Bill Summary – FastDemocracy

67th Legislature                                                                                          SB 399.1
                                             SENATE BILL NO. 399
                                          INTRODUCED BY G. HERTZ
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   A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING TAXATION OF INCOME, INCLUDING
   THE CORPORATE INCOME TAX; REQUIRING THE TAXATION OF INDIVIDUALS, PARTNERSHIPS, AND
   SUBCHAPTER S. CORPORATIONS, INCLUDING TRUSTS AND ESTATES, TO RELATE THE STATE
   INDIVIDUAL INCOME TAX TO FEDERAL TAXABLE INCOME; PROVIDING ADJUSTMENTS TO FEDERAL
   TAXABLE INCOME TO INCLUDE CERTAIN INCOME; PROVIDING ADJUSTMENTS TO FEDERAL TAXABLE
   INCOME TO EXCLUDE CERTAIN INCOME; ELIMINATING MOST INDIVIDUAL INCOME TAX DEDUCTIONS;
   ELIMINATING CERTAIN INDIVIDUAL INCOME TAX CREDITS; REVISING CERTAIN INDIVIDUAL INCOME
   TAX CREDITS; ELIMINATING CERTAIN CORPORATE INCOME TAX DEDUCTIONS AND CREDITS;
   REVISING INDIVIDUAL INCOME TAX RATES; PROVIDING A TRANSITION FOR CREDITS THAT ARE
   SUBJECT TO A CARRYFORWARD; PROVIDING A TRANSITION FOR DIFFERENCES IN FEDERAL AND
   MONTANA INCOME TAX LAWS; PROVIDING RULEMAKING AUTHORITY; AMENDING SECTIONS 2-18-
   1312, 7-14-1133, 7-14-1636, 7-34-2416, 15-30-2101, 15-30-2102, 15-30-2103, 15-30-2104, 15-30-2113, 15-30-
   2151, 15-30-2153, 15-30-2303, 15-30-2328, 15-30-2329, 15-30-2393, 15-30-2501, 15-30-2512, 15-30-2602,
   15-30-2605, 15-30-2606, 15-30-2618, 15-30-3003, 15-30-3004, 15-30-3005, 15-30-3312, 15-31-162, 15-31-
   1007, 15-32-104, 15-32-106, 15-61-202, 15-61-203, 15-62-103, 15-62-201, 15-62-206, 15-62-207, 15-62-208,
   15-63-202, 19-2-1004, 19-17-407, 19-18-612, 19-19-504, 19-20-706, 19-21-212, 20-4-503, 20-25-902, 33-27-
   101, 33-27-102, 33-27-103, 37-4-104, 50-51-114, 53-2-211, 53-25-117, 53-25-118, 67-11-303, 70-9-803, 75-2-
   103, 75-5-103, 87-2-102, AND 87-2-105, MCA; REPEALING SECTIONS 7-21-3701, 7-21-3702, 7-21-3703, 7-
   21-3704, 7-21-3710, 7-21-3715, 15-30-2110, 15-30-2111, 15-30-2114, 15-30-2115, 15-30-2116, 15-30-2117,
   15-30-2119, 15-30-2131, 15-30-2132, 15-30-2133, 15-30-2141, 15-30-2142, 15-30-2143, 15-30-2144, 15-30-
   2152, 15-30-2301, 15-30-2319, 15-30-2320, 15-30-2326, 15-30-2342, 15-30-2356, 15-30-2364, 15-30-2366,
   15-30-2373, 15-30-2381, 15-31-131, 15-31-132, 15-31-134, 15-31-135, 15-31-136, 15-31-137, 15-31-151, 15-
   31-163, 15-31-171, 15-32-109, 15-32-115, 15-32-201, 15-32-202, 15-32-203, 15-32-401, 15-32-402, 15-32-
   404, 15-32-405, 15-32-406, 15-32-407, 15-32-501, 15-32-502, 15-32-503, 15-32-504, 15-32-505, 15-32-506,
   15-32-507, 15-32-508, 15-32-509, 15-32-510, 15-32-601, 15-32-602, 15-32-603, 15-32-604, 15-32-609, 15-32-
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   610, 15-32-611, 15-32-701, 15-32-702, 15-32-703, AND 33-2-724, MCA; AND PROVIDING A DELAYED
   EFFECTIVE DATE AND AN APPLICABILITY DATE.”
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   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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              NEW SECTION. Section 1.         Adjustments to federal taxable income to determine Montana
   taxable income. (1) The items in subsection (2) are added to and the items in subsection (3) are subtracted
   from federal taxable income to determine Montana taxable income.
              (2)   The following are added to federal taxable income:
              (a)   to the extent that it is not exempt from taxation by Montana under federal law, interest from
   obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
   interest dividends attributable to that interest except to the extent already included in federal taxable income;
              (b)   that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal Revenue
   Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the income;
              (c)   depreciation or amortization taken on a title plant as defined in 33-25-105;
              (d)   the recovery during the tax year of an amount deducted in any prior tax year to the extent that the
   amount recovered reduced the taxpayer's Montana income tax in the year deducted;
              (e)   an item of income, deduction, or expense to the extent that it was used to calculate federal taxable
   income if the item was also used to calculate a credit against a Montana income tax liability;
              (f)   a deduction for an income distribution from an estate or trust to a beneficiary that was included in
   the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
   Revenue Code, 26 U.S.C. 651 and 661;
              (g)   a withdrawal from a medical care savings account provided for in Title 15, chapter 61, used for a
   purpose other than an eligible medical expense or long-term care of the employee or account holder or a
   dependent of the employee or account holder;
              (h)   a withdrawal from a first-time home buyer savings account provided for in Title 15, chapter 63,
   used for a purpose other than for eligible costs for the purchase of a single-family residence;
              (i)   for a taxpayer that deducts the qualified business income deduction pursuant to section 199A of
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   the Internal Revenue Code, 26 U.S.C. 199A, an amount equal to the qualified business income deduction
   claimed; and
              (j)   for a taxpayer that deducts state income taxes pursuant to section 164(a)(3) of the Internal
   Revenue Code, 26 U.S.C. 164(a)(3), an additional amount equal to the state income tax deduction claimed, not
   to exceed the amount required to reduce the federal itemized amount computed under section 161 of the
   Internal Revenue Code, 26 U.S.C. 161, to the amount of the federal standard deduction allowable under
   section 63(c) of the Internal Revenue Code, 26 U.S.C. 63(c).
              (3)   To the extent they are included as income or gain or not already excluded as a deduction or
   expense in determining federal taxable income, the following are subtracted from federal taxable income:
              (a)   a deduction for an income distribution from an estate or trust to a beneficiary in accordance with
   sections 651 and 661 of the Internal Revenue Code, 26 U.S.C. 651 and 661, recalculated according to the
   additions and subtractions in subsections (2) and (3)(b) through (3)(l);
              (b)   if exempt from taxation by Montana under federal law:
              (i)   interest from obligations of the United States government and exempt-interest dividends
   attributable to that interest; and
              (ii) railroad retirement benefits;
              (c)   (i) salary received from the armed forces by residents of Montana who are serving on active duty
   in the regular armed forces and who entered into active duty from Montana;
              (ii) the salary received by residents of Montana for active duty in the national guard. For the purposes
   of this subsection (3)(c)(ii), "active duty" means duty performed under an order issued to a national guard
   member pursuant to:
              (A)   Title 10, U.S.C.; or
              (B)   Title 32, U.S.C., for a homeland defense activity, as defined in 32 U.S.C. 901, or a contingency
   operation, as defined in 10 U.S.C. 101, and the person was a member of a unit engaged in a homeland
   defense activity or contingency operation.
              (iii) the amount received pursuant to 10-1-1114 or from the federal government by a service member,
   as defined in 10-1-1112, as reimbursement for group life insurance premiums paid;
              (iv) the amount received by a beneficiary pursuant to 10-1-1201; and
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              (v)   all payments made under the World War I bonus law, the Korean bonus law, and the veterans'
   bonus law. Any income tax that has been or may be paid on income received from the World War I bonus law,
   Korean bonus law, and the veterans' bonus law is considered an overpayment and must be refunded upon the
   filing of an amended return and a verified claim for refund on forms prescribed by the department in the same
   manner as other income tax refund claims are paid.
              (d)   interest and other income related to contributions that were made prior to January 1, 2022, that
   are retained in a medical care savings account provided for in Title 15, chapter 61, and any withdrawal for
   payment of eligible medical expenses or for the long-term care of the employee or account holder or a
   dependent of the employee or account holder;
              (e)   contributions or earnings withdrawn from a family education savings account provided for in Title
   15, chapter 62, or from a qualified tuition program established and maintained by another state as provided in
   section 529(b)(1)(A)(ii) of the Internal Revenue Code, 26 U.S.C. 529(b)(1)(A)(ii), for qualified education
   expenses, as defined in 15-62-103, of a designated beneficiary;
              (f)   interest and other income related to contributions that were made prior to January 1, 2022, that are
   retained in a first-time home buyer savings account provided for in Title 15, chapter 63, and any withdrawal for
   payment of eligible costs for the first-time purchase of a single-family residence;
              (g)   for each taxpayer that has attained the age of 65, an additional subtraction of $5,500;
              (h)   the amount of a scholarship to an eligible student by a student scholarship organization pursuant
   to 15-30-3104;
              (i)   a payment received by a private landowner for providing public access to public land pursuant to
   Title 76, chapter 17, part 1;
              (j)   the amount of any refund or credit for overpayment of income taxes imposed by this state or any
   other taxing jurisdiction to the extent included in gross income for federal income tax purposes but not
   previously allowed as a deduction for Montana income tax purposes;
              (k)   the recovery during the tax year of any amount deducted in any prior tax year to the extent that the
   recovered amount did not reduce the taxpayer's Montana income tax in the year deducted; and
              (l)   an amount equal to 30% of net-long term capital gains, as defined in section 1222 of the Internal
   Revenue Code, 26 U.S.C. 1222, if and to the extent such gain is taken into account in computing federal
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   taxable income.
              (4)   (a) A taxpayer who, in determining federal taxable income, has reduced the taxpayer's business
   deductions:
              (i)   by an amount for wages and salaries for which a federal tax credit was elected under sections 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 wages
   and salaries paid regardless of the credit taken; or
              (ii) for which a federal tax credit was elected under the Internal Revenue Code is allowed to deduct the
   amount of the business expense paid when there is no corresponding state income tax credit or deduction,
   regardless of the credit taken.
              (b)   The deductions in subsection (4)(a) must be made in the year that the wages, salaries, or
   business expenses were used to compute the credit. In the case of a partnership or small business corporation,
   the deductions in subsection (4)(a) must be made to determine the amount of income or loss of the partnership
   or small business corporation.
              (5)   (a) An individual who contributes to one or more accounts established under the Montana family
   education savings program or to a qualified tuition program established and maintained by another state 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
   taxable income by the lesser of $3,000 or the amount of the contribution. In the case of married taxpayers, each
   spouse is entitled to a reduction, not in excess of $3,000, for the spouses' contributions to the accounts.
   Spouses may jointly elect to treat half of the total contributions made by the spouses as being made by each
   spouse. The reduction in taxable income under this subsection (5)(a) applies only with respect to contributions
   to an account of which the account owner is the taxpayer, the taxpayer's spouse, or the taxpayer's child or
   stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of subsection (2)(d) do not
   apply with respect to withdrawals of contributions that reduced federal taxable income.
              (b)   Contributions made pursuant to this subsection (5) are subject to the recapture tax provided for in
   15-62-208.
              (6)   (a) An individual who contributes to one or more accounts established under the Montana
   achieving a better life experience program or to a qualified program established and maintained by another
   state may reduce taxable income by the lesser of $3,000 or the amount of the contribution. In the case of
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   married taxpayers, each spouse is entitled to a reduction, not to exceed $3,000, for the spouses' contributions
   to the accounts. Spouses may jointly elect to treat one-half of the total contributions made by the spouses as
   being made by each spouse. The reduction in taxable income under this subsection (6)(a) applies only with
   respect to contributions to an account for which the account owner is the taxpayer, the taxpayer's spouse, or
   the taxpayer's child or stepchild if the taxpayer's child or stepchild is a Montana resident. The provisions of
   subsection (2)(d) do not apply with respect to withdrawals of contributions that reduced taxable income.
              (b)   Contributions made pursuant to this subsection (6) are subject to the recapture tax provided in 53-
   25-118.
              (7)   By November 1 of each year, the department shall multiply the subtraction from federal taxable
   income for a taxpayer that has attained the age of 65 contained in subsection (3)(g) by the inflation factor for
   that tax year, rounding the result to the nearest $10. The resulting amount is effective for that tax year and must
   be used as the basis for the subtraction from federal taxable income determined under subsection (3)(g).
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              Section 2. Section 2-18-1312, MCA, is amended to read:
              "2-18-1312. Tax exemption. Employer contributions into an account, the accumulation of interest or
   other earnings in an account, and payments from an account for qualified health care expenses are tax-exempt,
   as provided in 15-30-2110 and under applicable federal laws and regulations to the extent that the plan is
   qualified under applicable sections of the Internal Revenue Code."
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              Section 3. Section 7-14-1133, MCA, is amended to read:
              "7-14-1133. Bonds and obligations. (1) Except for providing financial support to a private
   development organization, including a corporation organized under Title 32, chapter 4, whose purpose is to
   advance the economic development of its jurisdiction and of the state and its citizens, an authority may borrow
   money for any of its corporate purposes and issue bonds, including refunding bonds, for any of its corporate
   purposes. The bonds may be in the form and upon terms as it determines, payable out of any revenue of the
   authority, including revenue derived from:
              (a)   any port or transportation and storage facility;
              (b)   taxes levied pursuant to 7-14-1131 or 67-10-402;
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              (c)   grants or contributions from the federal government; or
              (d)   other sources.
              (2)   The bonds may be issued by resolution of the authority, without an election and without any
   limitation of amount, except that bonds may not be issued at any time if the total amount of principal and
   interest to become due in any year on the bonds and on any then outstanding then-outstanding bonds for which
   revenue from the same source is pledged exceeds the amount of revenue to be received in that year, as
   estimated in the resolution authorizing the issuance of the bonds. The authority shall take all action necessary
   and possible to impose, maintain, and collect rates, charges, and rentals and to request taxes, if any are
   pledged, sufficient to make the revenue from the pledged source in such that year at least equal to the amount
   of prin