Tax and Other Incentives

Montana Incentives for Renewable Energy

There are many incentives available to Montana residents, businesses, and developers looking to invest in clean energy solutions within Montana. These incentives can help reduce the costs associated with implementing clean energy.

For Montana residents looking to implement clean energy projects at their home, the most common state incentives used are:

  • The Alternative Energy Loan Program, which offers low-interest loans for up to $40,000 with repayment up to ten years.
  • 15-32-201- The $500 tax incentive ($1,000 for joint filings) for the installation of a renewable energy system or wood-stove.
  • 15-32-115- The $1,500 tax incentive for the installation of geothermal systems in a new residence.

For renewable energy developers looking to implement clean energy projects in Montana, the most common state incentives used are:

  • 15-24-1401- A 50 percent reduction on the local mill levy phased out over nine years for renewable energy systems larger than 1 MW.
  • 15-6-157- A lower property tax rate for transmission lines primarily carrying renewable energy.
  • A lower property tax rate for carbon capture and sequestration equipment, including carbon dioxide transport pipelines.

NorthWestern Energy customers may be eligible for renewable energy incentives.

The tax incentives are updated to cover the 2014 tax year. Forms from previous years are available from the Department of Revenue.

For federal tax incentives, see Federal Tax Incentives-Tax Incentives Assistance Project.


Descriptions of all renewable energy incentives available in Montana can be found below.

Tax Incentives

Topic: Lower property tax rates for transmission lines carrying renewable energy
Citation: 15-6-157 MCA
Summary: Transmission lines with firm contracts to carry electricity from certain renewable energy facilities are eligible to be classified as in class fourteen, which is taxed at 3 percent of its market value.
Contact: Department of Environmental Quality; also, Department of Revenue, 406-444-6900
Topic: Property tax exemption for buildings using renewable energy
Citation: 15-6-224 MCA
Summary: Certain amounts ($20,000 for a single-family residential dwelling or $100,000 for all other structures) of the assessed value of non-fossil forms of energy generation equipment or low-emission wood or biomass combustors are exempt from property taxes for 10 years following installation.
Contact: Department of Revenue, 406-444-6900; use state tax form AB-14 for individuals or for businesses
Topic: Property tax exemption for renewable generating facilities under 1 MW
Citation: 15-6-225 MCA
Summary: New generating facilities with nameplate capacity of less than 1 MW and using an alternative renewable energy source are exempt from property taxes for 5 years after start of operation.
Contact: No special form needed; contact Department of Revenue's local county office for more information
Topic: Property tax reduction for renewable generating facilities of 1 MW or greater
Citation: 15-24-1401 MCA
Summary:

Generating plants producing 1 megawatt or more by means of an alternative renewable energy source are eligible for the new or expanded industry property tax reduction on the local mill levy during the first nine years of operation, subject to approval by the local government. If so approved, the facility is taxed at 50 percent of its taxable value in the first five years after the construction permit is issued. Each year thereafter, the percentage is increased by equal percentages until the full taxable value is attained in the tenth year.

The tax reduction applies only to taxes levied for the local high schools and elementary schools and for the local government offering the reduction.

Contact: No special form needed; contact Department of Revenue's local county office for more information
Topic: Property tax abatement for renewable energy generating facilities
Citation: 15-24-3101 et seq. MCA
Summary:

Certain renewable energy facilities and equipment are eligible for a property tax abatement of 50 percent for up to 19 years. This abatement applies to all mills levied against the qualifying facility or equipment. Renewable energy research and development equipment, up to the first $1 million of value, also is eligible to receive the abatement.

Contact: Department of Environmental Quality; also, Department of Revenue, 406-444-6900
Topic: New or expanded industry tax credit
Citation: 15-31-124 et seq. MCA
Summary:

Businesses engaged in the production of energy by means of an alternative renewable energy source are eligible for the new or expanded industry tax credit against corporate income tax. To be considered an expanding industry, total full-time jobs must increase by 30 percent or more. The credit is equal to 1 percent of new wages paid in state during the first three years of operation. No carryback or carryover is allowed for this credit.

Contact: Department of Revenue, 406-444-1758; see ARM 42.4.1601-1612 for information that must be provided
Topic: Personal income tax credits for installing a residential geothermal system
Citation: 15-32-115 MCA
Summary:

A resident individual taxpayer who installs a geothermal or geothermal heat-pump system in the taxpayer's principal dwelling, or the builder of a house, can claim a tax credit based on the installation costs of the system, not to exceed $1,500. Credit not used in the year in which the system is installed may be carried forward for the 7 succeeding tax years. The credit can only be claimed once on any given house.

Contact: Department of Revenue, 406-444-6900; use state tax form ENRG-A for individuals or businesses
Topic: Alternative energy investment tax credit
Citation: 15-32-401 et seq. MCA
Summary:

Commercial and net metering alternative energy investments of $5,000 or more are eligible for up to 35 percent tax credit against individual or corporate tax on income generated by the investment. The credit may only be taken against net income produced by the eligible equipment or by certain associated business activities. Associated facilities, manufacturing plants producing alternative energy equipment and new or expanded businesses using the energy generated by the alternative energy investment may use the tax credit.

The tax credit must be taken the year the equipment is placed in service; however, any portion of the tax credit that exceeds the amount of tax to be paid may be carried over and applied against state tax liability for the following 7 years. A project of 5 MWs or larger on a reservation may carry the credit over for 15 years, if it has an employment agreement with the tribal government.

Taxpayers may not take this credit in conjunction with any other state energy or state investment tax benefits, or with the property tax exemption for nonfossil energy property 15-6-224.

This credit is available to taxpayers purchasing an existing facility as well as to those building a new facility.

Contact: Department of Revenue, 406-444-6900; use state tax form AEPC for individuals or for businesses
Topic: Exemption from wholesale energy transaction tax
Citation: 15-72-101 et seq. MCA
Summary:

Electricity from wind generation on state lands is exempt from the wholesale energy transaction tax of $0.00015/kWh transmitted. Electricity from any source, including renewables, that is generated on a reservation is exempt if it is for delivery out of state. Electricity generated by a US government agency for delivery outside the state and electricity from any source delivered to members of a cooperative or municipal is exempt from the WET tax.

Contact: Department of Revenue, 406-444-6900; WET Form

Other Financial Incentives

Topic: Renewable resource grant and loan program
Citation: 85-1-601 et seq. MCA
Summary:

The renewable resource grant and loan program is administered by the Department of Natural Resources and Conservation. Historically the program primarily has funded water projects, but it does offer grants to renewable energy projects of state, local, or tribal government entities. On a biennial basis, DNRC evaluates and recommends projects to the Legislature for funding.

Contact: Pam Smith, DNRC, 406-444-6839
Topic: Grants for renewable research and development
Citation: 90-3-1001 et seq. MCA
Summary:

The board of research and commercialization technology gives grants for renewable resource research and development projects, among other types, to be conducted at research and commercialization centers located in Montana.

Contact: Dave Desch, Executive Director, 841-2760, or visit the website
Topic: Local government revenue bonds
Citation: 90-5-101 et seq. MCA
Summary:

Limited obligation local government bonds ("special revenue bonds") may be issued for qualified electric energy generation facilities, including those powered by renewables. These bonds generally are secured by the project itself. The taxing power or general credit of the government may not be used to secure the bonds. Local governments may not operate any project financed by the sale of revenue bonds as a business except to lease it to some other party.

These bonds are exempt from state taxes and may qualify for federal tax incentives. The tax-exemption feature allows funds to be borrowed at a significantly lower rate (1-2 percent) than possible with taxable bonds. There are various restrictions on how such bonds may be used. Because of the legal complexity of a bond issue, retaining bond counsel is important.

The total amount of special revenue bonds that can be issued by state and local governments combined is capped, which theoretically could limit a government’s ability to issue new bonds for a generation facility.

Contact: Any interested county or municipality

Loan Programs

Topic: Microbusiness Loan Program
Citation: 17-6-401 et seq. MCA
Summary:

Businesses producing energy using an alternative renewable energy source are eligible for microbusiness loans, which are capped at $100,000. A microbusiness is a Montana-based company with fewer than ten full-time employees and a gross annual revenue of less than $1 million. Application for a loan is made to a certified microbusiness development corporation; there currently are five located around the state.

Contact: Anne Pichette, Program Specialist, Department of Commerce, (406) 841-2751 or visit the website to find locations of the nearest microbusiness development corporation
Topic: Montana Beginning Farm/Ranch Loan Program
Citation: 80-12-201 et seq. MCA
Summary:

Loans subsidized by tax-exempt bonds issued by the Montana Agricultural Loan Authority may be used for the production of energy using an alternative renewable energy source. The program is run through existing private agricultural lenders. The intent is to provide lower interest (1-2 percent below market) loans up to $477,000 to eligible beginning ag operators. To meet IRS regulations, the energy generated must be used within the agricultural operation.

Contact: Department of Agriculture, 406-444-5420

Programs Through Utilities

Topic: Small Power Production Facilities ("Qualifying Facilities")
Citation: 69-3-601 et seq. MCA
Summary:

The Public Service Commission sets special rates at which NorthWestern Energy or Montana-Dakota Utilities must buy power from qualifying facilities that either 1) use renewable resources or waste materials or 2) cogenerate. Flathead Electric Coop is the only rural electric cooperative that must offer QF contracts. It is regulated directly by FERC.

The nameplate capacity of eligible facilities can be no more than 80 MW according to federal legislation. The rates set by the PSC must be in compliance with the federal Public Utility Regulatory Policies Act (PURPA). The PSC requires QFs larger than 10 MW to go through an RFP process to obtain a long-term contract. Between solicitations, QFs larger than 10 MW can sell to the utility at a tariffed short-term rate.

NWE is the only Montana utility with QFs; its tariffs are available on its website.

The 2003 Legislature passed HB417, which repeals all Montana mini-PURPA, contingent on repeal of federal PURPA. It would not affect any legal action or agreement made prior to the repeal.

Contact: Frank Bennett, NorthWestern Energy, 406-497-2536 ; Darcy Neigum, Montana-Dakota Utilities, 701-222-7757; John Goroski, Flathead Electric Cooperative, 406-751-4468; Utility Division, Public Service Commission, 406-444-6199
Topic: Consumer Protection
Citation: 69-3-1404(2) MCA
Summary:

The Public Service Commission has the authority to regulate abusive practices by suppliers and others. The PSC requires suppliers to substantiate any claims that their natural gas is from renewable resources. (See ARM 38.5.6010 Claims Made In Marketing Natural Gas.)

Contact: Utility Division, Public Service Commission, 406-444-6199
Topic: Renewable Portfolio Standard
Citation: 69-3-2001 et seq. MCA
Summary:

NorthWestern and MDU must procure supplies for a minimum of 5 percent of their retail sales of electrical energy in Montana from eligible renewable resources through 2009, 10 percent between 2010 and 2014, and 15 percent starting January 1, 2015. Starting in 2012, a portion of their RPS requirement must be met with electricity from community renewable energy projects. Renewable energy credits created by an eligible renewable resource purchased separately from the associated electricity may be used to meet the RPS.

A cooperative utility with 5,000 or more customers is responsible for implementing and enforcing its own renewable energy standard that recognizes the intent of the legislature to encourage new renewable energy production and rural economic development.

The RPS also applies to competitive electricity suppliers, defined as any supplier other than a public utility or a cooperative selling electricity at retail rates to customers whose individual load has an average monthly demand of less than 5,000 kilowatts.

Contact: Frank Bennett, NorthWestern Energy, 406-497-2536; Darcy Neigum, Montana-Dakota Utilities Co., 701-222-7757; Utility Division, Public Service Commission, 406-444-619; local offices of the larger cooperatives
Topic: Retail Green Power
Citation: 69-8-210(2) MCA
Summary:

NorthWestern Energy must offer customers an opportunity to purchase a separately marketed (and possibly differently priced) product composed of power from biomass, wind, solar or geothermal resources. The PSC ensures that these resources have been certified as meeting industry-accepted standards.

Contact: NorthWestern Energy Green Power; Utility Division, Public Service Commission, 406-444-6199
Topic: Universal System Benefits Programs
Citation: 69-8-402 MCA
Summary:

All distribution utilities and cooperatives must collect a Universal System Benefits Charge (USBC), which is used for low-income assistance and weatherization, energy efficiency, renewable energy, and R&D programs. Utilities and cooperatives may manage their own USB program, or may pay into state funds that implement the USB program. The charge is set at a level rate that would have generated 2.4 percent of each utility’s 1995 retail sales revenue at 1995 sales volumes. However, the amount that can be charged to large customers is capped. Therefore, the total annual collection is less than 2.4 percent of the total utility and co-op revenue. Since actual loads vary year to year, total USBC collections also vary. The largest program is run by NorthWestern Energy.

Contact: NorthWestern Energy, 406-497-2329; Tamie Aberle, Montana-Dakota Utilities, 701-222-7856; Utility Division, Public Service Commission, 406-444-6199
Topic: Net Metering
Citation: 69-8-601 et seq. MCA
Summary:

Net metering is an arrangement that allows surplus energy generated by the customer’s renewable energy system to go back onto the utility electric system. The customer’s meter measures the electricity the customer uses from the utility system less the electricity the customer’s system puts back. The customer receives "credit" at retail rates for the electricity put back on the system, up to the amount of power the customer actually consumes at the location.               

Contact: Pamela Hanson, NorthWestern Energy, 406-497-3343, or see NWE’s interconnection agreement; Tamie Aberle, Montana-Dakota Utilities Co., 701-222-7856; Utility Division, Public Service Commission, 406-444-6199; your local co-op office

Other Programs that Support Renewables

Topic: Special Improvement Districts
Citation: 7-12-4101 et seq. MCA
Summary:

A city or town council may create a special improvement district for the purchase, installation, maintenance, and management of alternative energy production facilities. Under certain conditions, abutting property in the county can be included in a district. Property owners in the district are assessed a fee to pay for the investment and operation of the facilities.

Contact: The relevant local government
Topic: Solar Easements
Citation: 70-17-301 MCA
Summary:

Property owners may create an easement to ensure access to solar radiation. It must be created in writing and is subject to the same conveyancing and instrument recording requirements as other easements on real property.

Contact: County clerk and recorder
Topic: Solar Easements
Citation: 70-17-401 et seq. MCA
Summary:

A wind easement is an interest in real property to ensure access to wind. A property owner may grant a wind easement in the same manner and with the same effect as the conveyance of an interest in real property. The wind easement runs with the real property on and over which the wind resource flows and may not be severed from the property. A wind easement doesn’t affect rights belonging to or the dominance of the mineral estate. It is not an easement or grant of right of way for transmission lines.

Contact: County clerk and recorder

Ethanol and Biodiesel Incentives

Topic: Use of Ethanol-Blended Fuel By State Vehicles
Citation: 2-17-414 MCA
Summary:

All branches of state government and state institutions of higher education owning or operating a motor vehicle capable of burning ethanol-blended fuel shall take all reasonable steps to ensure that those vehicles use ethanol-blended fuel if that fuel is commercially available and competitively priced.

Contact: Individual agencies and institutions
Topic: Property Tax Exemption for Ethanol Production Facilities and Canola Seed Oil Processing Facilities
Citation: 15-6-220 MCA
Summary:

All manufacturing machinery, fixtures, equipment, and tools used for the production of ethanol from grain during the course of the construction of an ethanol manufacturing facility and for 10 years after initial production of ethanol from the facility are exempt from property taxes. Machinery and equipment used in a canola seed oil processing facility are exempt from property taxes.

Contact: State property tax exemption forms are available at the Department of Revenue’s county office
Topic: Income Tax Credit For Alternative Fuel Motor Vehicle Conversion
Citation: 15-30-2320 MCA
Summary:

An individual or business is allowed a state income tax credit for equipment and labor costs incurred to convert a motor vehicle licensed in Montana to operate on alternative fuel. The maximum credit that may be claimed in a year is up to 50 percent of the equipment and labor costs incurred but no more than $500 for conversion of a vehicle with a gross weight of 10,000 pounds or less or $1,000 for heavier vehicles. "Alternative fuel" means natural gas, liquefied petroleum gas, liquefied natural gas, hydrogen, electricity or any other fuel if at least 85 percent of the fuel is methanol, ethanol or other alcohol, ether, or any combination of them. The credit allowed under this section may not exceed the taxpayer's income tax liability and there is no carryback or carryforward of the credit.

Contact: Department of Revenue, 406-444-6900; use state tax form AFCR for individuals or for businesses
Topic: Oilseed Crush Facility Tax Credit
Citation: 15-32-701 MCA
Summary:

There is a credit against Montana income tax for the costs of investments in depreciable property in Montana used to crush oilseed crops primarily for purposes of biodiesel or biolubricant production. Fifteen percent of the cost of the property, up to a total of $500,000, may be claimed as a credit, for projects that begin operating before January 1, 2015. The credit may be carried forward seven years and is subject to recapture if the facility ceases operation within five years of claiming the credit.

Contact: Department of Revenue, 406-444-6900; use state tax form OSC for individuals or for businesses
Topic: Biodiesel Production Facility Tax Credit
Citation: 15-32-702 MCA
Summary:

There is a credit against Montana income tax for costs of investments in depreciable property for constructing or equipping a facility in Montana to produce biodiesel or biolubricants. Fifteen percent of the cost of the depreciable property may be claimed as a credit, for projects that begin operating before January 1, 2015. The credit may be carried forward seven years and is subject to recapture if the facility ceases operation within five years of claiming the credit.

Contact: Department of Revenue, 406-444-6900; use state tax form OSC for individuals or for businesses
Topic: Biodiesel Blending and Storage Tax Credit
Citation: 15-32-703 MCA
Summary:

There is a credit against Montana income tax for costs of investments in depreciable property for the storage and blending of biodiesel from Montana-produced ingredients with petroleum diesel. Fifteen percent of the cost of the property, up to a total of $52,500 for distributors and $7,500 for the owner or operator of a retail outlet, may be claimed as a credit. The credit may be claimed any year that blending biodiesel occurs or in the two tax years prior to when blending occurs. The credit may be carried forward seven years and is subject to recapture if the facility ceases operation within five years of claiming the credit.

Contact: Department of Revenue, 406-444-6900; use state tax form BBSC for individuals and businesses
Topic: Special Fuels Tax Exemption for Certain Biodiesel
Citation: 15-70-405 MCA
Summary:

Up to 2,500 gallons annually of biodiesel fuel from waste vegetable oil feedstock used for the operation of motor vehicles on public roads and highways is exempt from the special fuels tax, if the producer owns or controls those vehicles.

Contact: Department of Transportation, 406-444-7672
Topic: Refund for Fuel Taxes Paid on Biodiesel
Citation: 15-70-433 MCA
Summary:

A distributor may claim a refund equal to 2 cents a gallon on the fuel tax on biodiesel made entirely from ingredients produced in Montana. The owner or operator of a retail motor fuel outlet may claim a refund equal to 1 cent a gallon.

Contact: Department of Transportation, 406-444-7672; use the refund form
Topic: Tax Incentive for Production of Alcohol
Citation: 15-70-522 MCA
Summary:

There is a 20 cents a gallon tax incentive for alcohol produced in Montana from 100 percent Montana agricultural products, including Montana wood or wood products. The amount of the incentive is reduced proportionately if agricultural or wood products not from Montana are used in the production of the alcohol. Total payments of the incentive can’t exceed $6 million in any consecutive 12-month period. An individual alcohol distributor can’t receive incentive payments exceeding $2 million in any consecutive 12-month period. These benefits are available for the first six years of production. To receive the incentive payments, an alcohol distributor must provide a written plan to the Department of Transportation at least 24 months before the anticipated collection of the incentives.

Contact: Department of Transportation, 406-444-7672
Topic: Ethanol Requirement for Gasoline Sold in Montana
Citation: 82-15-121 MCA
Summary:

Once the state of Montana has produced 40 million gallons of denatured ethanol and has maintained that level of production on an annualized basis for at least three months, all gasoline sold to consumers for use in vehicles to be operated on public roads must be blended with 10 percent, by volume, of agriculturally derived, denatured ethanol and may not contain more than trace amounts of the additive methyl tertiary butyl ether. If the production of denatured ethanol drops below 20 million gallons on an annualized basis, this provision does not apply.

Contact: Department of Transportation, 406-444-7672

"Clean and Green" Property Tax Incentives

In 2007, the Legislature passed House Bill 3 (May special session) that established property tax incentives to encourage energy projects with less environmental impact than conventional facilities. The “Clean and Green” incentives come in three forms.

First, certain facilities and equipment (included in the list below) can be classified as either Class 14 or Class 15 Property (15-6-157 and 15-6-158, MCA). These classes are taxed at 3 percent of market value; previously, these facilities may have been taxed at a higher percent of their market value. To qualify for the 3 percent tax rate, the standard prevailing wages for heavy construction must be paid during construction and some other qualifications may also apply.

Second, high-voltage direct-current converter stations that are constructed in a location and manner so that the station can direct power to two different regional power grids can be classified as Class 16 property. Class 16 property is taxed at 2.25 percent of market value.

Third, a subset of Class 14, 15, and 16 properties are eligible for a property tax abatement of 50 percent for up to 19 years (15-24-3101 et seq. MCA). This abatement applies to all mills levied against the qualifying facility or equipment. For qualifying clean advanced coal research and development equipment or for renewable energy research and development equipment, only the first $1 million of the value receives the abatement.

The Department of Environmental Quality must certify that certain transmission lines, carbon dioxide pipelines and liquid fuel pipelines qualify as Class 14 or 15 property. The Department also certifies any facility or equipment seeking the property tax abatement. A taxpayer starts the process by filling out the appropriate application. Projects eligible for these property tax classifications and abatements are likely to have unique characteristics, so a follow-up interview or inspection may be necessary.

Rules setting the framework for “Clean and Green” certification are at ARM 17.80.201 and 17.80.202. Rules for alternating current transmission lines are at ARM 17.80.203 and ARM 17.80.225. Rules for carbon dioxide pipelines are at ARM 17.80.204. Rules for enhanced oil recovery equipment are at ARM 17.80.205-206. Once the property is certified, the Department of Revenue applies and administers the property tax just as with any other facility. DOR rules are ARM 42.4.4114 and 42.4.4115.

For additional information, contact:
Garrett Martin
406-444-6592

For CO2 pipelines and enhanced oil recovery equipment, contact:
Dave Aguirre
(406)-782-2689, Ext. 205
daguirre@mt.gov

AC Transmission Line Certification Form        

CO2 Pipeline Tax Certification Form

Closed-Loop Enhanced Oil Recovery Tax Certification Form        

Clean and Green Certification Form      

Types of facilities that may qualify for "Clean and Green" incentives:

  • biodiesel production facility
  • biogas production facility
  • biomass gasification facility
  • coal gasification facility that sequesters carbon dioxide
  • ethanol production facility
  • geothermal generating facility
  • integrated gasification combined cycle facility that sequesters carbon dioxide
  • a natural gas combined cycle facility
  • transmission lines and associated equipment and structures, including interconnections and converter stations
  • equipment used to capture and to prepare for transport carbon dioxide that will be sequestered or injected for the purpose of enhancing the recovery of oil and gas
  • carbon dioxide pipelines for the transportation of carbon dioxide for the purposes of sequestration or for use in closed-loop enhanced oil recovery operations
  • carbon sequestration equipment
  • equipment used in closed-loop enhanced oil recovery operations
  • qualified pipelines, including pumping and compression equipment, carrying “green” fuels.
  • all property or a portion of the property of a renewable energy manufacturing facility
  • research and development equipment for clean advanced coal or renewable energy technologies

Other Incentive Programs

The state has a variety of programs to encourage business activity. Some of these could apply to renewable energy businesses. Visit Department of Commerce's website for more information.