HOUSE BILL NO. 8

INTRODUCED BY R. JORE

A BILL FOR AN ACT ENTITLED: "AN ACT PHASING IN A 20 PERCENT REDUCTION IN INCOME TAXES BY REDUCING TAXES PAYABLE, BEFORE CREDITS, BY 5 PERCENT EACH YEAR FOR 4 CONSECUTIVE YEARS; PROVIDING THAT THE PROPOSED ACT BE SUBMITTED TO THE QUALIFIED ELECTORS OF MONTANA; AMENDING SECTIONS 15-30-101 AND 15-30-103, MCA; AND PROVIDING AN EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE."

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

Section 1. Section 15-30-101, MCA, is amended to read:

"15-30-101. Definitions. For the purpose of this chapter, unless otherwise required by the context, the following definitions apply:

(1) "Base year structure" means the following elements of the income tax structure:

(a) the tax brackets established in 15-30-103, but unadjusted by 15-30-103(3), in effect on June 30 of the tax year;

(b) the exemptions contained in 15-30-112, but unadjusted by 15-30-112(6), in effect on June 30 of the tax year;

(c) the maximum standard deduction provided in 15-30-122, but unadjusted by 15-30-122(2), in effect on June 30 of the tax year.

(2) "Consumer price index" means the consumer price index, United States city average, for all items, using the 1967 base of 100 as published by the bureau of labor statistics of the U.S. department of labor.

(3) "Department" means the department of revenue.

(4) "Dividend" means any distribution made by a corporation out of its earnings or profits to its shareholders or members, whether in cash or in other property or in stock of the corporation, other than stock dividends.

(5) "Fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or person, whether individual or corporate, acting in any fiduciary capacity for any person, trust, or estate.

(6) "Foreign government" means any jurisdiction other than the one embraced within the United States, its territories, and its possessions.

(7) "Gross income" means the taxpayer's gross income for federal income tax purposes as defined in section 61 of the Internal Revenue Code of 1954 (26 U.S.C. 61) or as that section may be labeled or amended, excluding unemployment compensation included in federal gross income under the provisions of section 85 of the Internal Revenue Code of 1954 (26 U.S.C. 85) as amended.

(8) "Inflation factor" means a number determined for each tax year by dividing the consumer price index for June of the tax year by the consumer price index for June 1980.

(9) "Information agents" includes all individuals, corporations, associations, and partnerships, acting in whatever capacity, including lessees or mortgagors of real or personal property, fiduciaries, brokers, real estate brokers, employers, and all officers and employees of the state or of any municipal corporation or political subdivision of the state, having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income with respect to which any person or fiduciary is taxable under this chapter.

(10) "Knowingly" is as defined in 45-2-101.

(11) "Montana lottery winnings" means income paid either in lump sum or in annual payments to:

(a) a resident taxpayer on a lottery ticket; or

(b) a nonresident taxpayer on a lottery ticket purchased in Montana.

(12) "Net income" means the adjusted gross income of a taxpayer less the deductions allowed by this chapter.

(13) "Paid", for the purposes of the deductions and credits under this chapter, means paid or accrued or paid or incurred, and the terms "paid or accrued" and "paid or incurred" must be construed according to the method of accounting upon the basis of which the taxable income is computed under this chapter.

(14) "Pension and annuity income" means:

(a) systematic payments of a definitely determinable amount from a qualified pension plan, as that term is used in section 401 of the Internal Revenue Code (26 U.S.C. 401), or systematic payments received as the result of contributions made to a qualified pension plan that are paid to the recipient or recipient's beneficiary upon the cessation of employment;

(b) payments received as the result of past service and cessation of employment in the uniformed services of the United States;

(c) lump-sum distributions from pension or profit-sharing plans to the extent that the distributions are included in federal adjusted gross income;

(d) distributions from individual retirement, deferred compensation, and self-employed retirement plans recognized under sections 401 through 408 of the Internal Revenue Code (26 U.S.C. 401 through 408) to the extent that the distributions are not considered to be premature distributions for federal income tax purposes; or

(e) amounts received from fully matured, privately purchased annuity contracts after cessation of regular employment.

(15) "Purposely" is as defined in 45-2-101.

(16) "Received", for the purpose of computation of taxable income under this chapter, means received or accrued, and the term "received or accrued" must be construed according to the method of accounting upon the basis of which the taxable income is computed under this chapter.

(17) "Resident" applies only to natural persons and includes, for the purpose of determining liability for the tax imposed by this chapter with reference to the income of any tax year, a person domiciled in the state of Montana and any other person who maintains a permanent place of abode within the state even though temporarily absent from the state and who has not established a residence elsewhere.

(18) "Stock dividends" means new stock issued, for surplus or profits capitalized, to shareholders in proportion to their previous holdings.

(19) "Taxable income" means the adjusted gross income of a taxpayer less the deductions and exemptions provided for in this chapter.

(20) "Taxable year" or "tax year" means the taxpayer's tax year for federal income tax purposes.

(21) "Taxpayer" includes any person or fiduciary, resident or nonresident, subject to a tax imposed by this chapter and does not include corporations."

Section 2. Section 15-30-103, MCA, is amended to read:

"15-30-103. Rate of tax. (1) Except as provided in subsection (2), there must be levied, collected, and paid for each tax year upon the taxable income of every taxpayer subject to this tax, after making allowance for exemptions and deductions as provided in this chapter, a tax on the following brackets of taxable income as adjusted under subsection (3) at the following rates:

(a) on the first $1,000 of taxable income or any part of that amount, 2%;

(b) on the next $1,000 of taxable income or any part of that amount, 3%;

(c) on the next $2,000 of taxable income or any part of that amount, 4%;

(d) on the next $2,000 of taxable income or any part of that amount, 5%;

(e) on the next $2,000 of taxable income or any part of that amount, 6%;

(f) on the next $2,000 of taxable income or any part of that amount, 7%;

(g) on the next $4,000 of taxable income or any part of that amount, 8%;

(h) on the next $6,000 of taxable income or any part of that amount, 9%;

(i) on the next $15,000 of taxable income or any part of that amount, 10%;

(j) on any taxable income in excess of $35,000 or any part of that amount, 11%.

(2) For tax years beginning after December 31, 1999, a taxpayer shall, after determining the amount of tax payable under subsection (1), but before accounting for any credits against the tax due, adjust the amount of tax payable under subsection (1) as follows:

(a) for the tax year beginning January 1, 2000, the tax payable under subsection (1) must be multiplied by 95%;

(b) for the tax year beginning January 1, 2001, the tax payable under subsection (1) must be multiplied by 90%;

(c) for the tax year beginning January 1, 2002, the tax payable under subsection (1) must be multiplied by 85%; and

(d) for the tax years beginning on or after January 1, 2003, the tax payable under subsection (1) must be multiplied by 80%.

(3) By November 1 of each year, the department shall multiply the bracket amount contained in subsection (1) by the inflation factor for that tax year and round the cumulative brackets to the nearest $100. The resulting adjusted brackets are effective for that tax year and must be used as the basis for imposition of the tax in subsection (1) ."

NEW SECTION. Section 3. Effective date. This act is effective upon approval by the electorate.

NEW SECTION. Section 4. Retroactive applicability. This act applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1999.

NEW SECTION. Section 5. Submission to electorate. This act shall be submitted to the qualified electors of Montana at the general election to be held in November 2000 by printing on the ballot the full title of this act and the following:

[]	FOR phasing in a 20% reduction in state individual income taxes.

[]	AGAINST phasing in a 20% reduction in state individual income taxes.

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