Montana

A taxpayer may deduct a portion of the cost of a capital investment in a building that promotes energy conservation. If the building is a residence, up to $1,800 may be deducted; if the building is non-residential, up to $3,600 may be deducted. Energy conservation is defined as reducing the waste or dissipation of energy or reducing the amount of energy necessary to accomplish a given quantity of work. New construction must surpass established standards of new construction to be eligible for this deduction.

Commercial and net metering alternative energy investments of $5,000 or more are eligible for a tax credit of up to 35% against individual or corporate tax on income generated by the investment. The investment must be depreciable. The credit is applied only against taxes due as a consequence of taxable or net income produced by:

• A manufacturing plant that is located in Montana and that produces alternative energy generating equipment;
• A new business facility or the expanded portion of an existing business facility that supplies basic energy needed from the alternative energy generating equipment, on a direct contract sales basis; or
• The alternative energy generating equipment itself.

This credit is available to taxpayers purchasing an existing facility as well as to those building a new facility. While net metered systems are eligible, the tax credit is only for any income generated by the system.

A "net metering system" means a facility for the production of electrical energy that:
(a) uses solar, wind, or hydropower for fuel;
(b) has a generating capacity of 50 kilowatts or less;
(c) is located on the customer-generator's premises;
(d) operates in parallel with the utility's distribution facilities; and
(e) is intended primarily to offset part or all of the customer-generator's requirements for electricity.

The tax credit must be taken the year the equipment is placed in service; however, any portion of the tax credit that exceeds the amount of tax to be paid may be carried over and applied against state tax liability for the following 7 years. If a project sized 5 megawatts (MW) or larger is installed on an Indian reservation in Montana, a credit may be extended through the 15th tax year succeeding the tax year of installation, provided that the installation meets other specified criteria.

Taxpayers may not take this credit in conjunction with any other state energy or state investment tax benefits, or with the property tax exemption for non-fossil energy property.

Commercial and net metering alternative energy investments of $5,000 or more are eligible for a tax credit of up to 35% against individual or corporate tax on income generated by the investment. The investment must be depreciable. The credit is applied only against taxes due as a consequence of taxable or net income produced by:

• A manufacturing plant that is located in Montana and that produces alternative energy generating equipment;
• A new business facility or the expanded portion of an existing business facility that supplies basic energy needed from the alternative energy generating equipment, on a direct contract sales basis; or
• The alternative energy generating equipment itself.

This credit is available to taxpayers purchasing an existing facility as well as to those building a new facility. While net metered systems are eligible, the tax credit is only for any income generated by the system.

The tax credit must be taken the year the equipment is placed in service; however, any portion of the tax credit that exceeds the amount of tax to be paid may be carried over and applied against state tax liability for the following 7 years. If a project sized 5 megawatts (MW) or larger is installed on an Indian reservation in Montana, a credit may be extended through the 15th tax year succeeding the tax year of installation, provided that the installation meets other specified criteria.

Taxpayers may not take this credit in conjunction with any other state energy or state investment tax benefits, or with the property tax exemption for non-fossil energy property.

In May 2007, Montana enacted legislation (H.B. 3) that allows a property tax abatement for new renewable energy production facilities, new renewable energy manufacturing facilities, and renewable energy research and development equipment. Eligible facilities and equipment are assessed at 50% of their taxable value.

Qualifying renewable energy manufacturing facilities are those that (1) produce materials, components or systems to convert solar, wind, geothermal, biomass, biogas or waste heat resources into useful energy, and (2) whose annual production of renewable energy equipment makes up at least half of the facility's total production. Fuel cells and components of fuel cells that generate energy using non-fossil fuels are also eligible. Qualifying renewable energy production facilities include biomass gasification, biomass, biogas and geothermal facilities. Qualifying renewable energy research and development equipment is considered to be equipment used primarily for research and development of the efficient use of renewable energy sources.

Under this policy, these facilities are assessed at 50% of their taxable value* for the construction period and the first 15 years after the facility commences operation, not to exceed 19 years. To qualify for the tax abatement, facilities must begin construction after June 1, 2007. Additionally, all renewable energy research and development equipment up to $1 million in value may qualify for a 50% property tax abatement if it is placed into service after June 30, 2007. The portion of the equipment used for renewable energy research and development in excess of $1 million in value does not qualify for the abatement. All production facilities, manufacturing facilities, and research and development equipment must be approved by the Montana Department of Environmental Quality in order to qualify for the abatement.

For the purposes of this policy, "renewable energy" is defined as energy from solar, wind, geothermal, biomass, biogas, non petroleum-based fuel cells, and waste heat sources. "Biomass" means any renewable organic matter, including dedicated energy crops and trees, agricultural food and feed crops, agricultural crop wastes and residues, wood wastes and residues, aquatic plants, animal wastes, municipal wastes, and other organic waste materials.

*These types of facilities are categorized as “Class 14” property, which is taxed at 3% of the property’s market value. A facility that qualifies for the 50% property tax abatement is therefore subject to property tax equal to 1.5% of the property’s market value.

The Northwest Energy Efficiency Alliance (NEEA) is offering a rebate program for homeowners who purchase and install an eligible heat pump water heater. A rebate of $1,000 is offered for qualifying heat pump water heater units. New units must replace an existing electric water heater and must be installed by a Smart Water Heat oriented contractor. Ducting with a constant airflow regulator must be utilized if the new unit is installed in a heated space. New construction is also eligible for the rebate. All program requirements for equipment and installation must be met in order to receive rebates. Incentives are available through October 31, 2012. Contact NEEA or view the program web site for more information on this program.

Commercial and net metering alternative energy investments of $5,000 or more are eligible for a tax credit of up to 35% against individual or corporate tax on income generated by the investment. The investment must be depreciable. The credit is applied only against taxes due as a consequence of taxable or net income produced by:

• A manufacturing plant that is located in Montana and that produces alternative energy generating equipment;
• A new business facility or the expanded portion of an existing business facility that supplies basic energy needed from the alternative energy generating equipment, on a direct contract sales basis; or
• The alternative energy generating equipment itself.

This credit is available to taxpayers purchasing an existing facility as well as to those building a new facility. While net metered systems are eligible, the tax credit is only for any income generated by the system.

A "net metering system" means a facility for the production of electrical energy that:
(a) uses solar, wind, or hydropower for fuel;
(b) has a generating capacity of 50 kilowatts or less;
(c) is located on the customer-generator's premises;
(d) operates in parallel with the utility's distribution facilities; and
(e) is intended primarily to offset part or all of the customer-generator's requirements for electricity.

The tax credit must be taken the year the equipment is placed in service; however, any portion of the tax credit that exceeds the amount of tax to be paid may be carried over and applied against state tax liability for the following 7 years. If a project sized 5 megawatts (MW) or larger is installed on an Indian reservation in Montana, a credit may be extended through the 15th tax year succeeding the tax year of installation, provided that the installation meets other specified criteria.

Taxpayers may not take this credit in conjunction with any other state energy or state investment tax benefits, or with the property tax exemption for non-fossil energy property.

Individual taxpayers may claim a credit against their tax liability for up to 25% of the costs of investment for energy conservation purposes in a building. For the installation of windows and doors in new homes, the credit is based on the incremental or extra cost for above code level windows and doors.  The maximum credit is $500 per individual for investment in the physical attributes of a building or in a water, heating or cooling system. The $500 credit is available to each individual that can claim ownership of a building, so a married couple filing jointly can claim a tax credit of $1,000. The credit must be claimed in the year that the expenditure is made. For new construction, only the portion of the work that surpasses any applicable state or federal construction standards may be used.

Use Montana Department of Revenue Tax Form ENRG-C to take this credit.

Residential taxpayers who install an energy system using a recognized non-fossil form of energy on their home after December 31, 2001 are eligible for a tax credit equal to the amount of the cost of the system and installation of the system, not to exceed $500. This cap is for individual taxpayers, so married taxpayers filing jointly can get a tax credit of up to $1,000 per household. The tax credit may be carried over for the following four taxable years.

Recognized non-fossil forms of energy generation means:

1. A system that captures energy or converts energy sources into usable sources, including electricity, by using:

• solar energy, including passive solar systems;
• wind;
• solid waste;
• the decomposition of organic wastes;
• geothermal;
• fuel cells that do not require hydrocarbon fuel; or
• an alternative energy system;

2. A system that produces electric power from biomass or solid wood wastes; or

3. A small system that uses water power by means of an impoundment that is not over 20 acres in surface area.

A resident individual taxpayer of Montana who installs a geothermal heating or cooling system in their principal dwelling can claim a tax credit based on the installation costs of the system, not to exceed $1,500.

Use Montana Department of Revenue Form ENRG-A to claim this tax credit.

Montana generating plants producing one megawatt (MW) or more with an alternative renewable energy source are eligible for the new or expanded industry property tax reduction. This incentive reduces the local mill levy during the first nine years of operation, subject to approval by the local government. If approved, the facility is taxed at 50% of its taxable value in the first five years following the issuance of the construction permit. Each year thereafter, the tax reduction decreases and the taxable value percentage is increased in equal increments until the full taxable value is attained in the tenth year. The tax reduction applies only to taxes levied for the local high schools and elementary schools and for the local government offering the reduction.

The taxable value varies, depending on the property ownership. If owned by a utility, an exempt wholesale generator or certain other electricity producers, the property is class 13 property and would otherwise be taxed at 6 percent of assessed value. If owned by an electric cooperative, the property is class 5 and would otherwise be taxed at 3 percent of assessed value. Certain electric cooperatives fall under class 7 or class 9 and property owned by those cooperatives is taxed at 8 percent of assessed value and 12% of assessed value, respectively.  If owned by any other business, the real property is class 4 and would otherwise be taxed at 2.63 percent of assessed value. Personal property is class 8 with a tax rate of 3 percent of assessed value. The assessed value of real property is adjusted every five years to reflect market trends. The assessed value of personal property is adjusted yearly based on a trend factor that reflects the relevant rate of inflation and on the Department of Revenue’s depreciation schedule.

New electricity generating facilities built in Montana with a capacity of up to one megawatt (MW) that use an alternative renewable energy source are exempt from property taxes for five years after operation begins. The taxable value of the property varies depending on the property ownership and class. The assessed value of personal property is adjusted yearly based on a trend factor that reflects the relevant rate of inflation and on the Montana Department of Revenue’s depreciation schedule. State property tax exemption forms are available at the Department of Revenue’s county office.

"Alternative renewable energy source" includes energy sources such as solar energy, wind energy, geothermal energy, conversion of biomass, fuel cells that do not require hydrocarbon fuel, small hydroelectric generators, and methane from solid waste that is used to generate energy in a useful form, including electricity.

Montana's property tax exemption for recognized non-fossil forms of energy generation and low emission wood or biomass combustion devices may be claimed for 10 years after installation of the property. The exemption is allowed for up to $20,000 in value for single-family residential dwellings and up to $100,000 in value for multi-family residential dwellings or non-residential structures. This property is class 4 property and otherwise would be taxed on 3.01% of assessed value.

Recognized forms of energy generation include solar photovoltaics, passive solar, wind, solid waste, decomposition of organic wastes, geothermal, small hydropower plants, low-emission wood or biomass combustion systems, and fuel cells that do not require hydrocarbon fuel.

Use Montana Department of Revenue Form AB-14 to claim this exemption.

The Alternative Energy Revolving Loan Program (AERLP) provides loans to individuals, small businesses, local government agencies, units of the university system, and nonprofit organizations to install alternative energy systems that generate energy for their own use. The program has historically been funded by air quality penalties collected by the Department of Environmental Quality (DEQ) and also used funding from The American Recovery and Reinvestment Act of 2009 (ARRA). The program is administered by the Department of Environmental Quality, which is responsible for developing the rules.

Alternative energy systems are defined by the Montana Code as "the generation system or equipment used to convert energy sources into usable sources." Technologies included in this definition are fuel cells using non-fossil fuels, geothermal, low emissions wood or biomass, wind, photovoltaics and small hydropower (under 1 megawatt). DEQ provides a technical review and approval of systems proposed for the loan program.

In 2005, SB 50 added local government agencies, units of the university system, and nonprofit organizations to the list of eligible sectors, and allowed energy conservation measures to be financed when installed with an eligible renewable energy project. Energy conservation measures financed by the loan are limited to 20% of the total loan amount. Interest rates are set annually and are fixed for the term of the loan. The rate for 2012 is 3.75%. Some funding from ARRA temporarily boosted the loan amount in April 2010, but loan amounts have returned to previous levels; the maximum loan amount is $40,000, with a maximum loan term of 10 years.

DEQ will accept and process loan applications throughout the year. Approved projects will be ranked according to criteria published in the Administrative Rules of Montana (ARM) Title 17, Chapter 85. This criteria includes items such as system reliability, return on investment and avoided fossil fuel consumption. Once a loan is approved, the applicant will be informed as to whether funds are currently available and when new funds are anticipated if funds are not currently available.

The E+ Business Partners Program offers funding for local energy conservation and load management projects in new and retrofit applications including commercial, institutional, industrial, agricultural, and multi-family residential facilities/systems. Both natural gas and electric customers are eligible for this program. It is not available for businesses already enrolled in the electric “Choice” programs.

NWE will examine the level of funding or advisory services it will invest in specific conservation or load management measures based on the life expectancy, reliability, and availability of the conservation resource, cost to NWE of administering the project, level of design assistance funding already attained, the projected payback to the entity owner, funding available from other sources, the value to the distribution system, and the renewable resource available.

Projects must demonstrate the cost-effectiveness of specific conservation and/or load management measures. These projects must also assure reliability and availability of equipment, while demonstrating the availability of qualified design services, contractors, and maintenance services. The deadline for project RFP submissions is December 31, 2012. Customers should call the Regulatory Support Services department at 1-888-700-6878 more information.

NorthWestern Energy (NWE), formerly Montana Power Company, periodically provides funding to its customers for renewable energy projects. In 1997, Montana established the Universal System Benefits (USB) program. The USB legislation requires all electric and gas utilities to establish USB funds for low-income energy assistance, weatherization, energy efficiency activities, and development of renewable energy resources. A typical NorthWestern Energy residential customer pays approximately $1 per month in electric USB charges. About $9 million is collected annually by NorthWestern, and about $1.2 million is used for renewable energy projects.

Most renewable energy projects include a public education or demonstration component to increase awareness of renewable energy. Incentives of $3.00/watt are offered for residential solar photovoltaic (PV) installations up to a maximum of $6,000 per customer; the incentive for wind is $2/watt to a maximum of $10,000 per customer. NorthWestern Energy has developed qualification requirements for dealers and installers of these small scale systems.  In order for a customer to receive the funds, the work must be completed by a NorthWestern Energy qualified dealer or installer. Off-grid installations inside NWE's service territory are not eligible for USB funds.

Residential solar PV installations receive the incentive through a qualified installer.  All other systems must participate in a request for proposal (RFP) process.  A guide to funding renewable energy projects explains the program and the request for proposal (RFP) process. The RFP should be submitted along with a cover sheet and equipment and installation cost information. A subcommittee of non-utility reviewers selects proposals for funding twice per year.

Black Hills Power provides rebates for its commercial customers who install energy efficient heat pumps, motors, variable frequency drives, lighting, and water heaters. Custom rebates for approved measures are also available. Examples of measures that could qualify for the custom rebate program include: large scale geothermal heat pumps, industrial and agricultural equipment, and energy management systems. For more information on specific program requirements, guidelines, and applications, visit Black Hills Power's website or contact the utility directly.

Black Hills Power offers cash rebates to residential customers who purchase and install energy efficient equipment in their homes. Incentives exist for water heaters, demand control units, air source and geothermal heat pumps, and refrigerator recycling. In addition to the incentives offered for equipment, Black Hills also provides free energy audits and reports. For more information on specific rebates, program terms and guidelines, and to access application forms, visit the program website or contact the utility directly.

Flathead Electric Cooperative, in conjunction with Bonneville Power Administration, encourages energy efficiency in the commercial sector by providing a commercial lighting retro-fit rebate program and a new construction lighting rebate program. When certain fixtures and/or bulbs are replaced with more efficient ones, or new high-efficiency fixtures are purchased, facility-owners may be eligible for a rebate that will help to offset the cost. In most cases the rebate will cover a significant portion of the initial cost. Certain restrictions apply and can be found on the application form. The rebate must be pre-approved by Flathead Electric Cooperative prior to the measures being installed and will be the lesser of 70% of the actual project cost, or the per fixture rebate total as calculated on the Lighting Rebate Verification Reports. Interested customers should check the verification form for either the new construction or retro-fit program.

Flathead Electric encourages its residential customers to occupy energy efficient homes. Owners and builders of new homes which meet the "Montana Homes" requirements listed on the program web site are eligible for a rebate of $1,500. All application information and home testing must be completed before a rebate may be issued. Further information can be found on the program web site.

In addition to this offer, a $750 rebate is payable to Northwest Energy Efficient Manufactured (NEEM) home buyers who site a new electrically heated NEEM home in Flathead Electric service territory. Rebates are payable after the home has been set-up and verified by a Flathead Electric Co-op representative. Home buyers will be required to submit a rebate form to Flathead Electric prior to set-up inspection. Additionally, a $150 Sales Representative Incentive is payable to the sales representative who sells an electrically heated NEEM home that is sited within Flathead Electric’s service territory. Contact Flathead Electric for more information on this program.

Flathead Electric offers incentives for residential customers to increase the energy efficiency of homes through a variety of equipment rebates. Customers who have a pre-approved contractor install a new, energy efficient air source heat pump can receive a $500 rebate. Geothermal heat pumps are also eligible for a $3,000 rebate, while ductless heat pumps are eligible for a rebate of $1,350. In addition to these rebates, Flathead Electric offers rebates for qualifying Energy Star appliances, energy efficient water heaters, duct sealing, building insulation, and new windows. All rebates are subject to a post-installation inspection performed by Flathead Electric to ensure proper installation of qualifying equipment. Contact Flathead Electric for more information on these programs prior to starting your project.

Montana-Dakota Utilities (MDU) offers a variety of rebates to commercial customers for the purchase and installation of energy efficient lighting measures, air conditioning equipment, variable speed drives and motors. Custom and prescriptive incentives are available for efficient lighting measures. Lighting equipment must meet technical standards specified on program web site and application form. Large customers, as defined by MCA 69-8103(17), will not be eligible for this program. Variable speed drive and motor rebates are based upon the horsepower (HP) of the equipment. Motors rebates also differ based on whether equipment is new or a replacement.

Rebates of up to $200/ton are also available for commercial customers who purchase and install energy efficient air conditioning systems. All systems must meet efficiency requirements as detailed by MDU. MDU issues rebate payments in the form of a check, which usually are processed within 4 to 6 weeks. Application forms must be fully completed with equipment information such as invoice or receipt, brand, model number, serial number, installation date and dealer information. See program web site listed above to view application form or to see more specific incentive and equipment information. Commercial MDU customers living in Montana are eligible for rebates.

Montana-Dakota Utilities (MDU) offers several residential rebates on energy efficient equipment for natural gas and electric customers. Natural gas customers are eligible for rebates on furnaces and programmable thermostats if the equipment meets program efficiency standards. New furnaces must be replacing a working model with an AFUE of 80% or less and be rated at least 90% AFUE. Programmable thermostats must be Energy Star qualified and are limited to one rebate per address. Electric customers are eligible for a rebate of $175/ton on central air conditioning systems. New systems must meet program efficiency standards outlined above and be replacing a system which is 10 SEER or less.


Rebate payments are issued in the form of U.S. Bank® Rebate Visa® Cards, for residential customers receiving rebates of $1,000 or less. Rebate payments of more than $1,000 are issued in the form of a check. Montana-Dakota does not issue rebates in the form of a utility bill credit. Application forms must be fully completed with equipment information such as invoice or receipt, brand, model number, serial number, installation date and dealer information. See program web site listed above to view application form or to see more program information. Only residential MDU customers living in Montana are eligible for rebates.

NorthWestern Energy offers multiple rebate programs for commercial and industrial customers to make energy efficient improvements to their businesses. This includes lighting, heating, irrigators, insulation, VFDs, refrigeration, air conditioning, appliances, and water heating incentives. Equipment requirements and specific rebate amounts can be found on the program web site.

The E+ Commercial Lighting Rebate Program offers rebates for the removal of old, less efficient lighting products which are replaced with high efficiency technologies. The program is primarily for retrofit projects. Specialized lighting application projects in new construction will be considered on a case-by-case basis. Program specifications can be found in the rebate application form.

The E+ Premium Efficiency Motor Rebate Program offers commercial and industrial customers incentives for motor retrofits or new construction. Motor purchases placed in stock are not eligible for this rebate. A chart of the rebate amounts can be found on the motor rebate application form. The application must be received by NorthWestern Energy within 90 days of motor purchase. NorthWestern Energy also provides a Motor Rewind Rebate Program to help customers reduce electricity costs when rewinding existing electric motors. Motors between 20 horsepower (HP) and 500 HP with a standard motor design (such as NEMA Premium and Epact), rewound by qualified Green Motors Practice Group members, will qualify for this rebate.

NorthWestern Energy offers a variety of rebates for residential customers to make energy efficiency improvements in their existing homes. Customers who purchase an Energy Star® programmable thermostat from a local retailer and install it in an eligible home can receive a mail-in rebate. Details are located in the Programmable Thermostat Rebate Application.

The utility sponsored Insulation Rebate program is also offered for Montana's NorthWestern Energy customers.  The Home Lighting Rebate Program offers mail-in rebates for the purchase of Energy Star light bulbs and fixtures. A variety of specifications apply; details are listed in the program application.   There are also many rebates available for different types of water measures and insulation improvements, for both electric and natural gas space and water-heating.

In addition to the home improvement rebates listed above, The E+ New Homes Program offers rebates for new home construction that incorporates certain energy efficiency measures. Members can receive rebates in the new home program in three ways: By installing Energy Star® light fixtures and CFLs, by building a home that qualifies under the NorthWestern Energy Star Homes standards, or by including other specific energy efficiency measures in the new construction.

NorthWestern Energy offers multiple rebate programs for commercial and industrial customers to make energy efficient improvements to their businesses.  The E+ Commercial Natural Gas Savings Program, for both existing businesses and new construction, offers incentives on a variety of equipment designed to improve energy efficiency. Many of the rebates are calculated based on KBtu/hr output rating of installed equipment. Prior to rebate payment, NorthWestern Energy representatives may inspect completed jobs. Information on specific equipment eligibility and rebate amounts may be found on the Natural Gas Savings application forms for new construction and existing businesses. 

NorthWestern Energy offers a variety of rebates for residential customers to make energy efficiency improvements in their existing homes. Customers who purchase an Energy Star programmable thermostat from a local retailer and install it in an eligible home can receive a $30 mail-in rebate.  Details are located in the Programmable Thermostat Rebate Application.

The utility sponsored Insulation Rebate program is also offered for Montana's NorthWestern Energy customers. In addition, Northwestern Energy's E+ program offers rebates for a variety of gas heating equipment improvements including the installation of boilers, furnaces, and equipment insulation through the Natural Gas Savings for the Home Program. There are also many rebates available for different types of water measures and insulation improvements, for both electric and natural gas space and water-heating. Customers building a new home are only eligible for boiler, furnace, boiler controls, and manufactured home incentives.

The Yellowstone Valley Electric Cooperative offers rebates to residential and commercial members for purchasing energy efficient add-on heat pumps, geothermal heat pumps, water heaters, dishwashers, refrigerators, and washing machines. (Note: A State Tax Credit of $1,500 is also available for Ground Source Heat Pumps.) Rebate applications are located on the program web site. All installation and equipment requirements must be met. Please contact Yellowstone Valley Electric Cooperative or visit the program website for additional information.