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Sponsor pitches tax deduction for grocers to boost Montana-produced foods; revenue and audit questions raised
Summary
House Bill 440 would let grocers deduct 50% of net income attributable to Montana-produced foods from state taxable income to incentivize shelf space for local producers; the Department of Revenue flagged $278,400 estimated revenue loss and proposed two FTEs for audit and verification.
Helena — House Bill 440, dubbed the "Montana Food First" bill, would create a state income tax subtraction for grocers equal to 50% of net income from the sale of Montana-produced food and beverage products, with proponents arguing it would help family farms win shelf space.
Representative Jane Weber, sponsor, said the measure aims to level the playing field for Montana producers facing national manufacturers and the slotting allowances and distribution advantages those manufacturers can use to secure shelf placement. Weber described the proposal as voluntary for grocers and said the tax incentive would apply only to income reported to Montana.
"This is a bill that would allow an opportunity for our own producers, our family farms and ranches, to be able to provide food on our grocery shelves," Weber said in opening remarks.
The fiscal note prepared by the Department of Revenue estimates a first-year reduction in general fund income tax collections of about $278,400. Department analysts recommended two full-time auditor positions to verify taxpayer claims and flagged technical concerns around verifying the net income attributable to Montana-produced goods and compliance with the Commerce Clause.
Department of Revenue witnesses explained that verifying a retailer’s net income attributable to Montana-produced products requires changes to tax forms and schedules and could be administratively intensive. Bureau staff said they would use risk-based thresholds when auditing claims but could not predict precise audit-sampling rates.
Supporters included the Montana Farmers Union and several lawmakers who argued the deduction would keep more agricultural income circulating within Montana. Opponents were not recorded in the hearing; committee members raised constitutional and administrative questions. Representative Albus asked whether other states have a precedent for this incentive; witnesses said they were not aware of an identical program and noted existing state marketing and "Made in Montana" programs operate differently.
No vote was taken in the hearing. Committee members signaled interest in clarifying statutory drafting, audit procedures and Commerce Clause implications before advancing the bill.
