SB 536: Revise contractor gross receipts tax - Montana

SB0536_X(3).pdf → SB0536_X(4).pdf · 5 edits

MODERATE

The bill was amended to remove provisions granting tax exemptions for individuals and businesses in good standing, replacing them with a focus on Employee Stock Ownership Plan (ESOP) companies. Additionally, the text was cleaned up to remove redundant definitions and formatting errors, while the effective date was set for January 1, 2026.

Scope change

The bill's scope narrowed by eliminating general tax exemptions for good-standing entities and specifically targeting tax credits for ESOP companies instead.

ELIGIBILITY

Removed the provision providing a tax exemption for certain individuals and businesses that are in good standing.

Changed the bill's purpose to focus on allowing Employee Stock Ownership Plan (ESOP) companies to claim a tax credit.

DEFINITION

Deleted the specific definition of 'public contractor' and related text regarding subcontractors and contract thresholds.

TIMELINE

Established a delayed effective date of January 1, 2026, for the act.

TECHNICAL

Corrected formatting errors and removed redundant text from the bill's title and body.

SB0536_3(5).pdf → SB0536_X.pdf · 4 edits

MODERATE

This bill amends the Montana Contractor's Gross Receipts Tax by adding a new definition for 'public contractor' and extending the timeframe for claiming tax credits. It clarifies that businesses performing public work on contracts exceeding $80,000 are subject to the tax, and it allows employee stock ownership plan companies to claim credits for up to seven years instead of five. The changes aim to broaden the tax base for public projects while providing longer relief for specific employee-owned businesses.

Scope change

The bill expands the definition of 'public contractor' to explicitly include subcontractors on contracts over $80,000, ensuring they are subject to the gross receipts tax.

DEFINITION

Added a specific definition for 'public contractor' to clarify that it includes any person submitting a proposal or entering a contract for public construction work where the contract value exceeds $80,000.

ELIGIBILITY

Extended the carryforward period for tax credits from five years to seven years for employee stock ownership plan companies.

REQUIREMENT

Added a requirement that taxpayers claiming credits against real property taxes must submit proof that all property taxes owed by the contractor are paid in full.

TECHNICAL

Updated the bill title and text to reflect the new provisions regarding public contractors and the extended credit timeframe.

SB0536_2(16).pdf → SB0536_3.pdf · 4 edits

MODERATE

This bill amends the Montana tax code to allow Employee Stock Ownership Plan (ESOP) companies to offset their corporate income tax liability with state real property taxes, rather than just personal property taxes. The change expands the types of taxes eligible for the credit and adds a requirement for taxpayers to prove they have paid all other state property taxes before claiming the benefit.

Scope change

The bill expands the scope of eligible taxes from 'personal property taxes' to include 'real property taxes,' with a specific exception for Class Four residential property.

ELIGIBILITY

Expanded the types of taxes eligible for the credit to include real property taxes (excluding Class Four residential property), in addition to existing personal property taxes.

REQUIREMENT

Added a new requirement that taxpayers claiming the credit must submit proof to the Department of Revenue that all other state property taxes owed by the contractor have been paid in full.

DEFINITION

Added a new definition of 'compliance' to clarify that it includes the filing and payment of all required state tax forms, returns, and statements by their statutory deadlines.

TIMELINE

Extended the carryforward period for unused tax credits from five succeeding tax years to seven succeeding tax years.

SB0536_1(6).pdf → SB0536_2(11).pdf · 5 edits

MODERATE

The bill was revised to introduce a new tax credit for Employee Stock Ownership Plan (ESOP) companies, allowing them to claim credits for personal property taxes and license fees. The text was also reorganized to clarify that the new ESOP provisions are added to a different section of the code (15-50-207) rather than the definitions section, and the applicability rules were updated to specifically address accrued credits for these new entities.

Scope change

The bill's scope expanded to include a specific tax credit mechanism for Employee Stock Ownership Plan corporations, which were not explicitly detailed in the original version.

ELIGIBILITY

Added eligibility for a tax credit specifically for Employee Stock Ownership Plan (ESOP) companies that are 100% owned by employees.

FISCAL

Established that additional license fees withheld from ESOP contractors can be used as a credit against corporate income tax or refunded.

REQUIREMENT

Specified that personal property taxes and vehicle registration fees paid by ESOP contractors can be credited against license fees.

TECHNICAL

Reorganized the bill structure to amend Section 15-50-207 instead of Section 15-50-101, clarifying where the new ESOP rules are codified.

TIMELINE

Added a specific applicability section stating that the act applies to accrued credit carryforwards available to ESOP contractors.

SB0536_2(10).pdf → SB0536_1(6).pdf · 5 edits

MODERATE

The bill was renumbered from SB 536.2 to SB 536.1 and had its effective date changed from January 1, 2026 to a delayed date. The legislation was significantly rewritten to remove specific tax credit provisions for Employee Stock Ownership Plans (ESOPs) and instead focus on creating a general exemption for residents and businesses that are in full compliance with state tax obligations. The bill now requires the Department of Revenue to publish a list of eligible entities on its website to grant these exemptions.

Scope change

The bill's scope shifted from providing specific tax credits for ESOP corporations to establishing a broad exemption for any individual or business meeting state tax compliance standards.

TIMELINE

The effective date was changed from January 1, 2026 to a delayed effective date.

ELIGIBILITY

Provisions granting specific tax credits and refunds for Employee Stock Ownership Plan (ESOP) corporations were removed.

A new exemption was created for any resident or business licensed in good standing that is in full compliance with state income, payroll, and property tax obligations.

ENFORCEMENT

The Department of Revenue is now required to publish a public list of individuals and businesses eligible for the tax exemption.

DEFINITION

The definition of 'compliance' was added to clarify that it includes filing all required forms and paying all taxes by their statutory deadlines.

SB0536_2(4).pdf → SB0536_2(5).pdf · 1 edit

MINOR

The bill text was reorganized to merge two subsections, (b) and (c), into a single paragraph. This change consolidates the rules regarding tax credit carryforwards, removing the visual separation between the two distinct provisions while keeping the substantive policy language identical.

TECHNICAL

The text was restructured by removing the line break and label between subsections (b) and (c), merging them into one continuous paragraph without altering the actual legal requirements.

SB0536_2(3).pdf → SB0536_2(4).pdf · 1 edit

MINOR

The amendment changes the language of Section 15-50-207 from a passive statement to an active command, clarifying that the Montana Code Annotated is being officially amended to read the new text. This is a technical correction to ensure the statute's authority is explicitly stated in the amendment process.

TECHNICAL

Changed the phrase 'is amended to read' to 'SECTION 15-50-207, MCA, IS AMENDED TO READ' to emphasize the legislative action.

SB0536_2(2).pdf → SB0536_2(3).pdf · 5 edits

MODERATE

This bill establishes a new exemption for individuals and businesses that are fully compliant with state tax obligations (income, payroll, and property taxes), allowing them to opt out of certain chapter provisions. It also amends the definition of 'public contractor' to explicitly include subcontractors on contracts valued over $80,000 and clarifies that businesses exempt as employee stock ownership plans are not considered public contractors. Additionally, the bill updates the rules for tax credits, allowing refunds for employee stock ownership plan corporations and extending the carryforward period for unused credits to five years.

Scope change

The bill expands the scope of the exemption to include any resident or licensed business meeting tax compliance criteria, rather than limiting it to specific entities previously implied. It also broadens the definition of 'public contractor' to cover subcontractors on larger projects.

ELIGIBILITY

Created a new exemption for any resident or licensed business that is in full compliance with all state income, payroll, and property tax obligations.

Added a specific refund mechanism for contractors exempt from income taxes due to their status as employee stock ownership plan corporations.

DEFINITION

Amended the definition of 'public contractor' to explicitly include subcontractors undertaking work on contracts exceeding $80,000.

Clarified that employee stock ownership plan corporations (100% owned by employees) are excluded from the 'public contractor' definition.

FISCAL

Extended the carryforward period for unused tax credits from contractors to five succeeding tax years.

SB0536_1(5).pdf → SB0536_2.pdf · 5 edits

MODERATE

The bill was renumbered and its primary focus shifted from a general exemption for tax-compliant businesses to a specific tax credit for Employee Stock Ownership Plan (ESOP) companies. The legislation now explicitly allows ESOPs to claim credits against state income taxes and refunds if they are exempt from income tax due to their employee-owned status. It also clarifies that credits for personal property taxes paid by contractors cannot be double-counted as license fees paid for income tax purposes.

Scope change

The bill's scope narrowed significantly from a broad exemption for any business in good standing to a targeted benefit exclusively for Employee Stock Ownership Plan corporations.

ELIGIBILITY

Exemption eligibility was restricted from all state-compliant businesses to only Employee Stock Ownership Plan (ESOP) companies.

FISCAL

New provisions allow ESOPs to receive tax credits or refunds for license fees withheld or paid, specifically addressing their unique tax-exempt status.

DEFINITION

The definition of 'compliance' was removed, and a new specific definition for ESOPs was added to the bill's title and text.

REQUIREMENT

Added a requirement that credits for personal property taxes cannot be used to satisfy license fee obligations for income tax credit calculations.

TECHNICAL

The bill number was updated from SB 536.1 to SB0536.2, and page numbering/formatting was adjusted.

LC1000.pdf → SB0536_1.pdf · 2 edits

MINOR

The bill's title and header were updated to reflect its official Senate Bill number (SB 536) and sponsor (G. Hertz), replacing the internal legislative committee designation (LC 1000). The page footer was also updated to indicate this is the authorized print version. No substantive policy changes, such as new definitions, funding amounts, or eligibility criteria, were identified in the provided text.

TECHNICAL

The bill's identifier was changed from 'LC 1000' to 'SB 536', and the sponsor was added as G. Hertz.

The page footer text was updated to read 'Authorized Print Version - SB 536' instead of 'LC 1000'.

Revise contractor gross receipts tax

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