House panel hears bill to adjust long‑term capital‑gains brackets; sponsor says change helps most filers, opponents warn about farm/ranch sales

The Montana House Taxation Committee on Tuesday heard testimony on House Bill 868, a proposal from Representative Scott Rosenzweig to restructure state long‑term capital gains tax brackets that the sponsor said would reduce rates for most filers while raising rates modestly for the highest earners.

Rosenzweig, Republican of House District 57, told the committee the measure changes multiple capital‑gains brackets and would produce a net contribution to the general fund while lowering rates for the majority of filers who report gains. "This is an extraordinarily slight alteration," Rosenzweig said, adding later that "99.8% of the population will get [a] capital gains tax break option." He said the bill would bring an estimated $13 million to $16 million into the general fund under recent tax years’ patterns.

The bill’s sponsor said only about 13% of Montana tax filers report any long‑term capital gains and that the top tiers represent a very small number of filers. Rosenzweig walked the committee through his handout showing distribution of capital‑gains reporting, saying roughly 516,000 filers exist in the state and that roughly 2,500 filers report more than $250,000 in gains, with a still‑smaller number reporting multimillion‑dollar gains.

Why it matters: The debate centered on who benefits and who would pay more. Supporters framed the bill as modest relief for most capital‑gains filers and added revenue for state needs. Opponents — speaking for farm, ranch and business groups — said the top‑end rate increases could disproportionately affect sellers of long‑held agricultural land or family businesses who realize gains as a one‑time event.

Opponents and informational witnesses. Bob Story of the Montana Taxpayers Association praised the sponsor’s materials but cautioned that not all capital gains are from market trading. "A significant number of it also is people who have gotten paper cuts or worse, who have built businesses, build farms and ranches, and eventually sell them," Story said, urging caution about raising rates on those sales. Nicole Rolfe of the Montana Farm Bureau Federation said in opposition that higher top rates could be a "one‑time hit" for older farmers and ranchers who sell land as part of retirement or because development encroaches.

The Montana Chamber of Commerce, represented by Sheridan Hoyer, also asked the committee to oppose the measure, saying the chamber was concerned about business climate and entrepreneurship if long‑term investment returns face higher tax rates.

The Department of Revenue’s income tax specialist, Brian Olsen, answered committee questions on implementation and on how federal rules interact with Montana taxation. In response to Representative Close’s question about estate planning and deferrals, Olsen said certain federal provisions can eliminate or defer gains: "The capital gains would be deferred on that. You ultimately would have to report those and pay the tax on the capital gains at that point. However, if you did then transfer to family members through a state plan, it would..." (answer continued during committee exchange). Representative Thane asked whether the federal $500,000 primary‑residence exclusion for married filers applies; Olsen confirmed Montana’s tax base follows federal taxable income, so that federal provision carries through.

Committee questions covered estate planning, 1031-like exchanges, the difference between recurring traders and single‑event sellers, and whether the change would discourage outside investment. Rosenzweig said the bill applies to individual personal tax filings and would affect resident individual filers.

Executive action and final disposition. The committee later took executive action on HB 868. After an initial motion to pass, a substitute motion to table the bill prevailed on a roll‑call vote, 11 to 10, and the committee tabled the measure. The committee reported the result as a tabling (no passage recorded). This executive action ended further consideration by the committee at that time.

Votes at a glance (other bills on the committee whiteboard during the same session): - House Bill 854: Amendment considered; final committee vote on the amended bill failed 10–11. A subsequent motion to table the bill passed by voice vote, reported as 21–0, and HB 854 was tabled. - House Bill 858: The committee voted to pass the bill in executive action by roll call, 12–9; HB 858 passed out of committee. - House Bill 859: The committee moved to table HB 859 in executive action; the motion to table carried 20–1 and the bill was tabled.

What’s next: With HB 868 tabled, the committee did not forward the bill to the full House at that time. The sponsor said he is open to adjusting bracket definitions and to alternative structures, and several committee members signaled interest in continuing discussion in later sessions or in other bill drafts.