2001 Montana Legislature

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HOUSE BILL NO. 623

INTRODUCED BY J. MANGAN, FRITZ, GOLIE, LENHART, MATTHEWS, SCHMIDT

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AN ACT PROVIDING TAX CREDITS FOR AMOUNTS PAID OR INCURRED BY THE EMPLOYER FOR DEPENDENT CARE ASSISTANCE; ALLOWING A CREDIT AGAINST MONTANA INCOME TAXES FOR AMOUNTS PAID OR INCURRED BY THE EMPLOYER TO ACQUIRE A DAY-CARE FACILITY FOR THE BENEFIT OF THE EMPLOYER'S EMPLOYEES; PROVIDING LIMITATIONS TO THE CREDIT; INCREASING THE TAX CREDIT FOR DEPENDENT CARE ASSISTANCE; EXPANDING THE TAX CREDIT FOR DEPENDENT CARE ASSISTANCE TO INCLUDE AMOUNTS PAID OR INCURRED BY AN EMPLOYER FOR INFORMATION AND REFERRAL SERVICES TO ASSIST EMPLOYEES IN OBTAINING DEPENDENT CARE; AMENDING SECTIONS 15-30-186 AND 15-31-131, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A RETROACTIVE APPLICABILITY DATE.



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



     Section 1.  Credit for day-care facilities. (1) There is a credit against the taxes otherwise due under this chapter that is allowable to an employer based on the amounts paid or incurred during the tax year by the employer to acquire, construct, reconstruct, renovate, or otherwise improve real property so that the property may be used primarily as a day-care facility. Subject to the conditions of this section, the amount of the credit is equal to:

     (a) the amount of the day-care facility credit determined under subsection (2); and

     (b) any day-care facility tax credit carryforwards.

     (2) The credit allowed under subsection (1) is the lesser of:

     (a) $2,500, multiplied by the number of dependents that the day-care facility is designed to accommodate at the end of the first tax year for which credit is first claimed;

     (b) 15% of the cost of the acquisition, construction, reconstruction, renovation, or other improvement; or

     (c) $50,000.

     (3) The amounts paid or incurred by the employer for the acquisition, construction, reconstruction, renovation, or other improvement to real property that qualify for the credit may be paid or incurred either:

     (a) to another person to be used to acquire, construct, reconstruct, renovate, or otherwise improve real property that is operated as a day-care facility and with whom the employer contracts to make day-care assistance payments, and the payments are excluded, or partially excluded, under 26 U.S.C. 129 from the income of the employee for federal tax purposes; or

     (b) to acquire, construct, reconstruct, renovate, or otherwise improve real property that is operated by the employer, or a combination of employers, to provide day-care assistance to the employees of the employer under a program or programs, and the program or programs are excluded, or partially excluded, under 26 U.S.C. 129 from the income of the employee for federal tax purposes.

     (4) To qualify for the credit allowed under subsection (1), the following conditions apply:

     (a) The property must be in actual use in Montana as a day-care facility on the last day of the tax year for which the credit or any carryforward amount of the credit is claimed.

     (b) Day-care services assisted by the employer must take place on the property on the last day of the tax year for which the credit or any carryforward amount of the credit is claimed.

     (c) The person operating the day-care facility must hold a current license or registration certificate under Title 52, chapter 2, part 7, on the last day of the tax year for which the credit under subsection (1) is claimed.

     (d) The day-care facility shall accommodate six or more children.

     (e) The day-care facility must be placed in operation before January 1, 2006.

     (5) The total amount of the costs upon which the credit allowed under subsection (1) is based and the total amount of the credit must be determined by the employer, subject to rules adopted by the department, during the tax year in which the property acquired, constructed, reconstructed, renovated, or otherwise improved is first placed in operation as a day-care facility.

     (6)  The amount paid or incurred by the employer upon which the credit allowed under subsection (1) is based must be excluded from the income of an employee subject to the limitations provided in 26 U.S.C. 129(b).

     (7) The taxpayer is allowed one-tenth of the total credit determined under subsection (2) in the first tax year in which the taxpayer may claim the credit and one-tenth of the total credit is allowed in each succeeding tax year, not to exceed 9 tax years.

     (8) Except as provided in subsections (4)(a) and (4)(b), if the tax credit allowed under subsection (1) exceeds the taxpayer's liability, the credit may be carried forward to the succeeding tax year or years, except that a carryforward amount is not allowed beyond the period allowed for the credit as provided in subsection (7).

     (9) The provisions of this section do not affect the computation of depreciation or basis for a day-care facility. However, if the credit allowed under this section is claimed, the amount of any deduction that is allowed or allowable under this chapter for the amounts paid or incurred, or upon which the credit is based, must be reduced by the dollar amount of the credit allowed.

     (10) The department shall require evidence from the taxpayer that the person operating the day-care facility on the date that the taxpayer's tax year ends is licensed or registered to operate the facility. The evidence must accompany the tax return in which any amount of tax credit allowed under this section is claimed. If the evidence is not furnished, the credit is not allowed for the tax year for which the evidence is not furnished. Upon request of the department, the department of public health and human services shall report to the department on whether the day-care facility was operated as a licensed or registered day-care facility on the last day of the tax year of the person claiming the credit.

     (11) The employer must meet any other requirements or furnish any information to the department that the department requires under rules adopted by the department to carry out the purposes of this section.

     (12) If the credit allowed under this section is claimed by a small business corporation, as defined in 15-31-201, or a partnership, the credit must be attributed to shareholders or partners, using the same proportion to report the corporation's or partnership's income or loss for Montana income tax purposes.

     (13) For purposes of the credit allowed under subsection (1):

     (a) the definitions and special rules contained in 26 U.S.C. 129(e) apply to the extent applicable; and

     (b) "employer" means an employer carrying on a business, trade, occupation, or profession in this state.



     Section 2.  Credit for day-care facilities. There is a credit against the taxes otherwise due under this chapter allowable to an employer based on the amounts paid or incurred during the tax year by the employer to acquire, construct, reconstruct, renovate, or otherwise improve real property to be used primarily as a day-care facility. The credit must be computed in accordance with the provisions of [section 1].



     Section 3.  Section 15-30-186, MCA, is amended to read:

     "15-30-186.  Credit for dependent care assistance and referral services. (1) There is a credit against the taxes otherwise due under this chapter allowable to an employer for amounts paid or incurred during the taxable tax year by the employer for dependent care assistance. The credit must be computed in accordance with the provisions of 15-31-131.

     (2) In addition to the credit allowed under subsection (1), there is a credit against the taxes otherwise due under this chapter allowable to an employer for amounts paid or incurred during the tax year by the employer to provide information and referral services to assist employees of the employer employed within this state to obtain dependent care. The credit must be computed in accordance with the provisions of 15-31-131."



     Section 4.  Section 15-31-131, MCA, is amended to read:

     "15-31-131.  Credit for dependent care assistance and referral services. (1) There is a credit against the taxes otherwise due under this chapter allowable to an employer for amounts paid or incurred during the taxable tax year by the employer for dependent care assistance actually provided to or on behalf of an employee if the assistance is furnished by a registered or licensed day-care provider and pursuant to a program that meets the requirements of section 129(d)(2) through (6) of the Internal Revenue Code, (26 U.S.C. 129(d)(2) through (d)(6)).

     (2)  (a) The amount of the credit allowed under subsection (1) is 20% 25% of the amount paid or incurred by the employer during the taxable tax year, but the credit may not exceed $1,250 $1,575 of day-care assistance actually provided to or on behalf of the employee.

     (b)  For the purposes of this subsection, marital status must be determined under the rules of section 21(e)(3) and (4) of the Internal Revenue Code, (26 U.S.C. 21(e)(3) and (e)(4)).

     (c)  In the case of an onsite facility, the amount upon which the credit allowed under subsection (1) is based, with respect to any dependent, must be based upon utilization and the value of the services provided.

     (3) (a) In addition to the credit allowed under subsection (1), there is a credit against the taxes otherwise due under this chapter allowable to an employer for amounts paid or incurred during the tax year by the employer to provide information and referral services to assist employees of the employer employed within this state to obtain dependent care.

     (b) The amount of the credit allowed under subsection (3)(a) is equal to 25% of the amount paid or incurred in the tax year.

     (3)(4)  An amount paid or incurred during the taxable tax year of an employer in providing dependent care assistance to or on behalf of any employee does not qualify for the credit allowed under subsection (1) if the amount was paid or incurred to an individual described in section 129(c)(1) or (2) of the Internal Revenue Code, (26 U.S.C. 129(c)(1) or (c)(2)).

     (4)(5)  An amount paid or incurred by an employer to provide dependent care assistance to or on behalf of an employee does not qualify for the credit allowed under subsection (1):

     (a)  to the extent the amount is paid or incurred pursuant to a salary reduction plan; or

     (b)  if the amount is paid or incurred for services not performed within this state.

     (5)(6)  If the credit allowed under subsection (1) or (3) is claimed, the amount of any deduction allowed or allowable under this chapter for the amount that qualifies for the credit (or upon which the credit is based) must be reduced by the dollar amount of the credit allowed. The election to claim a credit allowed under this section must be made at the time of filing the tax return.

     (6)(7)  The amount upon which the credit allowed under subsection (1) is based may not be included in the gross income of the employee to whom the dependent care assistance is provided. However, the amount excluded from the income of an employee under this section may not exceed the limitations provided in section 129(b) of the Internal Revenue Code, (26 U.S.C. 129(b)). For purposes of Title 15, chapter 30, part 2, with respect to an employee to whom dependent care assistance is provided, "wages" does not include any amount excluded under this subsection. Amounts excluded under this subsection do not qualify as expenses for which a deduction is allowed to the employee under 15-30-121.

     (7)(8)  Any tax credit otherwise allowable under this section that is not used by the taxpayer in a particular year may be carried forward and offset against the taxpayer's tax liability for the next succeeding tax year. Any credit remaining unused in the next succeeding tax year may be carried forward and used in the second succeeding tax year, and likewise through the fifth year succeeding the tax year in which the credit was first allowed or allowable. A credit may not be carried forward beyond the fifth succeeding tax year.

     (8)(9)  If the taxpayer is an S. corporation, as defined in section 1361 of the Internal Revenue Code, (26 U.S.C. 1361), and the taxpayer elects to take tax credit relief, the election may be made on behalf of the corporation's shareholders. A shareholder's credit must be computed using the shareholder's pro rata share of the corporation's costs that qualify for the credit. In all other respects, the effect of the tax credit applies to the corporation as otherwise provided by law.

     (9)(10)  For purposes of the credit allowed under subsection (1) or (3):

     (a)  The the definitions and special rules contained in section 129(e) of the Internal Revenue Code, (26 U.S.C. 129(e)), apply to the extent applicable.; and

     (b)  "Employer" "employer" means an employer carrying on a business, trade, occupation, or profession in this state."



     Section 5.  Codification instruction. (1) [Section 1] is intended to be codified as an integral part of Title 15, chapter 31, part 1, and the provisions of Title 15, chapter 31, part 1, apply to [section 1].

     (2) [Section 2] is intended to be codified as an integral part of Title 15, chapter 30, part 1, and the provisions of Title 15, chapter 30, part 1, apply to [section 2].



     Section 6.  Effective date. [This act] is effective on passage and approval.



     Section 7.  Retroactive applicability. [This act] applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 2000, and to day-care facilities acquired by an employer and placed in operation after December 31, 2000.

- END -




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