SB 536 revises Montana’s contractor gross receipts tax provisions. The bill updates the definition and treatment of credits and refunds available to contractors, including allowing certain tax credits or refunds to be claimed by employee stock ownership plan (ESOP) corporations that are 100% employee-owned and exempt from corporate or individual income tax. It also extends the carryforward period for the contractor credit from five to seven succeeding tax years and authorizes the Department of Revenue to adopt rules to administer the refund process for ESOP companies.
The bill further allows the contractor credit to be applied against certain real property taxes, personal property taxes, and specified vehicle-related fees paid in Montana, while requiring proof that all Montana property taxes owed by the contractor are paid in full before a real property tax credit may be claimed. The act applies to accrued credit carryforwards that were available but not claimed because of a contractor’s ESOP status, and it takes effect January 1, 2026. In practical terms, the bill modifies how contractors can use tax credits tied to gross receipts and property-related tax payments, and it broadens access to those benefits for qualifying employee-owned businesses.
Impact
SB 536 amends sections 15-50-101 and 15-50-207, MCA, changing the contractor gross receipts tax framework and the administration of related credits and refunds. It affects public contractors and subcontractors subject to the tax, as well as ESOP corporations that are 100% employee-owned and otherwise exempt from income tax. The bill also gives the Department of Revenue rulemaking authority to implement the new refund process and changes the carryforward period and allowable offsets for the credit, including certain real property taxes.
Sentiment
The bill appears to have received generally favorable support in both chambers, with multiple committee and floor votes passing by comfortable margins. It moved through Senate Taxation, Senate Finance and Claims, House Taxation, House Appropriations, and floor readings with broad approval, suggesting the underlying tax changes were viewed positively by most legislators. However, the final status indicates a veto override failed, showing that despite legislative support, the measure did not ultimately become law.
Contention
The main policy issues appear to have centered on tax relief and credit eligibility, especially the extension of the credit carryforward period and the special treatment for employee stock ownership plan companies. Any contention likely involved the fiscal impact of expanding or extending tax benefits, the fairness of allowing credits to offset property taxes, and the administrative complexity of requiring applications, proof of tax payment, and new rules from the Department of Revenue. The vote totals show some opposition at several stages, but not enough to prevent passage through the Legislature before the veto override failed.
Taxation; to exempt certain contractors from utility gross receipts tax, utility service use tax, and sales and use tax on natural gas and liquefied petroleum gas.