Provide exclusion from income for certain income from sale of a newly constructed residence
Summary
HB 895 would create a new Montana income tax subtraction for part of the income earned from selling a newly constructed single-family residence or duplex. For individual taxpayers, the bill allows a subtraction equal to 50% of the income generated from the sale of a qualifying newly constructed home sold to a third party for less than 85% of the county median residential value. The subtraction is denied if the seller receives additional compensation that, when combined with the sale price, exceeds that 85% threshold. The bill also adds a parallel corporate income tax deduction for the same type of sale, and it applies to tax years beginning after December 31, 2025.
The bill amends both the individual and corporate income tax statutes in the Montana Code Annotated. In practice, it would reduce taxable income for qualifying builders or sellers of newly constructed homes and duplexes priced below the specified county median benchmark, thereby lowering state income tax liability for those transactions. The bill also requires the Department of Revenue to calculate county median residential values every two years for purposes of administering the subtraction, tying the tax benefit to local housing market data.
The general sentiment reflected in the available legislative history is favorable or at least noncontroversial: the bill was tabled in the House Taxation Committee on a 21-0 vote, indicating unanimous support for the motion to table rather than a recorded floor debate on the merits. No committee transcript is available, so there is no direct record of detailed discussion, but the vote history suggests the bill did not advance and did not generate visible opposition in the recorded action.
The main point of contention, based on the bill’s structure, is likely its policy design rather than any recorded debate: it targets tax relief to a narrow class of transactions involving newly constructed homes sold below 85% of county median residential value. That raises questions about whether the incentive would meaningfully increase housing supply, how the threshold would affect builders and buyers in different counties, and whether the tax benefit is appropriately limited to lower-priced new construction. Because the bill died in process, it did not become law and would not change current tax treatment unless enacted in a future session.
Impact
HB 895 would have amended Montana’s individual and corporate income tax subtraction provisions to exclude 50% of qualifying income from the sale of newly constructed single-family residences or duplexes sold below 85% of county median residential value. It would have added a new tax preference for builders and sellers of qualifying new housing, while also requiring the Department of Revenue to periodically determine county median residential values for administration of the subtraction. The bill would apply beginning with tax years after December 31, 2025, but because it died in process, no statutory change took effect.
Sentiment
The available voting record suggests the bill did not face recorded opposition in committee, but it also did not advance. The House Taxation Committee vote to table the bill was unanimous at 21-0, which indicates procedural agreement to set it aside rather than a divided policy fight on the floor. With no committee transcript available, the broader sentiment can only be characterized as muted and noncontroversial in the recorded action, though ultimately not supportive enough to move forward.
Contention
The likely policy debate centers on whether a targeted income tax exclusion for newly constructed homes is an effective housing incentive or an unnecessary tax preference. Supporters would likely view it as a way to encourage construction and affordability in the lower end of the new-home market, while skeptics may question the revenue cost, the fairness of limiting the benefit to certain sales below a county-based threshold, and the administrative complexity of tracking county median residential values. The bill’s narrow eligibility rules and anti-abuse language suggest lawmakers were concerned about defining which sales should qualify and preventing additional unreported compensation from inflating the effective sale price.