Committee hears bill allowing cryptocurrency for state tax payments, raises implementation questions

Representative Randon Gregg opened the hearing on House Bill 453, saying the bill would let Montanans pay state income taxes using cryptocurrency and send a message that Montana embraces financial innovation. “Cryptocurrency is here to stay,” Representative Randon Gregg said, urging a do-pass recommendation.

Proponents described the proposal as a modernization step and a convenience for residents and businesses that hold assets in digital form. Tanner Avery, testifying as an individual, explained blockchain and use cases for the technology and said third-party processors would convert crypto to U.S. dollars prior to remittance: “This bill allows income taxes to be paid with cryptocurrency by directing a third party to convert crypto to dollars.”

A Montana cryptocurrency professional joining remotely said the option would help retain entrepreneurs who manage much of their wealth on-chain. “There is absolutely no downside that I can think of to making this an available option to citizens of Montana,” Thaddeus Prior (Pryor) said.

Department of Revenue staff raised implementation and technical questions. Derek Bell, division administrator for business and income tax, and John Irey, applications manager, told the committee that the department could accept a crypto-based payment only after a third party converts funds to dollars. Bell noted that state practice and IRS reporting could affect tax treatment; DOR staff asked for clarification of a bill provision that appeared to alter capital-gains treatment on crypto transactions. “There is no cash state capital gains tax in Montana; there is a preferential tax rate for capital assets,” Bell said, and he recommended clarification or removal of the contested section to avoid implementation ambiguity.

Committee members asked who would pay conversion fees and whether the department or the taxpayer would absorb them. Representative Greg said he expects the payer who chooses crypto would pay any transaction fees and that the sponsor would work to mirror language used in other states such as Utah. DOR staff said some jurisdictions pass transaction fees to the customer, and the committee discussed existing credit-card transaction fees as a comparable example.

Members also raised recordkeeping and reporting questions, including whether the department would need to issue federal forms reflecting conversion events and whether conversion methods (stablecoins vs. volatile tokens) would affect costs. DOR staff said conversion events could produce federal reporting that flows into state taxable-income calculations, and recommended clarifying capital-gains language in the bill to avoid unintended tax results.

After extended questions, Representative Greg asked for a do-pass recommendation. The committee closed the hearing on House Bill 453 and moved on to other business.