Montana LC 2572: Exempt a portion of interest earnings from individual income tax

Bill Text

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69th Legislature 2025 LC2572.1
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1 _____________ BILL NO. _____________
2 INTRODUCED BY _________________________________________________
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT REVISING INDIVIDUAL INCOME TAXATION BY PROVIDING AN
5 INTEREST RECEIVED DEDUCTION; PROVIDING THAT THE INTEREST INCOME MUST BE REPORTED
6 ON FORM 1099; LIMITING THE AMOUNT OF THE DEDUCTION BASED ON FILING STATUS; AMENDING
7 SECTION 15-30-2120, MCA; AND PROVIDING A DELAYED EFFECTIVE DATE AND AN APPLICABILITY
8 DATE.”
9
10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
11
12 Section 1. Section 15-30-2120, MCA, is amended to read:
13 "15-30-2120. Adjustments to federal taxable income to determine Montana taxable income. (1)
14 The items in subsection (2) are added to and the items in subsection (3) are subtracted from federal taxable
15 income to determine Montana taxable income.
16 (2) The following are added to federal taxable income:
17 (a) to the extent that it is not exempt from taxation by Montana under federal law, interest from
18 obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
19 interest dividends attributable to that interest except to the extent already included in federal taxable income;
20 (b) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal
21 Revenue Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the
22 income;
23 (c) depreciation or amortization taken on a title plant as defined in 33-25-105;
24 (d) the recovery during the tax year of an amount deducted in any prior tax year to the extent that
25 the amount recovered reduced the taxpayer's Montana income tax in the year deducted;
26 (e) an item of income, deduction, or expense to the extent that it was used to calculate federal
27 taxable income if the item was also used to calculate a credit against a Montana income tax liability;
28 (f) a deduction for an income distribution from an estate or trust to a beneficiary that was included

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69th Legislature 2025 LC2572.1
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1 in the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
2 Revenue Code, 26 U.S.C. 651 and 661;
3 (g) a withdrawal from a medical care savings account provided for in Title 15, chapter 61, used for
4 a purpose other than an eligible medical expense or long-term care of the employee or account holder or a
5 dependent of the employee or account holder;
6 (h) a withdrawal from a first-time home buyer savings account provided for in Title 15, chapter 63,
7 used for a purpose other than for eligible costs for the purchase of a single-family residence;
8 (i) for a taxpayer that deducts the qualified business income deduction pursuant to section 199A
9 of the Internal Revenue Code, 26 U.S.C. 199A, an amount equal to the qualified business income deduction
10 claimed;
11 (j) for an individual taxpayer that deducts state income taxes pursuant to section 164(a)(3) of the
12 Internal Revenue Code, 26 U.S.C. 164(a)(3), an additional amount equal to the state income tax deduction
13 claimed, not to exceed the amount required to reduce the federal itemized amount computed under section 161
14 of the Internal Revenue Code, 26 U.S.C. 161, to the amount of the federal standard deduction allowable under
15 section 63(c) of the Internal Revenue Code, 26 U.S.C. 63(c); and
16 (k) for a pass-through entity, estate, or trust, the amount of state income taxes deducted pursuant
17 to section 164(a)(3) of the Internal Revenue Code, 26 U.S.C 164(a)(3).
18 (3) To the extent they are included as income or gain or not already excluded as a deduction or
19 expense in determining federal taxable income, the following are subtracted from federal taxable income:
20 (a) a deduction for an income distribution from an estate or trust to a beneficiary in accordance
21 with sections 651 and 661 of the Internal Revenue Code, 26 U.S.C. 651 and 661, recalculated according to the
22 additions and subtractions in subsections (2) and (3)(b) through (3)(o) (3)(p);
23 (b) if exempt from taxation by Montana under federal law:
24 (i) interest from obligations of the United States government and exempt-interest dividends
25 attributable to that interest; and
26 (ii) railroad retirement benefits;
27 (c) (i) salary received from the armed forces by residents of Montana who are serving on active
28 duty in the regular armed forces and who entered into active duty from Montana;

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69th Legislature 2025 LC2572.1
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1 (ii) the salary received by residents of Montana for active duty in the national guard. For the
2 purposes of this subsection (3)(c)(ii), "active duty" means duty performed under an order issued to a national
3 guard member pursuant to:
4 (A) Title 10, U.S.C.; or
5 (B) Title 32, U.S.C., for a homeland defense activity,