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27 May 2025

Montana law allows individuals to claim previously unusable state-specific net operating loss carryovers

  • Montana Senate Bill 544 permits individual taxpayers to elect to claim net operating loss (NOL) carryovers that were previously unusable after 2021 legislative changes, effective retroactively for tax years starting after December 31, 2023.
  • Taxpayers must make the election on their 2024 income tax return, due by October 15, 2025, with no extensions allowed; amended returns claiming the election must also be filed by this date.
  • Individual taxpayers should evaluate the election's benefits and follow the Montana Department of Revenue for the forthcoming carryforward adjustment form.
 

On May 8, 2025, Montana Governor Greg Gianforte signed Senate Bill 544 (SB 544), which revises Montana's individual income tax laws to allow taxpayers to elect to claim net operating losses (NOLs) not provided for in legislation enacted in 2021. SB 544 applies retroactively to tax years beginning after December 31, 2023.

In 2021, Montana enacted Senate Bill 399 (SB 399), to more closely align Montana's individual income tax laws with federal law, effective beginning with the 2024 tax year. SB 399, however, eliminated Montana-specific NOL calculations and carryovers, which resulted in some individual taxpayers having remaining Montana-specific NOL carryovers they were unable to use.

SB 544 establishes an elective transition adjustment for IRC Section 172 NOL carryovers. The adjustment is the sum of all positive and negative adjustments to an individual taxpayer's Montana taxable income resulting from differences in federal and Montana law before January 1, 2024.

The difference between the federal and Montana-specific NOL carryover as of December 31, 2023, becomes a positive adjustment to Montana taxable income if the federal carryover exceeds the Montana carryover. If the Montana-specific carryover exceeds the federal carryover, the difference becomes a negative adjustment to Montana taxable income. A taxpayer making the election must apply the entire carryover adjustment to the 2024 tax year until Montana taxable income reaches zero. Any unused adjustment may be similarly carried forward for up to seven years.

Individual taxpayers must make the election on their 2024 income tax return, which must be filed on or before October 15, 2025. Taxpayers who have already filed their 2024 return may make the election on an amended Montana return filed by October 15, 2025. No extensions will be allowed. The 2024 return must include a completed carryforward adjustment form to be promulgated by the Montana Department of Revenue (Department) in the near future.

Implications

Individual taxpayers with unused Montana-specific NOL carryovers due to the 2021 law changes should consider the election and the statutory deadline for making it. Taxpayers will want to look for the required carryover adjustment form to be promulgated by the Department in the near future.

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Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor

Document ID: 2025-1136

 

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