Energy Related Tax Relief
The following information is provided to assist you in understanding the available energy credits and incentives. For personal assistance or more information, please call us toll-free at (866) 859-2254 (in Helena 444-6900).
Individual Income Tax Credits
The Energy Conservation Installation Credit is a tax credit applied against a taxpayer's income tax liability. Montana resident individuals can claim the credit for energy conservation investments made to a home or other building. The credit is equal to 25% of expenses, up to a maximum credit of $500. Two or more people may each qualify for the credit, as long as the building in which the investment is made is owned by all of the people claiming the credit. For example, a couple who jointly own their home may each claim a credit up to $500 each or $1,000 for the couple. To qualify for this credit, a taxpayer will have to show that the investment will reduce the waste or dissipation of energy or reduce the amount of energy required to accomplish a given amount of work. For examples of qualifying projects and further instructions on the energy conservation credit and to calculate this credit, see Montana Form ENRG-C. When claiming this credit, a taxpayer will have to attach Montana Form ENRG-C to the income tax return.
The Alternative Energy Systems Credit is a tax credit against income tax liability for the cost of purchasing and installing an energy system in a Montana resident's principal home that uses (1) a recognized nonfossil form of energy such as, but not limited to, solar energy, wind energy, solid waste, and organic waste or (2) a low emission wood or biomass combustion device such as a pallet or wood stove. The credit cannot exceed $500. Two or more people may each qualify for the credit, as long as the building in which the investment is made is owned by all of the people claiming the credit. For example, a couple who jointly own their home may each claim a credit up to $500 each or $1,000 for the couple. Any unused balance of the credit can be carried forward and applied to future income tax liabilities for a period of four succeeding tax years. For further instructions on the alternative energy system credit, and to calculate this credit, see Montana Form ENRG-B. When claiming this credit, a taxpayer will have to attach Montana Form ENRG-B to the income tax return.
Corporate License Tax Credits
An Energy Conservation Deduction for Corporations is available in lieu of the energy conservation credit (see below). A corporation is allowed a deduction no greater than $1,800 for a residential building or $3,600 for a non-residential building in computing the net income for the capital investment in a building for an energy conservation purpose.
Individual Income and Corporate License Tax Credits
The Alternative Fuel Credit is a tax credit against a taxpayer's income tax liability for the cost of converting a motor vehicle to operate on an alternative fuel. The credit is equal to 50% of the cost to convert the motor vehicle, up to a maximum credit of $1,000. To qualify for this credit, the motor vehicle has to be licensed in Montana and the conversion has to be from gasoline to an alternative fuel, such as natural gas, liquefied petroleum gas, liquefied natural gas, hydrogen, electricity, or other combinations. This credit should not be confused with the federal deduction for the purchase of a qualified clean-air vehicle. For further instructions on the alternative fuel credit and to calculate this credit, see Montana Form AFCR. When claiming this credit, a taxpayer will have to attach Montana Form AFCR to the income tax return.
The Recycling Credit is a tax credit applied against a taxpayer's income tax liability for the investment that the taxpayer's business makes in depreciable equipment or machinery that is used to collect, process, or manufacture a product from reclaimed material. The credit is equal to 25% of the first $250,000 invested in the property, 15% of the next $250,000 invested, and 5% of the next $500,000 invested. A taxpayer is not entitled to any additional credit for property that exceeds $1 million. For further instruction on the recycle credit, and to calculate this credit, see Montana Form RCYL. When claiming this credit, a taxpayer will have to attach Montana Form RCYL to the income tax return.
The Oil Seed Crushing and Biodiesel/Biolubricant Production Facilities Credit is a tax credit against income tax liability for the investment that a taxpayer's business makes in depreciable property in Montana to crush oilseed crops for the production of biodiesel. The credit is equal to 15% of the cost of the property, up to a maximum of $500,000. The credit is applied against the taxpayer's income tax liability in the tax year that the facility begins processing the oilseed or manufacturing a product from the oilseed. A taxpayer can also claim a credit against income tax liability for the cost of constructing and equipping a Montana business to produce biodiesel. The credit is equal to 15% of the cost of the facility or the property installed in the facility. For further instructions on the oil seed crushing and biodiesel production facility credit and to calculate this credit, see Montana Form OSC. When claiming this credit, a taxpayer will have to attach Montana Form OSC to the income tax return.
The Biodiesel Blending and Storage Credit is a tax credit against income tax liability for the investment that a taxpayer's business makes in the purchasing of storage and blending equipment that is used to blend biodiesel with petroleum diesel. The credit is equal to 15% of the cost of purchasing the storage and blending equipment. The credit may not exceed $7,500 and should be claimed in the year that the business begins blending the biodiesel for fuel. In addition, if a taxpayer is a special fuel distributor or an owner or operator of a motor fuel outlet, the taxpayer can claim a credit against income tax liability for the cost of installing any storage and blending equipment. This credit is available only in the year that the business begins blending biodiesel. The credit is equal to 15% of the cost of purchasing the storage and blending equipment and may not exceed $52,500. The credit has to be claimed in the year that the blending of biodiesel begins. For further instructions on the biodiesel blending and storage tank credit and to calculate this credit, see Montana Form BBSC. When claiming this credit, a taxpayer will have to attach Montana Form BBSC to the income tax return.
The Geothermal Systems Credit is a tax credit against income tax liability for the cost of purchasing and installing a geothermal system in a Montana resident's principal home. The amount of the credit cannot exceed $1,500 and is applied in the year that the geothermal system was installed. The unused balance of the credit can be carried forward and applied against subsequent income tax liabilities for a period of seven years. For further instructions on the geothermal systems credit, and to calculate this credit, see Montana Form ENRG-A. When claiming this credit, a taxpayer will have to attach Montana Form ENRG-A to the income tax return.
The Alternative Energy Production Credit is a tax credit against income tax liability for an investment of $5,000 or more that a taxpayer's business makes in depreciable property for the use of a commercial system or a net metering system that is located in Montana and that generates energy by means of an alternative renewable energy source. The amount of the credit is limited to 35% of the eligible cost associated with the purchasing, installing and upgrading of the alternative energy system. The credit is further limited in that it can only be applied against the tax liability due as a consequence of the alternative energy system generating taxable or net income. The credit cannot exceed that portion of a taxpayer's liability that results from taxable or net income generated as a result of the system. Any unused balance of the credit can be carried forward and applied to future income tax liabilities for a period of seven years. An exception to the seven year carry forward period applies when the investment is located within the exterior boundaries of a Montana Indian reservation. For further instructions on the alternative energy production credit and to calculate this credit, see Montana Form AEPC. When claiming this credit, a taxpayer will have to attach Montana Form AEPC to the income tax return.
Property Tax Exemptions and Relief
The Non-Fossil Fuel Energy Generation Exemption provides an exemption from property assessment for qualifying non-fossil fuel energy generating systems installed in residential and commercial structures. The maximum exemption amount per year is $20,000 for residential property, and $100,000 for commercial property. The value of the qualifying non-fossil fuel energy generating system must be included in the assessed value of the property prior to its exemption. If the system has been exempted by its non-inclusion in the assessed value of the property, no additional exemption will be granted. The exemption lasts for a period not to exceed 10 years from year of installation. The property owner must make application for exemption using Form AB-14. Application is required by March 1 following installation of system or within 30 days of receipt of assessment for the year the non-fossil fuel energy generating system is installed.
