67th Legislature SB 124.1
1 SENATE BILL NO. 124
2 INTRODUCED BY S. MORIGEAU
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING AN EXEMPTION FROM ADJUSTED GROSS
5 INCOME FOR A STUDENT LOAN REIMBURSEMENT MADE BY A TAXPAYER'S EMPLOYER; PROVIDING
6 DEFINITIONS; AMENDING SECTION 15-30-2110, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE
7 DATE AND A RETROACTIVE APPLICABILITY DATE.”
8
9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
10
11 Section 1. Section 15-30-2110, MCA, is amended to read:
12 "15-30-2110. Adjusted gross income. (1) Subject to subsection (15), adjusted gross income is the
13 taxpayer's federal adjusted gross income as defined in section 62 of the Internal Revenue Code, 26 U.S.C. 62,
14 and in addition includes the following:
15 (a) (i) interest received on obligations of another state or territory or county, municipality, district, or
16 other political subdivision of another state, except to the extent that the interest is exempt from taxation by
17 Montana under federal law;
18 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, 26 U.S.C.
19 852(b)(5), that are attributable to the interest referred to in subsection (1)(a)(i);
20 (b) refunds received of federal income tax, to the extent that the deduction of the tax resulted in a
21 reduction of Montana income tax liability as determined under subsection (16);
22 (c) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal Revenue
23 Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the income;
24 (d) depreciation or amortization taken on a title plant as defined in 33-25-105;
25 (e) the recovery during the tax year of an amount deducted in any prior tax year to the extent that the
26 amount recovered reduced the taxpayer's Montana income tax in the year deducted;
27 (f) if the state taxable distribution of an estate or trust is greater than the federal taxable distribution of
28 the same estate or trust, the difference between the state taxable distribution and the federal taxable
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1 distribution of the same estate or trust for the same tax period; and
2 (g) except for exempt-interest dividends described in subsection (2)(a)(ii), the amount of any dividend
3 to the extent that the dividend is not included in federal adjusted gross income.
4 (2) Notwithstanding the provisions of the Internal Revenue Code, adjusted gross income does not
5 include the following, which are exempt from taxation under this chapter:
6 (a) (i) all interest income from obligations of the United States government, the state of Montana, or a
7 county, municipality, district, or other political subdivision of the state and any other interest income that is
8 exempt from taxation by Montana under federal law;
9 (ii) exempt-interest dividends as defined in section 852(b)(5) of the Internal Revenue Code, 26 U.S.C.
10 852(b)(5), that are attributable to the interest referred to in subsection (2)(a)(i);
11 (b) interest income earned by a taxpayer who is 65 years of age or older in a tax year up to and
12 including $800 for a taxpayer filing a separate return and $1,600 for each joint return;
13 (c) (i) except as provided in subsection (2)(c)(ii) and subject to subsection (17), the first $4,070 of all
14 pension and annuity income received as defined in 15-30-2101;
15 (ii) subject to subsection (17), for pension and annuity income described under subsection (2)(c)(i), as
16 follows:
17 (A) each taxpayer filing singly, head of household, or married filing separately shall reduce the total
18 amount of the exclusion provided in subsection (2)(c)(i) by $2 for every $1 of federal adjusted gross income in
19 excess of $33,910 as shown on the taxpayer's return;
20 (B) in the case of married taxpayers filing jointly, if both taxpayers are receiving pension or annuity
21 income or if only one taxpayer is receiving pension or annuity income, the exclusion claimed as provided in
22 subsection (2)(c)(i) must be reduced by $2 for every $1 of federal adjusted gross income in excess of $33,910
23 as shown on their joint return;
24 (d) all Montana income tax refunds or tax refund credits;
25 (e) gain required to be recognized by a liquidating corporation under 15-31-113(1)(a)(ii);
26 (f) all tips or gratuities that are covered by section 3402(k) or service charges that are covered by
27 section 3401 of the Internal Revenue Code of 1954, 26 U.S.C. 3402(k) or 3401, as amended and applicable on
28 January 1, 1983, received by a person for services rendered to patrons of premises licensed to provide food,
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1 beverage, or lodging;
2 (g) all benefits received under the workers' compensation laws;
3 (h) all health insurance premiums paid by an employer for an employee if attributed as income to the
4 employee under federal law;
5 (i) all money received because of a settlement agreement or judgment in a lawsuit brought against a
6 manufacturer or distributor of "agent orange" for damages resulting from exposure to "agent orange";
7 (j) principal and income in a medical care savings account established in accordance with 15-61-201
8 or withdrawn from an account for eligible medical expenses, as defined in 15-61-102, including a medical care
9 savings account inherited by an immediate family member as provided in 15-61-202(6);
10 (k) principal and income in a first-time home buyer savings account established in accordance with
11 15-63-201 or withdrawn from an account for eligible costs, as provided in 15-63-202(7), for the first-time
12 purchase of a single-family residence;
13 (l) contributions or earnings withdrawn from a family education savings account or from a qualified
14 tuition program established and maintained by another state as provided by section 529(b)(1)(A)(ii) of the
15 Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), for qualified higher education expenses, as defined in 15-62-
16 103, of a designated beneficiary;
17 (m) the recovery during the tax year of any amount deducted in any prior tax year to the extent that
18 the recovered amount did not reduce the taxpayer's Montana income tax in the year deducted;
19 (n) if the federal taxable distribution of an estate or trust is greater than the state taxable distribution of
20 the same estate or trust, the difference between the federal taxable distribution and the state taxable
21 distribution of the same estate or trust for the same tax period;
22 (o) deposits, not exceeding the amount set forth in 15-30-3003, deposited in a Montana farm and
23 ranch risk management account, as provided in 15-30-3001 through 15-30-3005, in any tax year for which a
24 deduction is not provided for federal income tax purposes;
25 (p) income of a dependent child that is included in the taxpayer's federal adjusted gross income
26 pursuant to the Internal Revenue Code. The child is required to file a Montana personal income tax return if the
27 child and taxpayer meet the filing requirements in 15-30-2602.
28 (q) principal and income deposited in a health care expense trust account, as defined in 2-18-1303, or
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1 withdrawn from the account for payment of qualified health care expenses as defined in 2-18-1303;
2 (r) the amount of the gain recognized from the sale or exchange of a mobile home park as provided in
3 15-31-163;
4 (s) the amount of a scholarship to an eligible student by a student scholarship organization pursuant
5 to 15-30-3104; and
6 (t) a payment received by a private landowner for providing public access to public land pursuant to
7 Title 76, chapter 17, part 1; and
8 (u) (i) the amount of a student loan reimbursement, not to exceed $5,000. For the purposes of this
9 subsection (2)(u), the following definitions apply:
10 (A) "Educational loan" means a loan made pursuant to a federal loan program except for a federal
11 parent loan for undergraduate students (PLUS loans), as provided in 20 U.S.C. 1078-2.
12 (B) "Federal loan program" means an educational loan program authorized by 20 U.S.C. 1071, et
13 seq., 20 U.S.C. 1087a, et seq., and 20 U.S.C. 1087aa, et seq.
14 (C) "Student loan reimbursement" means a payment made by a taxpayer's employer to the taxpayer
15 when:
16 (I) the taxpayer has been employed on a full-time basis by the employer for at least 6 months;
17 (II) the taxpayer has provided to the employer documentation of the taxpayer's student loan payments
18 made in the current tax year; and
19 (III) the payment by the employer is for an educational loan.
20 (ii) Nothing in this subsection (2)(u) creates an obligation for any employer to pay any amount of a
21 student loan reimbursement or educational loan for any employee unless both parties agree to the payment.
22 (iii) A taxpayer using an exclusion under subsection (13) or (14) is not eligible for an exemption under
23 this subsection (2)(u).
24 (3) A shareholder of a DISC that is exempt from the corporate income tax under 15-31-102(1)(l) shall
25 include in the shareholder's adjusted gross income the earnings and profits of the DISC in the same manner as
26 provided by section 995 of the Internal Revenue Code, 26 U.S.C. 995, for all periods for which the DISC
27 election is effective.
28 (4) (a) A taxpayer who, in determining federal adjusted gross income, has reduced the taxpayer's
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1 business deductions:
2 (i) by an amount for wages and salaries for which a federal tax credit was elected under sections 38
3 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
4 and salaries paid regardless of the credit taken; or
5 (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to deduct the
6 amount of the business expense paid when there is no corresponding state income tax credit or deduction,
7 regardless of the credit taken.
8 (b) The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
9 business expenses were used to compute the credit. In the case of a partnership or small business corporation,
10 the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
11 or small business corporation.
12 (5) Married taxpayers filing a joint federal return who are required to include part of their social
13 security benefits or part of their tier 1 railroad retirement benefits in federal adjusted gross income may split the
14 federal base used in calculation of federal taxable social security benefits or federal taxable tier 1 railroad
15 retirement benefits when they file separate Montana income tax returns. The federal base must be split equally
16 on the Montana return.
17 (6) Married taxpayers filing a joint federal return who are allowed a capital loss deduction under
18 section 1211 of the Internal Revenue Code, 26 U.S.C. 1211, and who file separate Montana income tax returns
19 may claim the same amount of the capital loss deduction that is allowed on the federal return. If the allowable
20 capital loss is clearly attributable to one spouse, the loss must be shown on that spouse's return; otherwise, the
21 loss must be split equally on each return.
22 (7) In the case of passive and rental income losses, married taxpayers filing a joint federal return and
23 who file separate Montana income tax returns are not required to recompute allowable passive losses
24 according to the federal passive activity rules for married taxpayers filing separately under section 469 of the
25 Internal Revenue Code, 26 U.S.C. 469. If the allowable passive loss is clearly attributable to one spouse, the
26 loss must be shown on that spouse's return; otherwise, the loss must be split equally on each return.
27 (8) Married taxpayers filing a joint federal return in which one or both of the taxpayers are allowed a
28 deduction for an individual retirement contribution under section 219 of the Internal Revenue Code, 26 U.S.C.
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1 219, and who file separate Montana income tax returns may claim the same amount of the deduction that is
2 allowed on the federal return. The deduction must be attributed to the spouse who made the contribution.
3 (9) (a) Married taxpayers filing a joint federal return who are allowed a deduction for interest paid for
4 a qualified education loan under section 221 of the Internal Revenue Code, 26 U.S.C. 221, and who file
5 separate Montana income tax returns may claim the same amount of the deduction that is allowed on the
6 federal return. The deduction may be split equally on each return or in proportion to each taxpayer's share of
7 federal adjusted gross income.
8 (b) Married taxpayers filing a joint federal return who are allowed a deduction for qualified tuition and
9 related expenses under section 222 of the Internal Revenue Code, 26 U.S.C. 222, and who file separate
10 Montana income tax returns may claim the same amount of the deduction that is allowed on the federal return.
11 The deduction may be split equally on each return or in proportion to each taxpayer's share of federal adjusted
12 gross income.
13 (10) A taxpayer receiving retirement disability benefits who has not attained 65 years of age by the end
14 of the tax year and who has retired as permanently and totally disabled may exclude from adjusted gross
15 income up to $100 a week received as wages or payments in lieu of wages for a period during which the
16 employee is absent from work due to the disability. If the adjusted gross income before this exclusion exceeds
17 $15,000, the excess reduces the exclusion by an equal amount. This limitation affects the amount of exclusion,
18 but not the taxpayer's eligibility for the exclusion. If eligible, married individuals shall apply the exclusion
19 separately, but the limitation for income exceeding $15,000 is determined with respect to the spouses on their
20 combined adjusted gross income. For the purpose of this subsection, "permanently and totally disabled" means
21 unable to engage in any substantial gainful activity by reason of any medically determined physical or mental
22 impairment lasting or expected to last at least 12 months.
23 (11) (a) An individual who contributes to one or more accounts established under the Montana family
24 education savings program or to a qualified tuition program established and maintained by another state as
25 provided by section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), may reduce
26 adjusted gross income by the lesser of $3,000 or the amount of the contribution. In the case of married
27 taxpayers, each spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the
28 accounts. Spouses may jointly elect to treat half of the total contributions made by the spouses as being made
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1 by each spouse. The reduction in adjusted gross income under this subsection applies only with respect to
2 contributions to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's
3 child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (1)(e)
4 do not apply with respect to withdrawals of contributions that reduced adjusted gross income.
5 (b) Contributions made pursuant to this subsection (11) are subject to the recapture tax provided in
6 15-62-208.
7 (12) (a) An individual who contributes to one or more accounts established under the Montana
8 achieving a better life experience program or to a qualified program establis