Provide income tax credit for payment processing fees directed to a charitable organization
Summary
HB 900 would create a new Montana income tax credit for businesses that direct payment processing fees to a charitable organization under a qualifying contract. The credit would equal the amount of payment processing fees directed to the charity, could be claimed against either individual income tax or corporate income tax, and could be carried forward for up to two years if the credit exceeds the taxpayer’s liability. The bill also specifies that the credit is not refundable and cannot be claimed for amounts already deducted as charitable contributions, while allowing pass-through entities, small business corporations, and partnerships to allocate the credit to owners or shareholders in proportion to income or loss reporting.
The bill also amends Montana’s tax credit review statute to add this new credit to the list of credits that must be periodically reviewed by the revenue interim committee. It sets the first review cycle for the new credit beginning in the biennium starting July 1, 2021 for some credits and, specifically for this new credit, places it in the review schedule beginning with the biennium starting July 1, 2021 as amended in the bill text, with the committee required to evaluate it using standard criteria such as taxpayer behavior, distributional effects, out-of-state beneficiaries, timing of costs and benefits, adverse impacts, and broader economic effects. The act would apply to income tax years beginning after December 31, 2025.
Impact
HB 900 would amend Title 15 of the Montana Code Annotated by adding a new business tax credit provision and updating the state’s tax-credit review framework in section 15-30-2303, MCA. It would affect businesses that process electronic payments, charitable organizations that receive directed fee amounts, and taxpayers claiming individual or corporate income tax credits through pass-through entities. The bill would also require administrative review of the new credit as part of the state’s ongoing tax expenditure oversight process.
Sentiment
The available voting history suggests the bill had support at least in committee, with a 21-0 vote to table in House Taxation recorded twice in the materials, but the bill ultimately died in process. There are no committee transcripts provided, so the broader discussion record is limited. Overall, the bill appears to have been treated as a tax policy measure with a charitable giving component rather than a highly divisive proposal, though it did not advance to enactment.
Contention
The main policy questions raised by the bill are whether a tax credit tied to payment processing fees would meaningfully change business behavior, whether it would primarily benefit businesses rather than charities, and whether the state should subsidize a fee structure that may already be part of ordinary business operations. The bill’s requirement that the payment processor reimburse the state for the credit amount in the first year also suggests concern about fiscal exposure and implementation mechanics. Because no transcripts are available, specific arguments from supporters or opponents are not documented, but the structure of the credit and its interaction with existing charitable deduction rules are the most likely points of debate.