M&A Advisory in Montana

Montana's individual income tax has two brackets for tax year 2025: 4.7% on taxable income up to $21,100 (single) / $42,200 (MFJ), and 5.9% above those thresholds. Under HB 337 (signed April 28, 2025), the top rate falls to 5.65% in 2026 and 5.4% in 2027, and the 4.7% bracket roughly doubles in width. The Montana PTET (HB 192/2021, refined by SB 554/2023) is an annual, irrevocable election at the entity-level rate equal to the top individual rate (5.9% for 2025; 5.65% for 2026), with owners receiving a refundable credit, preserving the federal SALT-cap workaround for the M&A year.

HB 221 (2023) established a true preferential rate regime for net long-term capital gains: 3.0% (lower bracket) and 4.1% (upper bracket), replacing the prior 2% credit that was repealed effective tax year 2024. Montana sellers of long-held businesses pay roughly 30%–35% less than ordinary rates at the state level on qualifying LTCG. The 4.1% rate applies once nonqualified taxable income exceeds the same thresholds used for ordinary income; brackets are inflation-adjusted. This regime remains in effect for 2025–2026 and is among the most generous state-level long-term gain treatments in the country.

Montana is one of only five states with no general sales or use tax, making asset sales dramatically cleaner than in Idaho (6%), North Dakota (5%), South Dakota (4.2%), or Wyoming (4% plus local options). On a $20M asset deal with $5M in FF&E, Montana saves an estimated $200K–$300K of transfer-tax leakage versus contiguous states. Successor liability attaches primarily to unpaid Montana withholding tax, unemployment insurance, and corporate income tax — a MT DOR tax-clearance certificate via TAP eliminates buyer indemnity holdback risk. The Metalliferous Mines License Tax (Montana Code Annotated §15-37-101) applies only when gross value exceeds $250,000.

Montana uses rolling conformity to the IRC and bases Montana taxable income on federal taxable income (post-2024 simplification under SB 399). The state fully conforms to §1202 QSBS including OBBBA enhancements: tiered exclusions (50%/75%/100% at 3/4/5 years), the $15M per-issuer cap (up from $10M for stock issued after July 4, 2025), and the $75M aggregate gross-asset threshold. A qualifying Montana C-corp founder can exclude up to 100% of federal and Montana gain on a §1202-qualified exit with no state add-back or partial decoupling.

Montana has no state estate tax and no state inheritance tax for 2025–2026. Combined with the OBBBA-enhanced federal exemption ($15M individual / $30M MFJ for 2026, indexed), Montana sellers can pair pre-sale gifting trusts (GRATs, IDGTs) with the §1202 QSBS exclusion and the 3.0%/4.1% capital gains rates without state estate-tax leakage on rollover equity or post-closing transfers. This is a meaningful advantage over neighboring states with inheritance taxes.

Montana's corporate income tax is a flat 6.75% (7.0% under a water's-edge election; $50 minimum) — a mid-tier rate in the Rocky Mountain region, above Wyoming (0%) and Idaho (5.3%) but below federal-level comparisons. Targeted incentives include the Big Sky Economic Development Trust Fund, the Job Growth Incentive Tax Credit (50% of employer-paid FICA on net new jobs), and the expanded Business Equipment Tax Exemption ($1M–$3M, assignable or renegotiable in a transaction). These incentives can be structured as purchase-price levers when buyers articulate a credible job-growth plan in the CIM.