Revise income tax laws to lower income taxes

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69th Legislature 2025 HB 337
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ENROLLED BILL
AN ACT GENERALLY REVISING INCOME TAXES; REVISING BRACKETS TO LOWER INCOME TAXES;
INCREASING THE AMOUNT OF MONTANA TAXABLE INCOME BEFORE APPLICATION OF A HIGHER
RATE OF TAX; REDUCING THE HIGHEST INCOME TAX RATE; INCREASING THE EARNED INCOME TAX
CREDIT; AMENDING SECTIONS 15-30-2103 AND 15-30-2318, MCA; AND PROVIDING EFFECTIVE DATES,
APPLICABILITY DATES, AND A TERMINATION DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 15-30-2103, MCA, is amended to read:
"15-30-2103. Rate of tax -- net long-term capital gains -- definitions. (1) Except as provided in
subsections (2) and (3) subsection (2), there must be levied, collected, and paid for each tax year on the
Montana taxable income of each taxpayer subject to this chapter a tax on the brackets of taxable income as
follows:
(a) for every married individual who files a joint return and for every surviving spouse:
(i) on the first $41,000 $95,000 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $41,000 $95,000 or any part of that income, 5.9%
5.65%;
(b) for every head of household:
(i) on the first $30,750 $71,250 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $30,750 $71,250 or any part of that income, 5.9%
5.65%;
(c) for every individual other than a surviving spouse or head of household who is not a married
individual:
(i) on the first $20,500 $47,500 of Montana taxable income or any part of that income, 4.7%;
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(ii) on any Montana taxable income in excess of $20,500 $47,500 or any part of that income, 5.9%
5.65%;
(d) for every married individual who does not make a joint return and for every estate or trust not
exempt from taxation under the Internal Revenue Code:
(i) on the first $20,500 $47,500 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $20,500 $47,500 or any part of that income, 5.9%
5.65%.
(2) Except as provided in 15-30-3704 and subsection (3) of this section, that portion of a taxpayer's
Montana taxable income that consists of net long-term capital gains after accounting for amounts included in
taxable income that is not net long-term capital gains is subject to a tax on the brackets of net long-term capital
gains as follows:
(a) for every married individual who files a joint return and for every surviving spouse:
(i) on the first $41,000 $95,000 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on net long-term capital gains that exceed $41,000 $95,000 less nonqualified taxable income
or any part of that income, 4.1%, except that if the total nonqualified taxable income is $41,000 $95,000 or
greater, all of the net long-term capital gains are taxed at 4.1%;
(b) for every head of household:
(i) on the first $30,750 $71,250 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $30,750 $71,250 less nonqualified taxable
income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $30,750 $71,250
or greater, all of the net long-term capital gains are taxed at 4.1%;
(c) for every individual other than a surviving spouse or head of household who is not a married
individual:
(i) on the first $20,500 $47,500 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $20,500 $47,500 less nonqualified taxable
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income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $20,500 $47,500
or greater, all of the net long-term capital gains are taxed at 4.1%;
(d) for every married individual who does not make a joint return and for every estate or trust that
is not exempt from taxation under the Internal Revenue Code:
(i) on the first $20,500 $47,500 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $20,500 $47,500 less nonqualified taxable
income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $20,500 $47,500
or greater, all of the net long-term capital gains are taxed at 4.1%.
(3) By November 1 of each year, the department shall multiply the bracket amounts contained in
subsections (1) and (2) by the inflation factor for the following tax year and round the cumulative brackets to the
nearest $100. The resulting adjusted brackets are effective for that following tax year and must be used as the
basis for imposition of the tax in subsections (1) and (2).
(4)(3) For the purposes of this section, the following definitions apply:
(a) "Net long-term capital gains" means net long-term capital gains as that term is defined in
section 1222 of the Internal Revenue Code, 26 U.S.C. 1222.
(b) "Nonqualified taxable income" means Montana taxable income that is not considered net long-
term capital gains."
Section 2. Section 15-30-2103, MCA, is amended to read:
"15-30-2103. Rate of tax -- net long-term capital gains -- definitions. (1) Except as provided in
subsections (2) and (3), there must be levied, collected, and paid for each tax year on the Montana taxable
income of each taxpayer subject to this chapter a tax on the brackets of taxable income as follows:
(a) for every married individual who files a joint return and for every surviving spouse:
(i) on the first $41,000 $130,000 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $41,000 $130,000 or any part of that income,
5.9%, 5.4% ;;
(b) for every head of household:
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(i) on the first $30,750 $97,500 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $30,750 $97,500 or any part of that income,
5.9%, 5.4% ;
(c) for every individual other than a surviving spouse or head of household who is not a married
individual:
(i) on the first $20,500 $65,000 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $20,500 $65,000 or any part of that income,
5.9%, 5.4% ;
(d) for every married individual who does not make a joint return and for every estate or trust not
exempt from taxation under the Internal Revenue Code:
(i) on the first $20,500 $65,000 of Montana taxable income or any part of that income, 4.7%;
(ii) on any Montana taxable income in excess of $20,500 $65,000 or any part of that income,
5.9%, 5.4%.
(2) Except as provided in 15-30-3704 and subsection (3) of this section and subsection (3) of this
section, that portion of a taxpayer's Montana taxable income that consists of net long-term capital gains after
accounting for amounts included in taxable income that is not net long-term capital gains is subject to a tax on
the brackets of net long-term capital gains as follows:
(a) for every married individual who files a joint return and for every surviving spouse:
(i) on the first $41,000 $130,000 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on net long-term capital gains that exceed $41,000 $130,000 less nonqualified taxable income
or any part of that income, 4.1%, except that if the total nonqualified taxable income is $41,000 $130,000 or
greater, all of the net long-term capital gains are taxed at 4.1%;
(b) for every head of household:
(i) on the first $30,750 $97,500 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $30,750 $97,500 less nonqualified taxable
income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $30,750 $97,500
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or greater, all of the net long-term capital gains are taxed at 4.1%;
(c) for every individual other than a surviving spouse or head of household who is not a married
individual:
(i) on the first $20,500 $65,000 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $20,500 $65,000 less nonqualified taxable
income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $20,500 $65,000
or greater, all of the net long-term capital gains are taxed at 4.1%;
(d) for every married individual who does not make a joint return and for every estate or trust that
is not exempt from taxation under the Internal Revenue Code:
(i) on the first $20,500 $65,000 less nonqualified taxable income of net long-term capital gains,
3.0%;
(ii) on any net long-term capital gains that exceed $20,500 $65,000 less nonqualified taxable
income or any part of that income, 4.1%, except that if the total nonqualified taxable income is $20,500 $65,000
or greater, all of the net long-term capital gains are taxed at 4.1%.
(3) By November 1 of each year, the department shall multiply the bracket amounts contained in
subsections (1) and (2) by the modified inflation factor for the following tax year and round the cumulative
brackets to the nearest $100. The resulting adjusted brackets are effective for that following tax year and must
be used as the basis for imposition of the tax in subsections (1) and (2).
(4)(4) For the purposes of this section, the following definitions apply:
(a) "Modified inflation factor" has the same meaning as "inflation factor" as defined in 15-30-2101,
except that the consumer price index for June 2026 is substituted for the consumer price index for June 2023.
(a)(b) "Net long-term capital gains" means net long-term capital gains as that term is defined in
section 1222 of the Internal Revenue Code, 26 U.S.C. 1222.
(b)(c) "Nonqualified taxable income" means Montana taxable income that is not considered net long-
term capital gains."
Section 3. Section 15-30-2318, MCA, is amended to read:
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"15-30-2318. Earned income tax credit. (1) Except as provided in subsection (3), a resident
taxpayer is allowed as a credit against the tax imposed by 15-30-2103 a percentage of the credit allowed for the
federal earned income credit for which the individual taxpayer is eligible for the tax year under section 32 of the
Internal Revenue Code, 26 U.S.C. 32.
(2) The amount of the credit allowed under subsection (1) is 10% 20% of the amount of the credit
determined for the tax year under section 32 of the Internal Revenue Code, 26 U.S.C. 32.
(3) The credit is not allowed on earned income that is treated as a dividend received by a member
of an agricultural organization provided for in section 501(d) of the Internal Revenue Code, 26 U.S.C. 501(d).
For the purpose of this subsection, the amount of the state tax credit provided for in subsection (2) is reduced
by the reduction percentage.
(4) The taxpayer is entitled to a refund equal to the amount by which the credit exceeds the
taxpayer's tax liability or, if the taxpayer has no tax liability under this chapter, a refund equal to the amount of
the credit. The credit may be claimed by filing a Montana income tax return.
(5) For the purpose of this section, the following definitions apply:
(a) "Earned income" means earned income, as defined in section 32 of the Internal Revenue
Code, 26 U.S.C. 32, that was used to determine the amount of the federal earned income tax credit under
subsection (2).
(b) "Reduction percentage" means a percentage that is calculated by dividing the earned income
that is disallowed under subsection (3) by the total amount of earned income."
Section 4. Transition. The modified inflation factor provided for in 15-30-2103(3) does not apply until
tax year 2028.
Section 5. Effective dates. (1) Except as provided in subsections (2) and (3), [this act] is effective on
October 1, 2025.
(2) [Sections 1 and 3] are effective January 1, 2026.
(3) [Section 2] is effective January 1, 2027.
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Section 6. Applicability. (1) [Sections 1 and 3] apply to the income tax year beginning January 1,
2026.
(2) [Section 2] applies to income tax years beginning after December 31, 2026.
Section 7. Termination. [Section 1] terminates December 31, 2026.
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I hereby certify that the within bill,
HB 337, originated in the House.
___________________________________________
Chief Clerk of the House
___________________________________________
Speaker of the House
Signed this _______________________________day
of____________________________________, 2025.
___________________________________________
President of the Senate
Signed this _______________________________day
of____________________________________, 2025.
HOUSE BILL NO. 337
INTRODUCED BY B. LER, W. GALT, L. SCHUBERT, R. GREGG, M. THIEL, E. TILLEMAN, E. BUTTREY, S.
GIST, C. HINKLE, L. JONES, C. SPRUNGER, S. FITZPATRICK, G. OBLANDER, K. ZOLNIKOV, J. ETCHART,
L. DEMING, B. BARKER, L. BREWSTER, G. HERTZ, B. MITCHELL, K. SEEKINS-CROWE, Z. WIRTH
AN ACT GENERALLY REVISING INCOME TAXES; REVISING BRACKETS TO LOWER INCOME TAXES;
INCREASING THE AMOUNT OF MONTANA TAXABLE INCOME BEFORE APPLICATION OF A HIGHER RATE
OF TAX; REDUCING THE HIGHEST INCOME TAX RATE; INCREASING THE EARNED INCOME TAX CREDIT;
AMENDING SECTIONS 15-30-2103 AND 15-30-2318, MCA; AND PROVIDING EFFECTIVE DATES,
APPLICABILITY DATES, AND A TERMINATION DATE.