This page was updated Aug. 19, 2019, to reflect Montana’s improved rating after the enactment of H.B. 723.
Rating: Making progress
Key points:
- Montana is making progress because the state has adopted a plan for regular evaluation of tax incentives.
- A legislative interim committee will consider key criteria such as incentives' effects on the state's economy and the extent to which they change taxpayer behavior.
- The scope of Montana’s evaluation law could be expanded to include other costly incentives, such as those for oil and gas, which have also proved to be volatile.
Montana evaluation law
Year enacted: 2019.
Who evaluates: Revenue Interim Committee.
Length of review cycle: Ten years.
For more information on state ratings, please visit our interactive map.
The following information was current as of May 3, 2017.
Although Montana lacks a regular evaluation process, some legislators and state officials have recognized that implementing one could prove valuable. During the 2015 session, lawmakers considered a bill that would have placed expiration dates on numerous tax credits and required a legislative committee to review credits and make recommendations before these sunset dates.a
This approach has succeeded elsewhere. In Oregon, where tax credit programs expire after six years unless lawmakers extend them, the Legislature’s Joint Committee on Tax Credits studies incentives in-depth and makes recommendations to the full Legislature. Through this process, the state has modified credits to improve their effectiveness, allowed some to expire, and extended others.b
In Montana, the bill passed the Legislature but was vetoed by Governor Steve Bullock (D).c In his veto message, Bullock called the concept of tax credit review commendable but objected to the fact that the legislation applied to only some credits rather than applying sunsets consistently.d
For now, Montana is in the position of many other states: Officials publish some descriptive information on tax incentives but do not measure their effectiveness. For example, the Department of Revenue produces a report every two years that includes cost data on the state’s tax credits, exemptions, and deductions.e Additionally, legislative staff publishes data on individual income tax credits, including how Montanans at different income levels are affected by these provisions.f
It would be valuable to include Montana’s largest tax incentives in any evaluation process. For example, the state provides a preferential rate for newly drilled oil and gas wells, a provision that costs the state tens of millions of dollars a year.g An evaluation could help determine whether this policy is a cost-effective way to increase economic activity in Montana.
Endnotes
- Montana H.B. 154 (2015), http://leg.mt.gov/bills/2015/billpdf/HB0154.pdf.
- The Pew Charitable Trusts, “Tax Incentive Programs: Evaluate Today, Improve Tomorrow” (January 2015), 8–9, http://www.pewtrusts.org/~/media/assets/2015/01/ statetaxincentivesbriefjanuary2015.pdf.
- Montana H.B. 154.
- Montana Office of the Governor, veto message on H.B. 154, April 30, 2015, http://leg.mt.gov/bills/2015/AmdHtmH/HB0154GovVeto.pdf.
- Montana Department of Revenue, “Biennial Report: July 1, 2014—June 30, 2016” (Dec. 13, 2016), https://revenue.mt.gov/Portals/9/publications/biennial_reports/2014-2016/2016-Biennial-Report-Complete.pdf.
- Stephanie Morrison, “Individual Income Tax Credit Analysis,” prepared by the Montana Legislative Fiscal Division for the Revenue and Transportation Interim Committee (March 11, 2016), http://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/March-2016/income-tax-credit-analysis-2014.pdf.
- Montana Budget and Policy Center, “Montana Communities Cannot Afford the Oil and Gas Tax Holiday: Tax Breaks for Energy Companies Are Costing Us Millions” (January 2015), http://www.montanabudget.org/wp-content/uploads/2015/02/Tax-Holiday-Final.pdf.