Claiming a Tax Credit
About Insure Montana Tax Credit Program
If you are a small business that is currently providing a group health insurance policy for your employees, you may be having a tough time holding on to your plan as health care costs continue to rise. The Insure Montana Tax Credit program offers a Refundable tax credit for small businesses that are currently offering and contributing toward their employees health insurance premiums through a group health plan.
Funding is provided by a $1.00 increase to the price of cigarettes, passed in 2004 by Montana voters. Number of applicants admitted to the program, is dependent upon cigarette sales. Funding and sustainability of the Tax Credit Program is determined on an annual basis
How it works:
Insure Montana provides a refundable state income tax credit to employers who currently pay some or all of the cost of group health insurance for their employees. The program also provides additional Tax Credits when employers pay for health insurance premiums for the employee’s spouse and/or their dependents. Approximately 40% of the available funding per year is designated to the Employer Tax Credit.
Employer/Employee Eligibility Requirements
- The "small employer"* currently provides a group health insurance policy paid to a licensed health insurer. Employers who belong to a Multi Employer Welfare Arrangement (MEWA) are not eligible (i.e. Associated Employers Group Benefit Plan & Trust.);
- The employer has a number of employees that meets the eligibility criteria established by the State Auditor’s Office (between 2–9 "eligible employees"**);
- The business or any related employer***/business does not have any delinquent state tax liability owing the Montana Department of Revenue;
- The business may not have any employees, not including an owner, partner, or shareholder of the small business, who received more than $75,000 in wages, including bonuses and commissions, as defined in 39-71-123, from the small employer or related employer in the prior tax year.
- The tax credit cannot be more than 50% of premiums paid;
- The employer cannot pay premiums from a Medical Savings Account; http://www.irs.gov/publications/p969/index.html
- Non-profit organizations under Internal Revenue Code 501C(3) are not eligible to participate in Tax Credit Program.
*(20) "Small employer" means a person, firm, corporation, partnership, or bona fide association that is actively engaged in business and that, with respect to a calendar year and a plan year, employed at least two but not more than 50 eligible employees during the preceding calendar year and employed at least two employees on the first day of the plan year. In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a small or large employer must be based on the average number of employees reasonably expected to be employed by the employer in the current calendar year. In determining the number of eligible employees, companies are considered one employer if they:
(a) are affiliated companies;
(b) are eligible to file a combined tax return for purposes of state taxation; or
(c) are members of a bona fide association
**(12) (a) "Eligible employee" means an employee who works on a full-time basis with a normal workweek of 30 hours or more, except that at the sole discretion of the employer, the term may include an employee who works on a full-time basis with a normal workweek of between 20 and 40 hours as long as this eligibility criteria is applied uniformly among all of the employer's employees. The term includes a sole proprietor, a partner of a partnership, and an independent contractor if the sole proprietor, partner, or independent contractor is included as an employee under a health benefit plan of a small employer. The term also includes those persons eligible for coverage under 2-18-704.
(b) The term does not include an employee who works on a part-time, temporary, or substitute basis.
***MCA 33-22-2002 - (11) “Related Employers” (a) affiliates or affiliated entities or persons who directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with a specified entity or person; and (b) entities or persons that are eligible to file a combined or joint tax return for purposes of state taxation.
Tax Credit Amounts: The following are the tax credits that may be claimed under Insure Montana for each eligible employee, spouse and dependants:
| Tax Credit Amounts
||Dependants (max 2)
|Employer Tax Credit:
||up to $100/month
||up to $100/month
||up to $40/month
If the average age of employees is 45 or older, the tax credit for an employee increases to $125.00. Employers deemed eligible for a tax credit after July 1st will receive a tax credit for July to December of that year.
Claiming the Tax Credit
The amount stated on the certificate is the amount a business may claim for a refundable tax credit on its annual State income tax return. If the business operates as a C corporation, it will claim the credit on the entity’s Montana Corporation License Tax return (Form CLT-4). If the business operates as a Partnership or S corporation, it will report the credit on its Montana Partnership Return (Form PR-1) or Montana S Corporation Return (Form CLT-4S). Partners or shareholders of these entities will then report their respective share of the credit on their individual income tax return or the Form CLT-4 depending on whether they are an individual or C corporation. If the business operates as a sole proprietorship, the owner will claim the credit on his individual income tax return. When claiming the credit, the business or individual is not allowed a deduction for the insurance premiums that were used to generate this credit. This amount will usually be 200% of the credit claimed. The instructions for business or individual tax returns provide more information. Please contact the Montana Department of Revenue customer service center at 406-444-6900 to answer any questions.
How to Apply for the Tax Credit Program
- Employers submit an application to the Insure Montana office for a determination of eligibility and placement on the program’s waiting list. (NOTE: Businesses on the waiting list must complete a renewal application in the month of May each year. See ‘Renewals’.)
- Insure Montana staff will review the application and send the business a notice confirming or denying eligibility for program participation.
- Once funding becomes available, or if funding is currently available, Insure Montana staff will send the business directions to complete the application process and begin participation in the program.
To apply complete a Business Application. Click here.
Renewals – Tax Credit Participating Businesses
Montana Code (MCA 33-22-2008) requires businesses participating in the Insure Montana to complete an annual renewal application. Letters containing a unique log-ins and passwords will be mailed to the business owner toward the end of November. The business owner will then have a 60 day period to complete the online renewal process. If additional information is required to determine ongoing eligibility, Insure Montana staff will notify the business in writing and they will have 10 days to respond to the additional information request. Failure to complete the online renewal process or to provide requested information by the due date will result in closure of the business’ participation in the Insure Montana Tax Credit program. The business will be required to reapply for the program and will also lose eligibility for the current year’s tax credit.
Along with the submitting the online renewal application the business owner will also be required to either mail or fax a copy of the most recent premium statement from their group health policy carrier. The premium statement must show a breakdown of all eligible employees and their monthly premium amounts. These statements can be obtained by contacting the insurance carrier and requesting a copy if one is not mailed to the business monthly, the business’ group health insurance agent is also available to help obtain the proper documentation.
Renewals – Business on the Waiting List
Montana Code (MCA 33-22-2008) requires businesses participating in the Insure Montana program to complete a renewal application process in the month of May. Renewal applications will be sent to participating businesses toward the end of April. Businesses must submit a completed renewal application by May 31st. Businesses will receive a warning notice on or about May 20th if a completed application has not been received. If additional information is required to complete a determination of continued eligibility, the business will be required to provide the information by May 31st or within 10 days, whichever is longer.
Failure to provide a completed application or required information by the due date will result in removal of the business’ position on the waiting list.
The business would then be required to reapply for the program and it would be placed at the bottom of the waiting list.
Top of Page