House Bill No. 465
Introduced By _______________________________________________________________________________
A Bill for an Act entitled: "An Act allowing full deductibility of the tax on certain accommodations or "bed tax" in computing net income for the purposes of determining individual income tax, corporation license tax, or corporation income tax; increasing the rate of the "bed tax"; increasing the rate of reimbursement to the state general fund for "bed tax" paid by state employees and officials; allocating revenue collected from the "bed tax"; amending sections 15-30-121, 15-31-114, 15-65-111, and 15-65-121, MCA; and providing an effective date and an applicability date."
Be it enacted by the Legislature of the State of Montana:
Section 1. Section 15-30-121, MCA, is amended to read:
"15-30-121. Deductions allowed in computing net income. (1) In computing net income, there are allowed as deductions:
(1)(a) the items referred to in sections 161, including the contributions referred to in 33-15-201(5)(b), and 211 of the
Internal Revenue Code of 1954 (26 U.S.C. 161 and 211), or as sections 161 and 211 are labeled or amended, subject to the
following exceptions, which are not deductible: (a)(i) items provided for in 15-30-123; (b)(ii) state income tax paid; (c)(iii) one-half of premium payments for medical care as provided in subsection (9) (2); (2)(b) federal income tax paid within the tax year; (3)(c) expenses of household and dependent care services as outlined in subsections (3)(a) through (3)(c) and (9) (1)(c)(i)
through (1)(c)(iii) and (3) and subject to the limitations and rules as set out in subsections (3)(d) through (3)(f) (1)(c)(iv)
through (1)(c)(vi), as follows: (a)(i) expenses for household and dependent care services necessary for gainful employment incurred for: (i)(A) a dependent under 15 years of age for whom an exemption can be claimed; (ii)(B) a dependent as allowable under 15-30-112(5), except that the limitations for age and gross income do not apply, who
is unable to provide self-care because of physical or mental illness; and (iii)(C) a spouse who is unable to provide self-care because of physical or mental illness; (b)(ii) employment-related expenses incurred for the following services, but only if the expenses are incurred to enable the
taxpayer to be gainfully employed: (i)(A) household services that are attributable to the care of the qualifying individual; and (ii)(B) care of an individual who qualifies under subsection (3)(a) (1)(c)(i); (c)(iii) expenses incurred in maintaining a household if over half of the cost of maintaining the household is furnished by
an individual or, if the individual is married during the applicable period, is furnished by the individual and the individual's
spouse; (d)(iv) the amounts deductible in subsections (3)(a) through (3)(c) (1)(c)(i) through (1)(c)(iii), subject to the following
limitations: (i)(A) a deduction is allowed under subsection (3)(a) (1)(c)(i) for employment-related expenses incurred during the year
only to the extent that the expenses do not exceed $4,800; (ii)(B) expenses for services in the household are deductible under subsection (3)(a) (1)(c)(i) for employment-related
expenses only if they are incurred for services in the taxpayer's household, except that employment-related expenses
incurred for services outside the taxpayer's household are deductible, but only if incurred for the care of a qualifying
individual described in subsection (3)(a)(i) (1)(c)(i)(A) and only to the extent that the expenses incurred during the year do
not exceed: (A)(I) $2,400 in the case of one qualifying individual; (B)(II) $3,600 in the case of two qualifying individuals; and (C)(III) $4,800 in the case of three or more qualifying individuals; (e)(v) if the combined adjusted gross income of the taxpayers exceeds $18,000 for the tax year during which the expenses
are incurred, the amount of the employment-related expenses incurred, to be reduced by one-half of the excess of the
combined adjusted gross income over $18,000; (f)(vi) for purposes of this subsection (3) (1)(c): (i)(A) married couples shall file a joint return or file separately on the same form; (ii)(B) if the taxpayer is married during any period of the tax year, employment-related expenses incurred are deductible
only if: (A)(I) both spouses are gainfully employed, in which case the expenses are deductible only to the extent that they are a
direct result of the employment; or (B)(II) the spouse is a qualifying individual described in subsection (3)(a)(iii) (1)(c)(i)(C); (iii)(C) an individual legally separated from the individual's spouse under a decree of divorce or of separate maintenance
may not be considered as married; (iv)(D) the deduction for employment-related expenses must be divided equally between the spouses when filing
separately on the same form; (v)(E) payment made to a child of the taxpayer who is under 19 years of age at the close of the tax year and payments
made to an individual with respect to whom a deduction is allowable under 15-30-112(5) are not deductible as
employment-related expenses; (4)(d) in the case of an individual, political contributions determined in accordance with the provisions of section 218(a)
and (b) of the Internal Revenue Code (now repealed) that were in effect for the tax year ended December 31, 1978; (5)(e) that portion of expenses for organic fertilizer allowed as a deduction under 15-32-303 that was not otherwise
deducted in computing taxable income; (6)(f) contributions to the child abuse and neglect prevention program provided for in 41-3-701, subject to the conditions
set forth in 15-30-156; (7)(g) one-half of premium payments, except premiums deducted in determining Montana adjusted gross income, for: (a)(i) insurance for medical care made directly by the taxpayer; and (b)(ii) long-term care insurance with benefits that meet or exceed the minimum standards as established by the state
insurance commissioner; and (8)(h) contributions to the Montana drug abuse resistance education program provided for in 44-2-702, subject to the
conditions set forth in 15-30-159; and
(i) all taxes paid pursuant to 15-65-111 during the tax year.
(9)(2) For the purpose of subsection (7)(a) (1)(g)(i), deductible medical insurance premiums are those premiums that
provide payment for medical care as defined by 26 U.S.C. 213(d). (10)(3) (a) Subject to the conditions of subsection (3) (1)(c), a taxpayer who operates a family day-care home or a group
day-care home, as these terms are defined in 52-2-703, and who cares for the taxpayer's own child and at least one
unrelated child in the ordinary course of business may deduct employment-related expenses considered to have been paid
for the care of the child.
(b) The amount of employment-related expenses considered to have been paid by the taxpayer is equal to the amount that
the taxpayer charges for the care of a child of the same age for the same number of hours of care. The employment-related
expenses apply regardless of whether any expenses actually have been paid. Employment-related expenses may not exceed
the amounts specified in subsection
(c) Only a day-care operator who is licensed and registered as required in 52-2-721 is allowed the deduction under this
(10) (3). (Subsection (8) (1)(h) terminates on occurrence of contingency--sec. 12, Ch. 808, L. 1991.)"
Section 2. Section 15-31-114, MCA, is amended to read:
"15-31-114. Deductions allowed in computing income. (1) In computing the net income, the following deductions are allowed from the gross income received by the corporation within the year from all sources:
(a) all the ordinary and necessary expenses paid or incurred during the taxable year in the maintenance and operation of its business and properties, including reasonable allowance for salaries for personal services actually rendered, subject to the limitation contained in this section, and rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title or in which it has no equity. A deduction is not allowed for salaries paid upon which the recipient has not paid Montana state income tax. However, when domestic corporations are taxed on income derived from outside the state, salaries of officers paid in connection with securing the income are deductible.
(b) (i) all losses actually sustained and charged off within the year and not compensated by insurance or otherwise, including a reasonable allowance for the wear and tear and obsolescence of property used in the trade or business. The allowance is determined according to the provisions of section 167 of the Internal Revenue Code in effect with respect to the taxable year. All elections for depreciation must be the same as the elections made for federal income tax purposes. A deduction is not allowed for any amount paid out for any buildings, permanent improvements, or betterments made to increase the value of any property or estate, and a deduction may not be made for any amount of expense of restoring property or making good the exhaustion of property for which an allowance is or has been made. A depreciation or amortization deduction is not allowed on a title plant as defined in 33-25-105(15).
There there is allowed as a deduction for the taxable period a net operating loss deduction determined according to the
provisions of 15-31-119 .;
(c) in the case of mines, other natural deposits, oil and gas wells, and timber, a reasonable allowance for depletion and for depreciation of improvements. The reasonable allowance must be determined according to the provisions of the Internal Revenue Code in effect for the taxable year. All elections made under the Internal Revenue Code with respect to capitalizing or expensing exploration and development costs and intangible drilling expenses for corporation license tax purposes must be the same as the elections made for federal income tax purposes.
The the amount of interest paid within the year on its indebtedness incurred in the operation of the business from which
its income is derived. Interest may not be allowed as a deduction if paid on an indebtedness created for the purchase,
maintenance, or improvement of property or for the conduct
of business unless the income from the property or business would be taxable under this part.
(e) (i) taxes paid within the year, except the following:
(A) taxes imposed by this part;
(B) taxes assessed against local benefits of a kind tending to increase the value of the property assessed;
(C) taxes on or according to or measured by net income or profits imposed by authority of the government of the United States;
(D) taxes imposed by any other state or country upon or measured by net income or profits
Taxes taxes deductible under this part must be construed to include taxes imposed by any county, school district, or
municipality of this state .;
(f) that portion of an energy-related investment allowed as a deduction under 15-32-103;
(g) (i) except as provided in subsection (1)(g)(ii), charitable contributions and gifts that qualify for deduction under section
170 of the Internal Revenue Code, as amended
The the public service commission may not allow in the rate base of a regulated corporation the inclusion of
contributions made under this subsection; and
(h) all taxes paid pursuant to 15-65-111 during the tax year.
(2) In lieu of the deduction allowed under subsection (1)(g), the taxpayer may deduct the fair market value, not to exceed 30% of the taxpayer's net income, of a computer or other sophisticated technological equipment or apparatus intended for use with the computer donated to an elementary, secondary, or accredited postsecondary school located in Montana if:
(a) the contribution is made no later than 5 years after the manufacture of the donated property is substantially completed;
(b) the property is not transferred by the donee in exchange for money, other property, or services; and
(c) the taxpayer receives a written statement from the donee in which the donee agrees to accept the property and representing that the use and disposition of the property will be in accordance with the provisions of subsection (2)(b).
(3) In the case of a regulated investment company or a fund of a regulated investment company, as defined in section 851(a) or 851(h) of the Internal Revenue Code of 1986, as that section may be amended or renumbered, there is allowed a deduction for dividends paid, as defined in section 561 of the Internal Revenue Code of 1986, as that section may be amended or renumbered, except that the deduction for dividends is not allowed with respect to dividends attributable to any income that is not subject to tax under this chapter when earned by the regulated investment company. For the purposes of computing the deduction for dividends paid, the provisions of sections 852(b)(7) and 855 of the Internal Revenue Code of 1986, as those sections may be amended or renumbered, apply. A regulated investment company is not allowed a deduction for dividends received as defined in sections 243 through 245 of the Internal Revenue Code of 1986, as those sections may be amended or renumbered."
Section 3. Section 15-65-111, MCA, is amended to read:
"15-65-111. Tax rate. (1) There is imposed on the user of a facility a tax at a rate equal to
4% 10% of the accommodation
charge collected by the facility.
(2) Accommodation charges do not include charges for rooms used for purposes other than lodging."
Section 4. Section 15-65-121, MCA, is amended to read:
"15-65-121. Distribution of tax proceeds -- general fund loan authority. (1) The proceeds of the tax imposed by
15-65-111 must, in accordance with the provisions of 15-1-501, be deposited in an account in the state special revenue fund
to the credit of the department of revenue. The department may spend from that account in accordance with an expenditure
appropriation by the legislature based on an estimate of the costs of collecting and disbursing the proceeds of the tax.
Before allocating the balance of the tax proceeds in accordance with the provisions of 15-1-501 and as provided in
subsections (1)(a) through (1)(e) of this section, the department shall determine the expenditures by state agencies for
in-state lodging for each reporting period and deduct
4% 10% of that amount from the tax proceeds received each reporting
period. The amount deducted must be deposited in the general fund. The balance of the tax proceeds received each
reporting period and not deducted pursuant to the expenditure appropriation or deposited in the general fund is statutorily
appropriated, as provided in 17-7-502, and must be transferred to an account in the state special revenue fund to the credit
of the department of commerce for tourism promotion and promotion of the state as a location for the production of motion
pictures and television commercials, to the Montana historical society, to the university system, and to the department of
fish, wildlife, and parks, as follows:
(a) 1% to the Montana historical society to be used for the installation or maintenance of roadside historical signs and historic sites;
(b) 2.5% to the university system for the establishment and maintenance of a Montana travel research program;
(c) 6.5% to the department of fish, wildlife, and parks for the maintenance of facilities in state parks that have both resident and nonresident use;
(d) 67.5% to be used directly by the department of commerce; and
(e) (i) except as provided in subsection (1)(e)(ii), 22.5% to be distributed by the department to regional nonprofit tourism corporations in the ratio of the proceeds collected in each tourism region to the total proceeds collected statewide; and
(ii) if 22.5% of the proceeds collected annually within the limits of a city or consolidated city-county exceeds $35,000, 50% of the amount available for distribution to the regional nonprofit tourism corporation in the region where the city or consolidated city-county is located, to be distributed to the nonprofit convention and visitors bureau in that city or consolidated city-county.
(2) If a city or consolidated city-county qualifies under this section for funds but fails to either recognize a nonprofit convention and visitors bureau or submit and gain approval for an annual marketing plan as required in 15-65-122, then those funds must be allocated to the regional nonprofit tourism corporation in the region in which the city or consolidated city-county is located.
(3) If a regional nonprofit tourism corporation fails to submit and gain approval for an annual marketing plan as required in 15-65-122, then those funds otherwise allocated to the regional nonprofit tourism corporation may be used by the department of commerce for tourism promotion and promotion of the state as a location for the production of motion pictures and television commercials."
NEW SECTION. Section 5. Applicability. (1) [Sections 1 and 2] apply to tax years beginning after December 31, 1997.
(2) [This act] applies to all tax revenue received under the provisions of Title 15, chapter 65, recorded on or after [the effective date of this act] regardless of when the tax obligation accrued.
NEW SECTION. Section 6. Effective date. [This act] is effective July 1, 1997.