Committee hears bill to expand post-9/11 military pension tax exemption; fiscal impact questioned

Senator John Fuller introduced Senate Bill 93 to expand the subtraction available to military retirees by changing the residency cutoff and removing a five‑year limit on how long the subtraction can be claimed. Fuller said the change would restore eligibility to veterans who established Montana residency on or after Sept. 11, 2001, and remove a current five‑year cap created in 2023.

“For those who spend a career in service of their country… Montana should join the 43 other states” that exempt some retirement income, Senator Fuller said, calling the measure part of an effort to bring veterans back to Montana. Fuller asked the committee to consider the state constitution’s allowance for special treatment of veterans in tax matters.

Proponents described economic and workforce benefits. Duane Cunningham, adjutant for the American Legion, testified that the change “really is a jobs bill,” saying veterans often start businesses and add to local economies and that Montana should provide incentives to attract them. Dennis Stoner, representing the Officers and Enlisted Association for the Montana National Guard and a retiree, said other states use pension exemptions to retain and attract retirees and urged the committee to broaden the benefit.

Dan Brooks of the Billings Chamber of Commerce also testified in support, saying local employers value skills veterans bring and urging a “do pass” recommendation.

Department of Revenue staff appeared as informational witnesses. Aaron McNay and Rachel Milne told the committee the fiscal model used for the current fiscal note assumes 8,215 households with military pension income and estimates an initial reduction in personal income tax collections (the fiscal note referenced a $5.9 million figure discussed during questioning). McNay explained that under current law the subtraction was designed to expire after five years and that the fiscal model assumed the number of taxpayers claiming the subtraction would decrease by 80% after that period; eliminating the five‑year limit would change that assumption.

Committee members asked the department for additional data: an estimate of the average benefit per taxpayer and revised fiscal notes modeling (1) restoring the post‑9/11 eligibility date, (2) removing the five‑year limit, and (3) a variant that would limit the subtraction to a percentage of military retirement pay. The department said it could provide summary statistics and run alternative fiscal scenarios; members asked that the department email the revised analyses to committee staff.

Supporters stressed that a smaller number of veterans would be affected than the fiscal note’s household count suggests; Fuller disputed the 8,215-household assumption and requested additional modeling. No vote was taken; Fuller closed the hearing and asked the committee to give the bill a due pass.