Provide income tax credits for contributions to a community improvement organization
HB 859 creates a new Montana income tax credit for cash contributions to a “community improvement organization.” The credit would be available against either individual or corporate income tax, and the amount of the credit would generally equal the cash donation, subject to a cap of the lesser of 10% of Montana taxable income or $3,000 per taxpayer. The bill allows the credit to pass through to owners of pass-through entities, and it also permits estates and trusts to claim the credit and allocate unused amounts to beneficiaries.
The bill also establishes an annual statewide cap on the total credits that may be claimed: $2 million for tax year 2026 and $5 million for 2027 and later years, with a mechanism to increase the cap by 20% if 80% of the limit is preapproved in cash contributions. Credits may be carried forward for three years if they exceed a taxpayer’s liability. The bill further amends Montana’s tax credit review statute to add this new credit to the list of credits subject to periodic legislative review by the revenue interim committee.
In practical terms, the bill would add a new tax expenditure to Montana’s income tax code and create a new compliance process involving preapproval by the Department of Revenue and receipt documentation from the organization receiving the contribution. It would affect taxpayers making qualifying donations, community improvement organizations, and the Department of Revenue, while also tying the new credit into the state’s existing framework for reviewing tax credits under Title 15 of the Montana Code Annotated.
The general sentiment in the available voting history appears mixed but not strongly supportive overall: the bill was advanced to a “to table” motion in the House Taxation Committee by a 20-1 vote, and the bill ultimately died in process. That suggests the committee was willing to consider the measure, but the final outcome indicates it did not secure enough support to continue through the legislative process.
The main points of contention likely centered on the fiscal cost of the credit, the creation of a new tax preference, and whether the organizations eligible for the credit were sufficiently defined and limited. The bill’s definition excludes organizations with paid employees or board members, which may have been intended to narrow eligibility, but the statewide cap, preapproval system, and the interaction with existing charitable contribution deductions suggest concerns about revenue loss, administrative complexity, and whether the credit would meaningfully change donor behavior.
HB 859 would amend Montana’s income tax laws by adding a new credit in Title 15 for qualifying cash contributions to community improvement organizations and by updating the tax credit review statute in 15-30-2303 to include this credit in the legislature’s periodic review schedule. It would also establish new administrative requirements for preapproval, receipts, carryforward treatment, and annual statewide credit limits, affecting taxpayers, pass-through entities, estates and trusts, qualifying nonprofit organizations, and the Department of Revenue.
The available record suggests the bill had some committee support but not enough momentum to advance. The 20-1 vote on the motion to table indicates the committee did not unanimously oppose discussion of the bill, but the fact that the bill died in process shows it ultimately lacked sufficient support to become law. No transcript excerpts are available, so the specific arguments for or against the bill are not documented in the provided materials.
Likely areas of disagreement included the revenue impact of creating a new refundable-style tax preference, whether the credit would primarily benefit donors rather than public facilities, and whether the eligibility rules were too narrow or too broad. The bill’s exclusion of organizations with paid employees or board members may have raised questions about which community groups could actually qualify, while the annual cap and preapproval system suggest concern about limiting fiscal exposure and controlling administration. The interaction with existing charitable deduction rules may also have been a point of discussion, since taxpayers would need to choose between the new credit and certain deductions.