House Bill No. 94
Introduced By kitzenberg
A Bill for an Act entitled: "An Act providing for a general investment tax credit; providing that a 3 percent credit for qualified investments is allowed against individual income taxes or corporate license taxes; limiting the investment tax credit in any 1 year to no more than 45 percent of the taxpayer's tax liability; providing for a 7-year carryover of unused investment tax credits if the underlying investment remains in Montana; amending section
15-31-123, MCA; and providing effective dates and an applicability date."
Be it enacted by the Legislature of the State of Montana:
Section 1. Section 15-31-123, MCA, is amended to read:
"15-31-123. Investment credit. (1) The purpose of this section is to allow small businesses to take an investment credit,
as provided for in subsection
(3) (2), and to stimulate capital investment by the small business sector. (2) For the purposes of this section, "small business" means a business that does not have: (a) more than 10 shareholders; (b) a person who is not an individual (other than an estate or other than a trust described in subsection (8)) as a
shareholder; (c) a nonresident alien as a shareholder; and (d) more than one class of stock. (3)(2) There is allowed as a credit against the taxes imposed by 15-30-103, 15-31-101, 15-31-121, and 15-31-122 an
amount equal to:
a percentage of the tax credit carryovers; and
(b) the tax credit for the tax year.
(3) An investment qualifies for a credit
allowed with respect to certain if:
(a) it is depreciable property under
section 38 sections 46(c) and 48 of the Internal Revenue Code of 1954, as amended, or
as section 38 may be renumbered or amended. 1986, as those sections read prior to November 5, 1990, However,
rehabilitation costs as set forth under subject to the limitations provided for certain regulated companies in section
46(a)(2)(F) 46(f) of the Internal Revenue Code of 1954, or as section 46(a)(2)(F) may be renumbered or amended, are not
to be included in the computation of the investment credit. 1986, as that section read prior to November 5, 1990, and if the
property is not a motor vehicle under 8,000 pounds gross weight; The credit is allowed for the purchase and installation of
certain qualified property defined by section 38 of the Internal Revenue Code of 1954, as amended, if the property meets all
of the following qualifications: (a)(b) it was placed in service in Montana; and (b)(c) it was used for the production of Montana income acquired, constructed, reconstructed, erected, or placed into
service after December 31, 1997. (4) The amount of the credit allowed for the taxable year is 5% of the amount of credit determined under section 46(a)(2)
of the Internal Revenue Code of 1954, as amended, or as section 46(a)(2) may be renumbered or amended. (5)(4) (a) The amount of the credit for a tax year is 3% of the amount of qualified investments made during the tax
year. Notwithstanding the provisions of subsection (4), the The investment credit allowed for the taxable tax year may not
exceed $500 45% of the tax liability of the taxpayer.
(b) If the sum of credit carryovers and the amount of credit for the tax year from the credit allowed by subsection (2) exceeds the limitation imposed by subsection (4)(a) for the current tax year, the excess attributable to the current tax year's credit is an investment credit carryover to the 7 succeeding tax years. The entire amount of unused credit must be carried forward to the earliest of the succeeding years, and the oldest available unused credit must be used first, as long as the qualified investment property for which the unused credit was granted still remains in Montana.
(6)(5) If property for which an investment credit is claimed is used both inside and outside this state, only a portion of the
credit is allowed. The credit must be apportioned according to a fraction the numerator of which is the number of days
during the taxable tax year that the property was located in Montana and the denominator of which is the number of days
during the taxable tax year that the taxpayer owned the property. The investment credit may be applied only to the tax
liability of the taxpayer who purchases and places in service the property for which an investment credit is claimed. (7)(6) The investment credit allowed by this section is subject to recapture as provided for in section 47 of the Internal
Revenue Code of 1954, as amended, or as section 47 may be renumbered or amended. A recapture of the credit allowed by
this section is not required in regard to property ceasing to qualify by reason of an involuntary conversion within the
meaning of section 1033 of the Internal Revenue Code. (8) (a) For purposes of subsection (2)(b), any of the following trusts may be a shareholder without disqualifying the
business for the investment credit: (i) a trust all of which is treated as owned by the grantor under sections 671 through 678 of the Internal Revenue Code; (ii) a trust created primarily to exercise the voting power of stock transferred to it; (iii) any trust with respect to stock transferred to it pursuant to the terms of a will, but only for the 60-day period beginning
on the day on which such stock is transferred to it. (b) In the case of a trust described in subsection (8)(a)(ii), each beneficiary of the trust shall be treated as a shareholder.
(7) If a small business corporation, as defined in 15-31-201, qualifies for the credit in this section, the credit must be attributed to the shareholders, using the proportion used to report the corporation's income or loss for Montana income tax purposes."
NEW SECTION. Section 2. Effective date -- applicability -- adoption of rules. (1) Except as provided in subsection (2), [this act] is effective on passage and approval.
(2) [Section 1] is effective January 1, 1998, and applies to tax years beginning after December 31, 1997.
(3) The department of revenue may proceed to adopt rules to implement [section 1], but the rules may not become effective prior to January 1, 1998.