Information about the Transition Election

Senate Bill 399, passed during the 2021 legislative session, provided for a transition election. This election affects a limited number of taxpayers that may have incurred differences in the amount of capital losses and passive losses because of the recalculation of Montana adjusted gross income under the law before Senate Bill 399. The election is one-time catchup calculation that reconciles the difference between the federal and Montana amounts of passive activity losses as well as short-term and long-term capital losses. The transition election also includes the ability to report the recovery of federal income tax deducted in 2023.

Because it is an election, the department reminds taxpayers that transition item adjustments only need to be reported if the taxpayer chooses to report the item. To make the election, you must file the 2024 Form 2 by the extended due date and complete the Transition Schedule. If an election to report one adjustment is made, all other applicable adjustments must be made as well. For example, if a taxpayer makes an election to report a subtraction from federal taxable income to reconcile the difference between Montana capital losses and federal capital losses and received a refund of federal taxes deducted in 2023, the taxpayer must report both the subtraction for the capital loss recognition and the addition for the federal refund deducted in 2023.

Taxpayers may amend their return to revoke an election and its related adjustment if the original filing included an incorrect adjustment or unintentional election.