HB 904 revises Montana’s individual income tax treatment of capital gains. The bill keeps the existing ordinary income tax brackets but changes the special capital gains brackets so that preferential rates apply only up to certain income thresholds. For taxpayers with Montana taxable income above $1 million for joint filers or surviving spouses, or above $500,000 for all other filers, the bill eliminates the capital gains preference by treating all income above those thresholds as nonqualified taxable income subject to the higher rate structure.
The bill also updates definitions of “net long-term capital gains” and “nonqualified taxable income,” ties bracket amounts to annual inflation adjustments, and sets a delayed effective date of January 1, 2026, applying to tax years beginning after December 31, 2025. In practical terms, it would increase tax liability for higher-income taxpayers with significant capital gains while leaving lower and middle brackets unchanged.
Overall sentiment appears limited and procedural rather than broadly debated, because there are no committee transcript excerpts and the bill ultimately died in process. The recorded House action shows a unanimous 21-0 vote to table the bill, indicating that members present agreed not to advance it further.
The main point of contention is the policy choice to reduce or remove capital gains tax preferences for high-income taxpayers. Supporters would likely view the bill as a tax fairness or revenue measure aimed at high earners, while opponents would likely see it as a tax increase that could discourage investment or penalize capital gains realization. The threshold-based design suggests the debate centered on whether Montana should continue preferential treatment for capital gains at upper income levels.
Impact
HB 904 would amend section 15-30-2103, MCA, to create a modified capital gains tax structure for Montana individual income tax filers. It preserves the general income tax brackets but narrows the capital gains preference by taxing capital gains at the higher 4.1% rate once taxable income exceeds $1 million for joint returns and surviving spouses or $500,000 for other return types. It also requires annual inflation indexing of bracket amounts and applies prospectively to tax years beginning after December 31, 2025.
Sentiment
The available voting history suggests the bill did not generate enough support to advance, as it was unanimously tabled in the House Taxation Committee by a 21-0 vote and later died in process. With no committee transcript provided, there is little evidence of extended public debate in the record, but the procedural outcome indicates the proposal was not politically viable in its introduced form.
Contention
The central controversy is whether Montana should eliminate or limit capital gains tax preferences for high-income taxpayers. Likely supporters would frame the bill as improving tax equity and increasing revenue from wealthy filers, while likely opponents would argue it raises taxes on investment income and could affect economic behavior, business owners, and investors. The income thresholds and the treatment of gains above those thresholds are the key policy fault line.