HOUSE BILL NO. 518
INTRODUCED BY L. GRINDE
A BILL FOR AN ACT ENTITLED: "AN ACT SUBMITTING TO THE QUALIFIED ELECTORS AN INCREASE IN BUSINESS INCOME TAX BY TAXING COMMERCIAL ENTERPRISE BUSINESS INCOME OF RELIGIOUS, CHARITABLE, SCIENTIFIC, AND EDUCATIONAL CORPORATIONS AND ASSOCIATIONS; AMENDING SECTION 15-31-102, MCA; AND PROVIDING AN EFFECTIVE DATE AND AN APPLICABILITY DATE."
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 15-31-102, MCA, is amended to read:
"15-31-102. Organizations exempt from tax -- unrelated business income not exempt. (1) Except as provided in subsection (3), there may not be taxed under this title any income received by any:
(a) labor, agricultural, or horticultural organization;
(b) fraternal beneficiary, society, order, or association operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents;
(c) cemetery company owned and operated exclusively for the benefit of its members;
(d) except as provided in [section 1 of LC 698] pertaining to engaging in a commercial enterprise, corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net income of which inures to the benefit of any private stockholder or individual;
(e) business league, chamber of commerce, or board of trade not organized for profit, no part of the net income of which inures to the benefit of any private stockholder or individual;
(f) civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;
(g) club organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net income of which inures to the benefit of any private stockholder or members;
(h) farmers' or other mutual hail, cyclone, or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or similar organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses;
(i) cooperative association or corporation engaged in the business of operating a rural electrification system or systems for the transmission or distribution of electrical energy on a cooperative basis;
(j) corporations or associations organized for the exclusive purpose of holding title to property, collecting income from the property, and turning over the entire amount of the income, less expenses, to an organization that itself is exempt from the tax imposed by this title;
(k) wool and sheep pool, which is an association owned and operated by agricultural producers organized to market association members' wool and sheep, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses. Income, for this purpose, does not include expenses and money distributed to members contributing wool and sheep.
(l) corporation that qualifies as a domestic international sales corporation (DISC) under the provisions of section 991, et seq., of the Internal Revenue Code (26 U.S.C. 991, et seq.) and that has in effect for the entire taxable year a valid election under federal law to be treated as a DISC. If a corporation makes that election under federal law, each person who at any time is a shareholder of the corporation is subject to taxation under Title 15, chapter 30, on the earnings and profits of this DISC in the same manner as provided by federal law for all periods for which the election is effective.
(m) farmers' market association not organized for profit, no part of the net income of which inures to the benefit of any member, but that is organized for the sole purpose of providing for retail distribution of homegrown vegetables, handicrafts, and other products either grown or manufactured by the seller;
(n) common trust fund as defined in 26 U.S.C. 584(a);
(o) foreign capital depository chartered under the provisions of 32-8-104, 32-8-201, and 32-8-202.
(2) In determining the license fee to be paid under this part, there may not be included any earnings derived from any public utility managed or operated by any subdivision of the state or from the exercise of any governmental function.
(3) Any unrelated business taxable income, as defined by section 512 of the Internal Revenue Code of 1954 (26 U.S.C. 512), as amended, earned by any exempt corporation resulting in a federal unrelated business income tax liability of more than $100 must be taxed as other corporation income is taxed under this title. An exempt corporation subject to taxation on unrelated business income under this section shall file a copy of its federal exempt organization business income tax return on which it reports its unrelated business income with the department of revenue."
NEW SECTION. Section 2. Submission to electorate. This act shall be submitted to the qualified electors of Montana at the tax election to be held in 1999 by printing on the ballot the full title of this act and the following:
SHALL THE BUSINESS INCOME TAX BE INCREASED ANNUALLY BY TAXING BUSINESS INCOME OF RELIGIOUS, CHARITABLE, SCIENTIFIC, AND EDUCATIONAL CORPORATIONS AND ASSOCIATIONS ON INCOME EARNED IN COMMERCIAL ENTERPRISE ACTIVITY?
[] FOR taxing commercial enterprise business income of religious, charitable, scientific, and educational corporations and associations.
[] AGAINST taxing commercial enterprise business income of religious, charitable, scientific, and educational corporations and associations.
NEW SECTION. Section 3. Contingent voidness. (1) If Constitutional Initiative No. 75, enacting Article VIII, section 17, of the Montana constitution, is declared invalid, then this act is void.
(2) If [LC 698] is not passed and approved, this act is void.
NEW SECTION. Section 4. Effective date. If approved by the electorate, this act is effective July 1, 1999.
NEW SECTION. Section 5. Applicability. This act applies to taxes for business income from commercial enterprise activity engaged in by religious, charitable, scientific, and educational corporations and associations subject to this act commencing January 1, 2000.
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Latest Version of HB 518 (HB0518.01)
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