On March 13, 2023, Governor Greg Gianforte signed several tax bills focused on providing tax relief to individual and business taxpayers. In addition to reducing the individual tax rates, the bills will provide real estate and business property tax relief, as well as changes to capital gains taxes and business apportionment methods.
Apportionment
Senate Bill 124 implements a single sales factor apportionment model for purposes of corporate income tax. The new rules are effective for tax years beginning on or after January 1, 2025. Montana had moved away from an even-weighted three-factor apportionment method in 2021 by adopting a double-weighted sales factor apportionment. Once implemented, the new rules will put Montana on par with many of the states imposing corporate income taxes.
Business Property Exemption
House Bill 212 increases the business equipment property tax market value exemption from $300,000 to $1,000,000, effective for tax years beginning after December 31, 2022. Current tax rates on Class 8 business property are 1.5% for values between $300,000 and $6,000,000 and 3% for all higher values.
Individual Income Tax
Recently enacted Senate Bills 121 and 399 reduced the number of income tax brackets and lowered the top rates from 6.5% to 5.9% beginning in 2024. The state Earned Income Tax Credit was increased from 3% of the federal credit to 10%, also effective in 2024.
Long-term Capital Gains
House Bill 221 includes changes to the state’s long-term capital gains deduction, effective January 1, 2024. The bill replaces the 30% net long-term capital gains deduction with two separate capital gains tax rates based on income. The tax will be imposed at the rate of 3% on income levels of $20,500 for single filers, $41,000 for joint filers, and $30,750 for head of household filers. All filers with higher income levels will be taxed at the rate of 4.1%.
Find out if, how, or when the new Montana tax bills will affect your business. Reach out to one of the Ryan professionals listed below to determine how these changes could impact your business.
TECHNICAL INFORMATION CONTACTS:
Mark L. Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com
Mary Bernard
Manager
Ryan
401.272.3363
mary.bernard@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.