Individual Income Tax Incentives

The following information provides the incentives classified under individual income tax.

College Contribution Credit (15-30-163,15-31-135, 15-31-136 MCA)

• Eligibility: Individual, corporation, partnership or small business corporation
• Qualifying Expenditures: Contributions to general endowment funds of the Montana University System foundations or to the general endowment fund of a Montana private college or its foundation
• Benefit: The credit is equal to 10% of the aggregate amount of charitable contributions made by the taxpayer during the tax year. The maximum credit that a taxpayer may claim in a year is $500. No carry back or carry forward is permitted.
• Form: CC

Qualified Endowment Credit (15-30-165 through 15-30-167, 15-31-161, 15-31-162 MCA)

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To visit the Governor's Task Force on Endowments and Philanthropy, click here .

• Eligibility: Individual, corporation, small business corporation, partnership, or a limited liability company. This "allowable contribution" for the purposes of the qualified endowment credit is a charitable gift made to a qualified endowment. The contribution from an individual to a qualified endowment must be by means of a planned gift as defined in 15-30-165, MCA. A contribution from a corporation, small business corporation, estate, trust, partnership, or limited liability company may be made by means of a planned gift or may be made directly to a qualified endowment.

Benefit:
For Planned Gift:

For Qualified Charitable Gift:

The credit is non refundable; the credit is not subject to a carry back or carry forward. The credit cannot be claimed on any portion of the gift taken as a deduction under MCA 15-30-121, 15-30-136 or 15-31-114.

Energy Conservation Installation Credit (15-32-109, 15-30-125 MCA)

• Eligibility: An individual may claim a credit against his or her tax liability for some of the cost of an investment for energy conservation purposes in a building.
• Qualifying Expenditures: Montana law defines an eligible expense as "the installed cost of materials and equipment which reduce the waste or dissipation of energy or reduce the amount of energy required to accomplish a given amount of work."
• Benefit: The maximum credit is $500 for investments in the physical attributes of a building or for investing in a water, heating or cooling system.
• Form: ENRG-C

Alternative Fuel Credit (15-30-164, 15-31-137 MCA)

• Eligibility: An individual, corporation, partnership or small business corporation as defined in MCA 15-30-1101 is allowed a tax credit against taxes imposed by MCA 15-30-103 or MCA 15-31-101 for equipment and labor costs incurred to convert a motor vehicle licensed in Montana to operate on alternative fuel.
• Qualifying Expenditures: Equipment and labor costs incurred to convert a motor vehicle licensed in Montana to operate on alternative fuel.
• Benefit: 50% of equipment and labor costs up to $500 for a vehicle less than 10,000 pounds or $1,000 for a vehicle weighing more than 10,000 pounds.
• Form: AFCR

Rural Physicians Credit (15-30-188 through 15-30-191 MCA)

• Eligibility: A physician who commences practice in an area without a 60 bed hospital located within 30-mile radius, may claim a credit against individual income tax.
• Qualifying Expenditures: The credit is $5,000 a year and may be used only to offset tax liability.
• Benefit: The credit may be claimed for each of four consecutive years beginning with the year in which his/her practice starts in a qualifying area. In order to qualify for the credit, a physician must have located his or her principal place of practice to a rural area and be opened to the general public. The physician must maintain the practice for at least 9 months of the taxable year in which the credit is claimed. Credit may not be used for any taxable year in which the physician ceases to practice in an area described above.

Health Insurance for Uninsured Montanans Credit (15-30-129, 15-31-132 MCA)

• Eligibility: Montana employers who: 
  • Have been in business in Montana for at least 12 months
  • Employ 20 or fewer employees working at least 20 hours per week
• Qualifying Expenditures: Premiums for health insurance on behalf of employees if at least 50% of each employee's premium is paid by the employer
• Benefit: The credit is equal to $25 a month for each employee (up to 10 employees maximum) if the employer pays 100% of an employee's premium, or a proportionate amount of $25 if the employer pays less than 100% of an employee's premium. The credit may not exceed 50% of the premium cost for each employer. The credit may not be claimed for a period of more than 36 consecutive months. A tax credit may not be granted to an employer or its successor within 10 years of the last consecutive credit claimed. The credit is nonrefundable and may not be carried forward or back.
• Form: HI

Elderly Care Credit (15-30-128 MCA)

• Eligibility: An individual may be eligible to receive a credit for paying certain expenses of an elderly family member who is 65 or older or has been determined disabled for Social Security purposes.
• Benefit: The credit is limited to $5,000 for a single family member; $5,000 for a joint return; $2,500 per person filing a married separate return. the combined total credit of two or more family members cannot exceed $10,000. No carryback or carryforward of the credit is allowed.

Developmental Disability Services Account Credit (15-30-187 MCA)

• Eligibility: Individual, corporations, partnership or small business corporations
• Qualifying Expenditures: a donation may be made to a state special revenue account established to provide services to individuals with developmental disabilities. A taxpayer claiming a credit under this section may not claim a deduction under 15-30-121(1), 15-30-136(2), or 15-31-114 for the contribution for which a credit is claimed.
• Benefit: 30% of the amount contributed to the account up to a maximum of $10,000 may be claimed as a credit against taxes imposed by 15-30-103 or 15-31-101, MCA. There is no carryforward or carryback. The credit must be applied in the year the donation is made, as determined by the taxpayer's accounting method. Applicable for tax years beginning after December 31, 2002.

Recycle Credit (15-32-602, 15-32-603 MCA)

• Eligibility: Individual, corporation, partnership or small business corporations
• Qualifying Expenditures: Investments in depreciable equipment or machinery used to collect, process or manufacture a product from reclaimed material or depreciable property that treats soil contaminated by hazardous wastes
• Benefit: A percentage (25% to 5%) of the cost of the property used in Montana. No carry forward or carry back is allowed.
• Form: RCYL

Oil Seed Crushing and Biodiesel Production Facility Credit   (15-32-701, 15-32-702 MCA)

You can claim a credit against your income tax liability for the investment that your business makes in depreciable property in Montana to crush oilseed crops for the production of biodiesel.  Your credit is equal to 15% of your cost in the property, up to a maximum credit of $500,000.  It will be applied against your income tax liability in the tax year that your facility begins processing the oilseed or manufacturing a product from the oilseed.

You can also claim a credit against your income tax liability for the cost of constructing and equipping your Montana business to produce biodiesel.  Your credit is equal to 15% of the cost of the facility or the property that you installed in the facility.

Biodiesel Blending and Storage Tank Credit   (15-32-703 MCA)

You can claim a credit against your income tax liability for the investment that your business makes in the purchasing of storage and blending equipment that is used to blend biodiesel with petroleum diesel.  Your credit is equal to 15% of the cost of purchasing the storage and blending equipment.  It may not exceed $7,500 and should be claimed in the year that you begin blending the biodiesel for fuel.

In addition, if you are a special fuel distributor or an owner or operator of a motor fuel outlet, you can claim a credit against you income tax liability for the cost of installing any storage and blending equipment.  This credit is available only in the year that you begin blending biodiesel.  Your credit is equal to 15% of your cost of purchasing the storage and blending equipment and may not exceed $52,500.  It has to be claimed in the year that you begin blending biodiesel.

Contractors Gross Receipts Tax Credit (15-50-207 MCA)

• Eligibility: Contractors, and some sub-contractors, performing public construction work under a federal, state or local government contract
• Qualifying Expenditures: An additional license fee equal to 1% of the gross receipts for government contracts is paid.
• Benefit: The credit can be used to offset the tax liability of individual, corporate license or corporate income taxes.
• Unused Contractor's Gross Receipts Tax Credit can be carried forward and used  in subsequent tax years.
• Form: PC-4

Alternative Energy Systems Credit and Geothermal Systems Credit (15-32-115, 15-32-201 MCA)

• Eligibility: Resident individuals
• Qualifying Expenditures:
  • Geothermal System: Installation cost including such cost, but not limited to, trenching, well drilling, casing, ground source pumps, ductwork, and design and labor.
  • Nonfossil form of energy generation systems include such systems as wind and solar systems and expenditures include cost of the system, installation cost less any grants received.
  • Low emission wood or biomass combustion device cost includes the cost of the system including the installation cost.
• Benefits: The credit for the installation of a Geothermal System in a taxpayer's principal dwelling is entitled to a credit not to exceed $1,500. The amount of the credit not used in the year in which the installation is made may be carried forward against taxes imposed under chapter 30 for the 7 succeeding tax years. The entire mount of the credit not used in the year that it was earned must be carried first to the earliest tax year in which the credit may be applied and then to each succeeding tax year.
• 
  The credit for the installation of a recognized nonfossil form of energy generation system in the taxpayer's principal dwelling is the cost of the system, including installation costs, less grants received, not to exceed $500 against the income tax liability imposed. The credit is deducted from the taxpayer's income tax liability for the taxable year in which the energy system was acquired. Any excess credit not claimed in the year of installation may be carried forward for 4 succeeding taxable years. A recognized nonfossil form of energy generation includes solar, wind, solid waste, decomposed organic waste, geothermal, fuel cell and alternative energy systems.

Alternative Energy Production Credit (15-32-402 MCA)

• Eligibility: Individual, corporation, partnership or small business corporation
• Qualifying Expenditures: Investment of $5,000 or more in certain depreciable property qualifying under section 38 of the Internal Revenue Code of 1954, as amended, for a commercial or net metering system located in Montana which generates energy by means of an alternative renewable energy source.
• Benefit: The credit is 35% of the eligible expenditures. The credit must first be claimed in the year in which the asset was placed in service; any excess credit may be carried over up to 7 years. For wind energy investments 5 megawatts or larger, which are located within the exterior boundaries of a Montana Indian reservation, the credit may be carried over up to 15 years and the limitation of 60% of eligible costs is eliminated. This limitation is also no longer in effect for investments in a commercial system located on state trust land. (Please refer to MCA 15-32-402 and 403 for additional qualifications necessary regarding investments located on a Montana Indian reservation or on state trust land.) This provision applies for tax years beginning after December 31, 2001.
• Form: AEPC

Dependent Care Assistance Credit (15-30-186, 15-31-131 MCA)

• Eligibility: An employer carrying on a business, trade, occupation or profession in Montana
• Qualifying Expenditures: (1) Amounts paid or incurred for dependent care assistance actually provided to or on behalf of an employee. A registered or licensed day-care provider must have furnished the assistance; (2) amounts paid or incurred for providing daycare information and referral services; or (3) for daycare facilities acquired by an employer and placed in operation after December 31, 2000, there is a credit allowable to an employer based on the amounts paid or incurred during the tax year by the employer to acquire, construct, reconstruct, renovate or otherwise improve real property so that the property may be used primarily as a daycare facility.
• Benefit: (1) The credit is 25% of the amount paid or incurred by the employer for dependent care assistance during the taxable year with a limit of $1,575 per employee. Any unused credit may be carried forward five years. (2) credit is 25% of the amount paid or incurred for providing day-care information and referral services, or (3) the amount of daycare facility credit is the lessor of (a) $2,500 multiplied by the number of dependents the daycare facility is designed to accommodate at the end of the first tax year for which the credit is claimed, (b) 15% of the cost of the acquisition, construction, reconstruction, renovation or other improvement, or (c) $50,000.
• Form: DCAC

Historical Property Preservation Credit (15-30-180 MCA)

• Eligibility: Individuals, corporations, small business corporations or partnerships
• Qualifying Expenditures: Qualified rehabilitation expenditures, as provided in 26 U.S.C 47 and as it may be amended
• Benefit: For individuals or businesses, twenty-five percent of the federal credit allowed. An alternative credit is allowed for individuals, equal to 20% of the cost of creating a conservation easement and for the diminishing value of historic property, including buildings and structures that result from placing a conservation easement on the property. This is a non-refundable credit. Carry forward provisions for 6 succeeding tax years.
• Form: Attach Federal Form 3468

Montana Capital Company Credit (90-8-202 MCA)

• Eligibility: Individuals, corporations, s-corporations, partnerships, trusts, decedents' estates
• Qualifying Expenditures: Investment in a qualified Montana capital company
• Benefit: The credit is equal to 50% of the investment, up to $150,000 per taxpayer. Credit is allowed for the year in which the investment is made. Excess credit may be carried back three years and forward 15 years. NOTE: All tax credits have been allotted. No new tax credits for capital companies are available.

Infrastructure Users Fee Credit (17-6-316 MCA)

• Eligibility: Businesses using infrastructure improvements financed through Board of Investment grants to local government. The local government may charge a fee for use of the infrastructure.
• Qualifying Expenditures: The business may take a credit against corporate license tax for the fee charged by a local government unit.
• Benefit: The incentive was enacted to encourage local economic development. 

Empowerment Zone Tax Credit (15-30-182 MCA)

• Eligibility: Individual, corporations, small business corporations, pass-through entities and partnerships. Local governments can establish empowerment zones to encourage economic development. Among other criteria, unemployment within the empowerment zone area must be at least 150% of the statewide average unemployment or poverty rate in the 2 years prior to creation of the empowerment zone.
• Qualifying Expenditures:
  • Business must be located in a facility within the empowerment zone;
  • Less than 10% of the business is from retail sales of tangible personal property, other than that manufactured in the facility;
  • Shall increase employment within the empowerment zone from employees who:
    • work at least 1,750 hours per year in permanent employment intended to last at least 3 years;
    • were not employed in the business within the 12 preceding months;
    • at least 35% are residents of the county at the time of their employment;
    • are provided a health benefit plan of which at least 50% of the premium is paid by the business;
    • are paid for job duties performed at the empowerment zone location;
• Benefit: for individuals or corporations meeting eligibility criteria, the credit against income tax liability for each qualifying employee is $500 for the first year of employment; $1,000 for the second year of employment and $1,500 for the third year of employment. If the credit exceeds the taxpayers' income tax liability, the credit may be carried forward 7 years and carried back 3 years.

  In addition to the income tax credits, the employer is also entitled to a credit against the taxes imposed by 33-2-705, MCA, the insurance premium tax. The credits against the tax are the same as listed above.

Increasing Research Activities Credit (15-30-168, 15-31-150 MCA)

• Eligibility: Individual, corporation, small business corporation, partnership, limited liability partnership or limited liability company. Applies to tax years beginning after December 31, 1998. This credit was enacted by the 1999 legislature.
• Qualifying Expenditures: Increases in qualified research expense and basic research payments for research conducted in Montana. Credit is determined in accordance with section 41 of the Internal Revenue Code (IRC), 26 U.S.C. 41 and as it maybe amended, with exception that the applicable is 5% for Montana purposes.
• Benefit: The credit is equal to 5% of the increase in qualified research expense and basic research payments for research in Montana. The credit is non refundable but maybe carried back two years and forward 15 years.
• Form: RSCH

Mineral Exploration Incentive Credit (15-32-501 MCA)

• Eligibility: Individual, corporation, partnership, small business corporation or limited liability company engaged in mineral exploration in the state. Applies to tax years beginning after December 31, 1998. This credit was enacted by the 1999 legislature.
• Qualifying Expenditures: Certified expenditures for mining exploration activities, which represent costs incurred for activities in direct support of exploration activity conducted at a specific exploration site for the purpose of determining the existence, location, extent or quality of a mineral or coal deposit. The credit applies to activities associated with both new mines and mines that are being reopened. These expenditures must receive prior certification by the department in order to qualify for the credit.
• Benefit: A credit may be claimed for certified expenditures of mining exploration activities not to exceed 50% of the tax liability for the tax year that is related to production from the mining operation at which the exploration activities occurred. If a portion of the credit is not applied during a tax year, it may be carried forward and applied during a subsequent tax year.
• Forms: MINE-Cert and MINE-Cred

Elderly Homeowner/Renter Credit (15-30-171 through 15-30-179 MCA)

• Eligibility: An individual who has:
  • Reached age 62 or older during the claim period for which relief is sought.
  • Resided in Montana for at least 9 months of the period.
  • Occupied one or more dwellings in Montana as an owner, renter, or lessee for at least 6 months of the claim period.
  • Less then $45,000 of gross household income.
• Qualifying relief: A claimant may qualify for the elderly homeowner/renter credit by owning a home. The amount of relief is calculated on the amount of property tax billed to the residence. A claimant may qualify for the elderly homeowner/renter credit by renting a home. The amount of relief is calculated on the rent-equivalent tax paid by claimant.
• Benefits: Relief is in the form of a credit against the claimer's Montana individual income tax liability for the claim period. If the amount of the credit exceeds the claimants liability, the amount of the excess is refunded to the claimant. The credit may be claimed even though the claimant has no income tax filing responsibility.
  The credit granted may not exceed $1,000.
• Form: 2EC

Film Employment Production Credit   (15-31-901 through 15-31-911 MCA)

• You can claim a nonrefundable or refundable credit against your income tax liability for employing residents of Montana in a state-certified production.  The credit is equal to the sum of 12% of the first $50,000 or less that was compensated to each Montana resident who was employed in a state-certified production.
• When you claim this credit, you should make a one-time election by either:
  • Applying the credit against your income tax liability and carrying forward any unused credit to be applied against your income tax liability in subsequent years, or;
  • Applying the credit against your income tax liability with any unused credit refunded to you.

Film Qualified Expenditures Credit (15-31-901 through 15-31-911 MCA)

You can receive a refundable film qualified expenditure credit for expenditures made in Montana in connection with our state-certified production.  Your credit is equal to 8% of the total qualified expenses that you incurred in connection with your production.

Expenses that qualify for the calculation of this credit are expenses that occur in Montana by your production company and that are directly related to your production.  These expenses include lodging expenses, restaurant and food expenses, location fees, lumber and construction materials, rental, or production equipment and vehicles and supplies and materials that are used in the production.

Capital Gains and Dividends from Small Business Investment Company Tax Exemption (15-33-101 through 15-33-106 MCA)

• Eligibility: Any capital gains or dividend income realized by an individual or corporation from an investment in a Small Business Investment Company (as defined by state law).
• Benefit: The capital gains or dividend income is exempt from state individual and corporate income tax.

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