate a credit against a Montana income tax liability;
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68th Legislature 2023 SB 104.1
1 (f) a deduction for an income distribution from an estate or trust to a beneficiary that was included
2 in the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
3 Revenue Code, 26 U.S.C. 651 and 661;
4 (g) a withdrawal from a medical care savings account provided for in Title 15, chapter 61, used for
5 a purpose other than an eligible medical expense or long-term care of the employee or account holder or a
6 dependent of the employee or account holder;
7 (h) a withdrawal from a first-time home buyer savings account provided for in Title 15, chapter 63,
8 used for a purpose other than for eligible costs for the purchase of a single-family residence;
9 (i) for a taxpayer that deducts the qualified business income deduction pursuant to section 199A
10 of the Internal Revenue Code, 26 U.S.C. 199A, an amount equal to the qualified business income deduction
11 claimed; and
12 (j) for a taxpayer that deducts state income taxes pursuant to section 164(a)(3) of the Internal
13 Revenue Code, 26 U.S.C. 164(a)(3), an additional amount equal to the state income tax deduction claimed, not
14 to exceed the amount required to reduce the federal itemized amount computed under section 161 of the
15 Internal Revenue Code, 26 U.S.C. 161, to the amount of the federal standard deduction allowable under
16 section 63(c) of the Internal Revenue Code, 26 U.S.C. 63(c).
17 (3) To the extent they are included as income or gain or not already excluded as a deduction or
18 expense in determining federal taxable income, the following are subtracted from federal taxable income:
19 (a) a deduction for an income distribution from an estate or trust to a beneficiary in accordance
20 with sections 651 and 661 of the Internal Revenue Code, 26 U.S.C. 651 and 661, recalculated according to the
21 additions and subtractions in subsections (2) and (3)(b) through (3)(m);
22 (b) if exempt from taxation by Montana under federal law:
23 (i) interest from obligations of the United States government and exempt-interest dividends
24 attributable to that interest; and
25 (ii) railroad retirement benefits;
26 (c) (i) salary received from the armed forces by residents of Montana who are serving on active
27 duty in the regular armed forces and who entered into active duty from Montana;
28 (ii) the salary received by residents of Montana for active duty in the national guard. For the
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68th Legislature 2023 SB 104.1
1 purposes of this subsection (3)(c)(ii), "active duty" means duty performed under an order issued to a national
2 guard member pursuant to:
3 (A) Title 10, U.S.C.; or
4 (B) Title 32, U.S.C., for a homeland defense activity, as defined in 32 U.S.C. 901, or a contingency
5 operation, as defined in 10 U.S.C. 101, and the person was a member of a unit engaged in a homeland
6 defense activity or contingency operation.
7 (iii) the amount received pursuant to 10-1-1114 or from the federal government by a service
8 member, as defined in 10-1-1112, as reimbursement for group life insurance premiums paid;
9 (iv) the amount received by a beneficiary pursuant to 10-1-1201; and
10 (v) all payments made under the World War I bonus law, the Korean bonus law, and the veterans'
11 bonus law. Any income tax that has been or may be paid on income received from the World War I bonus law,
12 Korean bonus law, and the veterans' bonus law is considered an overpayment and must be refunded upon the
13 filing of an amended return and a verified claim for refund on forms prescribed by the department in the same
14 manner as other income tax refund claims are paid.
15 (d) interest and other income related to contributions that were made prior to January 1, 2024, that
16 are retained in a medical care savings account provided for in Title 15, chapter 61, and any withdrawal for
17 payment of eligible medical expenses or for the long-term care of the employee or account holder or a
18 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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68th Legislature 2023 SB 104.1
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) an amount equal to 30% of net-long term capital gains, as defined in section 1222 of the
9 Internal Revenue Code, 26 U.S.C. 1222, if and to the extent such gain is taken into account in computing
10 federal taxable income; and
11 (m) the amount of the gain recognized from the sale or exchange of a mobile home park as
12 provided in 15-31-163; and
13 (n) (i) up to 50% of all military pensions or military retirement income received by a retired member
14 of:
15 (A) the armed forces of the United States, as defined in 10 U.S.C. 101;
16 (B) the Montana army national guard or the army national guard of other states;
17 (C) the Montana air national guard or the air national guard of other states; or
18 (D) a reserve component, as defined in 38 U.S.C. 101, of the United States armed forces; and
19 (ii) up to 50% of all income received as survivor benefits for military service provided for in
20 subsection (3)(n)(i).
21 (4) (a) A taxpayer who, in determining federal taxable income, has reduced the taxpayer's
22 business deductions:
23 (i) by an amount for wages and salaries for which a federal tax credit was elected under sections
24 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
25 wages and salaries paid regardless of the credit taken; or
26 (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to
27 deduct the amount of the business expense paid when there is no corresponding state income tax credit or
28 deduction, regardless of the credit taken.
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68th Legislature 2023 SB 104.1
1 (b) The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
2 business expenses were used to compute the credit. In the case of a partnership or small business corporation,
3 the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
4 or small business corporation.
5 (5) (a) An individual who contributes to one or more accounts established under the Montana
6 family education savings program or to a qualified tuition program established and maintained by another state
7 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
8 taxable income by the lesser of $3,000 or the amount of the contribution. In the case of married taxpayers, each
9 spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the accounts.
10 Spouses may jointly elect to treat half of the total contributions made by the spouses as being made by each
11 spouse. The reduction in taxable income under this subsection (5)(a) applies only with respect to contributions
12 to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's child or
13 stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (2)(d) do not
14 apply with respect to withdrawals of contributions that reduced federal taxable income.
15 (b) Contributions made pursuant to this subsection (5) are subject to the recapture tax provided for
16 in 15-62-208.
17 (6) (a) An individual who contributes to one or more accounts established under the Montana
18 achieving a better life experience program or to a qualified program established and maintained by another
19 state may reduce taxable income by the lesser of $3,000 or the amount of the contribution. In the case of
20 married taxpayers, each spouse is entitled to a reduction, not to exceed $3,000, for the spouses' contributions
21 to the accounts. Spouses may jointly elect to treat one-half of the total contributions made by the spouses as
22 being made by each spouse. The reduction in taxable income under this subsection (6)(a) applies only with
23 respect to contributions to an account for which the account owner is the taxpayer, the taxpayer's spouse, or
24 the taxpayer's child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of
25 subsection (2)(d) do not apply with respect to withdrawals of contributions that reduced taxable income.
26 (b) Contributions made pursuant to this subsection (6) are subject to the recapture tax provided in
27 53-25-118.
28 (7) By November 1 of each year, the department shall multiply the subtraction from federal taxable
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68th Legislature 2023 SB 104.1
1 income for a taxpayer that has attained the age of 65 contained in subsection (3)(g) by the inflation factor for
2 that tax year, rounding the result to the nearest $10. The resulting amount is effective for that tax year and must
3 be used as the basis for the subtraction from federal taxable income determined under subsection (3)(g)."
4
5 NEW SECTION. Section 2. Effective dates. (1) Except as provided in subsection (2), [this act] is
6 effective on passage and approval
7 (2) [Section 1] is effective January 1, 2024.
8
9 NEW SECTION. Section 3. Applicability. [This act] applies to military retirement or pension income
10 or survivor benefits received after December 31, 2023.
11 - END -
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Statutes affected:
SB0104_1.pdf: 15-30-2120
SB0104_2.pdf: 15-30-2120
SB0104_3.pdf: 15-30-2120
SB0104_4.pdf: 15-30-2120
SB0104_5.pdf: 15-30-2120
SB0104_X.pdf: 15-30-2120
Amended: 15-30-2120
Introduced: 15-30-2120