SENATE BILL NO. 244

INTRODUCED BY J. TESTER

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 SECTIONS 15-30-161, 15-30-162, AND 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 15-30-161, MCA, is amended to read:

"15-30-161. Purpose. The purpose of 15-30-162 is to allow individuals, estates, and trusts to take the investment credit, as provided for in 15-30-162, in order to stimulate capital investment by the business sector."

Section 2. Section 15-30-162, MCA, is amended to read:

"15-30-162. Investment credit. There is allowed an investment tax credit against the tax imposed by 15-30-103. The amount of the credit must be determined pursuant to 15-31-123.

"

Section 3. Section 15-31-123, MCA, is amended to read:

"15-31-123. Investment credit. (1) The purpose of this section is to allow businesses to take an investment credit, as provided for in subsection (2), and to stimulate capital investment by the business sector.

(2) There is allowed as a credit against the taxes imposed by 15-31-101, 15-31-121, and 15-31-122 an amount equal to:

(a) the tax credit carryovers; and

(b) the tax credit for the tax year.

(3) An investment qualifies for a credit if:

(a) it is depreciable property under sections 46(c) and 48 of the Internal Revenue Code of 1986, as those sections read prior to November 5, 1990, subject to the limitations provided for certain regulated companies in section 46(f) of the Internal Revenue Code of 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;

(b) it was placed in service in Montana; and

(c) it was used, acquired, constructed, reconstructed, erected, or placed into service after December 31, 1999.

(4) (a) The amount of the credit for a tax year is 3% of the amount of qualified investments made during the tax year. The investment credit allowed for the tax year may not exceed 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.

(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 tax year that the property was located in Montana and the denominator of which is the number of days during the 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.

(6) The investment credit allowed by this section is subject to recapture as provided for in section 50 of the Internal Revenue Code of 1986. 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 of 1986.

(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.

(8) A tax credit claimed under this section may be claimed after any other tax credit to which the taxpayer may be entitled."

NEW SECTION. Section 4. Effective date -- applicability -- adoption of rules. (1) This section is effective on passage and approval.

(2) [Sections 1 through 3] are effective January 1, 2000, and apply to tax years beginning after December 31, 1999.

(3) The department of revenue may proceed to adopt rules to implement [sections 1 through 3], but the rules may not become effective prior to January 1, 2000.

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