Senate Bill No. [number], introduced by G. Hertz, aims to revise individual income tax laws in Montana by allowing taxpayers to make a transition adjustment for certain net operating losses that were not addressed in the 2021 income tax simplification legislation. The bill permits taxpayers to elect to adjust their Montana taxable income based on differences between federal and Montana net operating loss carryovers as of December 31, 2023. Specifically, if the Montana carryover is smaller than the federal carryover, it results in a positive adjustment, while a larger Montana carryover leads to a negative adjustment. Taxpayers must make this election on their 2024 income tax return by October 15, 2025, and can file an amended return to do so.

Additionally, the bill establishes that the transition adjustment must be applied until the taxpayer's Montana taxable income reaches $0, and it can be carried forward for up to seven years. If the election is not made by the deadline, the taxpayer will not be able to make the carryforward adjustment, and the previous law will apply. The Department of Revenue is granted authority to create necessary forms and rules for administering these adjustments. The bill is effective upon passage and approval and applies retroactively to income tax years beginning after December 31, 2023.