67th Legislature HB 129.1
1 HOUSE BILL NO. 129
2 INTRODUCED BY D. BEDEY
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING THE FAMILY EDUCATION SAVINGS
5 ACT; LIMITING MONTANA TAX BENEFITS TO THE MONTANA FAMILY EDUCATION SAVINGS PROGRAM;
6 REVISING QUALIFYING EXPENDITURES TO INCLUDE K-12 TUITION, CERTAIN EXPENSES FOR
7 REGISTERED APPRENTICESHIPS, AND REPAYING STUDENT LOANS; REVISING PROGRAM
8 REQUIREMENTS; REVISING THE DUTIES OF THE BOARD OF REGENTS IN ADMINISTERING THE
9 FAMILY EDUCATION SAVINGS PROGRAM; REVISING DEFINITIONS; AMENDING SECTIONS 15-30-2110,
10 15-62-102, 15-62-103, 15-62-201, 15-62-202, 15-62-203, 15-62-206, 15-62-208, 15-62-301, AND 20-25-902,
11 MCA; REPEALING SECTION 15-62-302, MCA; AND PROVIDING AN EFFECTIVE DATE AND AN
12 APPLICABILITY DATE.”
13
14 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
15
16 Section 1. Section 15-30-2110, MCA, is amended to read:
17 "15-30-2110. Adjusted gross income. (1) Subject to subsection (15), adjusted gross income is the
18 taxpayer's federal adjusted gross income as defined in section 62 of the Internal Revenue Code, 26 U.S.C. 62,
19 and in addition includes the following:
20 (a) (i) interest received on obligations of another state or territory or county, municipality, district, or
21 other political subdivision of another state, except to the extent that the interest is exempt from taxation by
22 Montana under federal law;
23 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, 26 U.S.C.
24 852(b)(5), that are attributable to the interest referred to in subsection (1)(a)(i);
25 (b) refunds received of federal income tax, to the extent that the deduction of the tax resulted in a
26 reduction of Montana income tax liability as determined under subsection (16);
27 (c) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal Revenue
28 Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the income;
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1 (d) depreciation or amortization taken on a title plant as defined in 33-25-105;
2 (e) the recovery during the tax year of an amount deducted in any prior tax year to the extent that the
3 amount recovered reduced the taxpayer's Montana income tax in the year deducted;
4 (f) if the state taxable distribution of an estate or trust is greater than the federal taxable distribution of
5 the same estate or trust, the difference between the state taxable distribution and the federal taxable
6 distribution of the same estate or trust for the same tax period; and
7 (g) except for exempt-interest dividends described in subsection (2)(a)(ii), the amount of any dividend
8 to the extent that the dividend is not included in federal adjusted gross income.
9 (2) Notwithstanding the provisions of the Internal Revenue Code, adjusted gross income does not
10 include the following, which are exempt from taxation under this chapter:
11 (a) (i) all interest income from obligations of the United States government, the state of Montana, or a
12 county, municipality, district, or other political subdivision of the state and any other interest income that is
13 exempt from taxation by Montana under federal law;
14 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, 26 U.S.C.
15 852(b)(5), that are attributable to the interest referred to in subsection (2)(a)(i);
16 (b) interest income earned by a taxpayer who is 65 years of age or older in a tax year up to and
17 including $800 for a taxpayer filing a separate return and $1,600 for each joint return;
18 (c) (i) except as provided in subsection (2)(c)(ii) and subject to subsection (17), the first $4,070 of all
19 pension and annuity income received as defined in 15-30-2101;
20 (ii) subject to subsection (17), for pension and annuity income described under subsection (2)(c)(i), as
21 follows:
22 (A) each taxpayer filing singly, head of household, or married filing separately shall reduce the total
23 amount of the exclusion provided in subsection (2)(c)(i) by $2 for every $1 of federal adjusted gross income in
24 excess of $33,910 as shown on the taxpayer's return;
25 (B) in the case of married taxpayers filing jointly, if both taxpayers are receiving pension or annuity
26 income or if only one taxpayer is receiving pension or annuity income, the exclusion claimed as provided in
27 subsection (2)(c)(i) must be reduced by $2 for every $1 of federal adjusted gross income in excess of $33,910
28 as shown on their joint return;
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1 (d) all Montana income tax refunds or tax refund credits;
2 (e) gain required to be recognized by a liquidating corporation under 15-31-113(1)(a)(ii);
3 (f) all tips or gratuities that are covered by section 3402(k) or service charges that are covered by
4 section 3401 of the Internal Revenue Code of 1954, 26 U.S.C. 3402(k) or 3401, as amended and applicable on
5 January 1, 1983, received by a person for services rendered to patrons of premises licensed to provide food,
6 beverage, or lodging;
7 (g) all benefits received under the workers' compensation laws;
8 (h) all health insurance premiums paid by an employer for an employee if attributed as income to the
9 employee under federal law;
10 (i) all money received because of a settlement agreement or judgment in a lawsuit brought against a
11 manufacturer or distributor of "agent orange" for damages resulting from exposure to "agent orange";
12 (j) principal and income in a medical care savings account established in accordance with 15-61-201
13 or withdrawn from an account for eligible medical expenses, as defined in 15-61-102, including a medical care
14 savings account inherited by an immediate family member as provided in 15-61-202(6);
15 (k) principal and income in a first-time home buyer savings account established in accordance with
16 15-63-201 or withdrawn from an account for eligible costs, as provided in 15-63-202(7), for the first-time
17 purchase of a single-family residence;
18 (l) contributions or earnings withdrawn from a family education savings an account established under
19 the Montana family education savings program, Title 15, chapter 62, or from a qualified tuition program
20 established and maintained by another state as provided by section 529(b)(1)(A)(ii) of the Internal Revenue
21 Code, 26 U.S.C. 529(b)(1)(A)(ii), for qualified higher education expenses, as defined in 15-62-103, of a
22 designated beneficiary;
23 (m) the recovery during the tax year of any amount deducted in any prior tax year to the extent that
24 the recovered amount did not reduce the taxpayer's Montana income tax in the year deducted;
25 (n) if the federal taxable distribution of an estate or trust is greater than the state taxable distribution of
26 the same estate or trust, the difference between the federal taxable distribution and the state taxable
27 distribution of the same estate or trust for the same tax period;
28 (o) deposits, not exceeding the amount set forth in 15-30-3003, deposited in a Montana farm and
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1 ranch risk management account, as provided in 15-30-3001 through 15-30-3005, in any tax year for which a
2 deduction is not provided for federal income tax purposes;
3 (p) income of a dependent child that is included in the taxpayer's federal adjusted gross income
4 pursuant to the Internal Revenue Code. The child is required to file a Montana personal income tax return if the
5 child and taxpayer meet the filing requirements in 15-30-2602.
6 (q) principal and income deposited in a health care expense trust account, as defined in 2-18-1303, or
7 withdrawn from the account for payment of qualified health care expenses as defined in 2-18-1303;
8 (r) the amount of the gain recognized from the sale or exchange of a mobile home park as provided in
9 15-31-163;
10 (s) the amount of a scholarship to an eligible student by a student scholarship organization pursuant
11 to 15-30-3104; and
12 (t) a payment received by a private landowner for providing public access to public land pursuant to
13 Title 76, chapter 17, part 1.
14 (3) A shareholder of a DISC that is exempt from the corporate income tax under 15-31-102(1)(l) shall
15 include in the shareholder's adjusted gross income the earnings and profits of the DISC in the same manner as
16 provided by section 995 of the Internal Revenue Code, 26 U.S.C. 995, for all periods for which the DISC
17 election is effective.
18 (4) (a) A taxpayer who, in determining federal adjusted gross income, has reduced the taxpayer's
19 business deductions:
20 (i) by an amount for wages and salaries for which a federal tax credit was elected under sections 38
21 and 51(a) of the Internal Revenue Code, 26 U.S.C. 38 and 51(a), is allowed to deduct the amount of the wages
22 and salaries paid regardless of the credit taken; or
23 (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to deduct the
24 amount of the business expense paid when there is no corresponding state income tax credit or deduction,
25 regardless of the credit taken.
26 (b) The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
27 business expenses were used to compute the credit. In the case of a partnership or small business corporation,
28 the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
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1 or small business corporation.
2 (5) Married taxpayers filing a joint federal return who are required to include part of their social
3 security benefits or part of their tier 1 railroad retirement benefits in federal adjusted gross income may split the
4 federal base used in calculation of federal taxable social security benefits or federal taxable tier 1 railroad
5 retirement benefits when they file separate Montana income tax returns. The federal base must be split equally
6 on the Montana return.
7 (6) Married taxpayers filing a joint federal return who are allowed a capital loss deduction under
8 section 1211 of the Internal Revenue Code, 26 U.S.C. 1211, and who file separate Montana income tax returns
9 may claim the same amount of the capital loss deduction that is allowed on the federal return. If the allowable
10 capital loss is clearly attributable to one spouse, the loss must be shown on that spouse's return; otherwise, the
11 loss must be split equally on each return.
12 (7) In the case of passive and rental income losses, married taxpayers filing a joint federal return and
13 who file separate Montana income tax returns are not required to recompute allowable passive losses
14 according to the federal passive activity rules for married taxpayers filing separately under section 469 of the
15 Internal Revenue Code, 26 U.S.C. 469. If the allowable passive loss is clearly attributable to one spouse, the
16 loss must be shown on that spouse's return; otherwise, the loss must be split equally on each return.
17 (8) Married taxpayers filing a joint federal return in which one or both of the taxpayers are allowed a
18 deduction for an individual retirement contribution under section 219 of the Internal Revenue Code, 26 U.S.C.
19 219, and who file separate Montana income tax returns may claim the same amount of the deduction that is
20 allowed on the federal return. The deduction must be attributed to the spouse who made the contribution.
21 (9) (a) Married taxpayers filing a joint federal return who are allowed a deduction for interest paid for
22 a qualified education loan under section 221 of the Internal Revenue Code, 26 U.S.C. 221, and who file
23 separate Montana income tax returns may claim the same amount of the deduction that is allowed on the
24 federal return. The deduction may be split equally on each return or in proportion to each taxpayer's share of
25 federal adjusted gross income.
26 (b) Married taxpayers filing a joint federal return who are allowed a deduction for qualified tuition and
27 related expenses under section 222 of the Internal Revenue Code, 26 U.S.C. 222, and who file separate
28 Montana income tax returns may claim the same amount of the deduction that is allowed on the federal return.
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1 The deduction may be split equally on each return or in proportion to each taxpayer's share of federal adjusted
2 gross income.
3 (10) A taxpayer receiving retirement disability benefits who has not attained 65 years of age by the end
4 of the tax year and who has retired as permanently and totally disabled may exclude from adjusted gross
5 income up to $100 a week received as wages or payments in lieu of wages for a period during which the
6 employee is absent from work due to the disability. If the adjusted gross income before this exclusion exceeds
7 $15,000, the excess reduces the exclusion by an equal amount. This limitation affects the amount of exclusion,
8 but not the taxpayer's eligibility for the exclusion. If eligible, married individuals shall apply the exclusion
9 separately, but the limitation for income exceeding $15,000 is determined with respect to the spouses on their
10 combined adjusted gross income. For the purpose of this subsection, "permanently and totally disabled" means
11 unable to engage in any substantial gainful activity by reason of any medically determined physical or mental
12 impairment lasting or expected to last at least 12 months.
13 (11) (a) An individual who contributes to one or more accounts established under the Montana family
14 education savings program or to a qualified tuition program established and maintained by another state as
15 provided by section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), may reduce
16 adjusted gross income by the lesser of $3,000 or the amount of the contribution. In the case of married
17 taxpayers, each spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the
18 accounts. Spouses may jointly elect to treat half of the total contributions made by the spouses as being made
19 by each spouse. The reduction in adjusted gross income under this subsection applies only with respect to
20 contributions to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's
21 child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (1)(e)
22 do not apply with respect to withdrawals of contributions that reduced adjusted gross income.
23 (b) Contributions made pursuant to this subsection (11) are subject to the recapture tax provided in
24 15-62-208.
25 (12) (a) An individual who contributes to one or more accounts established under the Montana
26 achieving a better life experience program or to a qualified program established and maintained by another
27 state may reduce adjusted gross income by the lesser of $3,000 or the amount of the contribution. In the case
28 of married taxpayers, each spouse is entitled to a reduction, not to exceed $3,000, for the spouses'
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1 contributions to the accounts. Spouses may jointly elect to treat one-half of the total contributions made by the
2 spouses as being made by each spouse. The reduction in adjusted gross income under this subsection (12)(a)
3 applies only with respect to contributions to an account for which the account owner is the taxpayer, the
4 taxpayer's spouse, or the taxpayer's child or stepchild if the taxpayer's child or stepchild is a Montana resident.
5 The provisions of subsection (1)(e) do not apply with respect to withdrawals of contributions that reduced
6 adjusted gross income.
7 (b) Contributions made pursuant to this