Montana Incentives and Laws

Last Updated November 2006

State Incentives

Ethanol Production Incentive

Montana based ethanol producers are entitled to a tax incentive of $0.20 per gallon of ethanol that are completely produced from Montana products, or if the ethanol was produced from non-Montana agricultural products when Montana products were unavailable. The amount of the tax incentive for each gallon is reduced proportionately, based upon the amount of agricultural or wood products not produced in Montana that are used in the production of the ethanol. The tax incentive is available to a facility for the first six years from the date that production begins. Ethanol eligible for the incentive must be blended with gasoline for sale as gasohol in Montana, exported from Montana to be blended with gasoline for sale as gasohol, or used in the production of ethyl tertiary-butyl ether for use in reformulated gasoline.

An ethanol distributor is not eligible to receive the tax incentive unless at least 20% of Montana product is used to produce ethanol at the facility in the first year of production, 25% of Montana product is used the second year, and the amount of Montana product used each year thereafter must increase by 10% annually. (Reference Montana Code Annotated 15-70-522)

Biodiesel Tax Credit

A tax credit is available to businesses and individuals for up to 15% of the cost of storage and blending equipment used for blending biodiesel with petroleum diesel. The amount of the credit may not exceed $52,500 for a special fuel distributor and $7,500 for an owner or operator of a motor fuel outlet. The credit can only be claimed in the year in which the taxpayer begins blending biodiesel for fuel or sale.

A licensed distributor who pays the special fuel tax on biodiesel may claim a refund equal to $0.02 per gallon of biodiesel sold during the previous quarter if the biodiesel is created entirely from biodiesel ingredients produced in Montana. The owner or operator of a retail motor fuel outlet may claim a refund equal to $0.01 per gallon of biodiesel purchased from a licensed distributor if the biodiesel is created entirely from biodiesel ingredients produced in Montana. (Reference Montana Code Annotated 15-70-369 and 15-70-703)

Biodiesel Production Facility Tax Credit

A tax credit is available to businesses and individuals for up to 15% of the cost of constructing and equipping a facility to be used for biodiesel production. The credit must be claimed in the tax year in which the facility begins production, and the facility must be in operation before January 1, 2010. Additionally, a tax credit is available for property used to crush oilseed crops for purposes of biodiesel production. (Reference Montana Code Annotated 15-32-701 and 15-32-702)

Biodiesel Production Incentive

A tax incentive payable to biodiesel producers is available for increases in annual biodiesel production for the first three years of production in the amount of $0.10 per gallon for each gallon of increased production over the previous year. For the purposes of this incentive, the production year begins July 1. This tax incentive is available until July 1, 2010. (Reference Montana Code Annotated 15-70-601)

Alternative Fuel Vehicle Conversion Tax Credit

An income tax credit is available to businesses or individuals for up to 50% of the equipment and labor costs for converting vehicles to operate on alternative fuels. The maximum credit is $500 for the conversion of vehicles of 10,000 pounds (lbs.) or less Gross Vehicle Weight Rating (GVWR) and $1,000 for vehicles over 10,000 lbs. GVWR. The credit must be applied in the year the conversion is made, and the seller of an alternative fuel may not receive a credit for converting their own vehicles to operate on the alternative fuel they sell. (Reference Montana Code Annotated 15-30-164)

Tax Reduction for Ethanol Blends

A state road tax reduction of 15%, as compared to the tax on gasoline, is available to consumers for using gasohol. Gasohol is defined as a gasoline fuel that is blended with denatured ethanol. This incentive will be available until the Montana renewable fuels standard is in effect. (Reference Montana Code Annotated 15-70-201 and 15-70-204)

State Laws and Regulations

Renewable Fuels Standard

All gasoline sold to consumers for use in motor vehicles used on the public roads must be blended with 10% (E10), by volume, of agriculturally derived, denatured ethanol, within one year after the Montana Department of Transportation has certified that the state has produced 40 million gallons of ethanol and has maintained that level of production on an annualized basis for at least 3 months. If the production of ethanol in Montana drops below 20 million gallons on an annualized basis, the 10% blend requirement does not apply. All gasoline sold as E10 may not contain more than trace amounts of the additive methyl tertiary-butyl ether, or MTBE. (Reference Montana Code Annotated 82-15-121)

Alternative Fuel Promotion

The state of Montana encourages the use of alternative fuels and fuel blends to the extent that doing so produces environmental and economic benefits to the citizens of Montana. The state legislature recommends several guidelines for the development of a state alternative fuels policy, including the following: 1) encourage the use of self-sufficient markets; 2) any state alternative fuels program should have measurable benefits that are communicated to the public; 3) state and local governments should be encouraged to set an example with their vehicle fleets in the use of alternative fuels and fuel blends. The state also encourages production of alternative fuels and fuel blends. (Reference Montana Code Annotated 90-4-1011)

Hydrogen Energy Plan

The Montana Hydrogen Energy Plan aims to develop the hydrogen economy in Montana and establish Montana as a key state in the hydrogen economy. The Montana Hydrogen Futures Project has been established as the key economic development focus of the state, such that by the year 2020, 50% of all vehicles and equipment in Montana and 100% of all state-run vehicles will be powered by alternative fuels; all intercity bus systems will use hydrogen; distribution of synthetic fuels and hydrogen will be provided for the trucking industry; a school bus retrofit and hydrogen power program will be established; and incentives will be provided for converting internal combustion engines to operate on hydrogen. (Reference House Joint Resolution 26, 2003)

Compressed Natural Gas (CNG) or Liquefied Petroleum Gas (LPG) Tax

Retail sales for CNG and LPG used in vehicles are subject to a modified tax based on energy content. (Reference Montana Code Annotated 15-70-711)

Compressed Natural Gas (CNG) or Liquefied Petroleum Gas (LPG) License

A person may not act as a CNG or LPG dealer unless the person holds a valid CNG or LPG dealer's license issued by the Montana Department of Transportation. (Reference Montana Code Annotated 15-70-702)

Utilities/Private Incentives

There are currently no known utility or private incentives offered in Montana

Montana Points of Contact: