Montana Laws and Incentives

Listed below are the summaries of all current Montana laws, incentives, regulations, funding opportunities, and other initiatives related to alternative fuels and vehicles, advanced technologies, or air quality. You can go directly to summaries of:

State Incentives

Alternative Fuel Vehicle (AFV) Conversion Tax Credit

Businesses and individuals are eligible for an income tax credit of up to 50% of the equipment and labor costs for converting vehicles to operate using alternative fuels. Qualified alternative fuels are compressed and liquefied natural gas, liquefied petroleum gas (propane), hydrogen, electricity, and fuels containing at least 85% ethanol, methanol, ether, or another alcohol. The maximum credit is $500 for the conversion of vehicles with a gross vehicle weight rating (GVWR) of 10,000 pounds (lbs.) or less and $1,000 for vehicles with a GVWR of more than 10,000 lbs. The credit is only available for the year the business or individual converts the vehicle. An alternative fuel seller may not receive a credit for converting its own vehicles to operate on the alternative fuel it sells. (Reference Montana Code Annotated 15-30-2320)

Ethanol Production Incentive

Montana-based ethanol producers are eligible for a tax incentive of $0.20 per gallon of ethanol produced solely from Montana agricultural products or ethanol produced from non-Montana agricultural products when Montana products are unavailable. If the producer uses non-Montana based agricultural products, the amount of the tax incentive per gallon is reduced proportionately, based on the percentage of non-Montana based agricultural or wood products used in production. The tax incentive is available to a facility for the first six years from the date production begins.

Ethanol eligible for the incentive must be blended with gasoline for sale as ethanol-blended gasoline in Montana, exported from Montana for sale as ethanol-blended gasoline, or used in the production of ethyl butyl ether for use in reformulated gasoline. To receive the tax incentive, an ethanol producer must use at least 20% Montana products to produce the ethanol in the first year of production, must use at least 25% Montana products in the second year of production, and must increase the amount of Montana products by 10% each year thereafter.

(Reference Montana Code Annotated 15-70-522)

Ethanol Production Facility Property Tax Exemption

Equipment used to produce ethanol from grain is exempt from state property taxes during construction of an ethanol manufacturing facility and for 10 years after ethanol production begins at the facility. (Reference Montana Code Annotated 15-6-220)

Biodiesel Blending Tax Credit

Businesses and individuals are eligible for a tax credit of up to 15% of the cost of qualified equipment used for storing or blending biodiesel with petroleum diesel offered for sale. Biodiesel must be made entirely from components produced in Montana and must account for at least 2% of the business' or individual's total diesel sales within three years of the initial credit. 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 be claimed up to two tax years before the taxpayer begins blending biodiesel fuel for sale, and may be carried forward until the total amount has been deducted from tax liability. If the facility ceases to blend biodiesel for 12 continuous months within five years of a credit claim, the total credit amount must be returned. (Reference Montana Code Annotated 15-32-703)

Biodiesel Tax Refund

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 made entirely from components produced in Montana. Additionally, 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 made entirely from components produced in the state. Refund requests must be filed on a quarterly basis. (Reference Montana Code Annotated 15-70-433)

Alternative Fuel and Vehicle Production Property Tax Incentive

Alternative fuel production facilities, including biodiesel, biomass, biogas, and ethanol production facilities, may qualify for a reduced property tax rate of 3% of market value. Renewable energy manufacturing facilities, including those manufacturing plug-in electric vehicles or hybrid electric vehicles, also qualify. In addition, temporary property tax rate abatements are available for qualified biodiesel, biomass, biogas, and ethanol production facilities. The tax abatements are available during facility construction and for the first 15 years after the facility begins operation. The total time of the qualifying period may not exceed 19 years. For more information, see the Montana Department of Environmental Quality "Clean and Green" Property Tax Incentives website. (Reference Montana Code Annotated 15-6-157 and 15-24-3111)

Biodiesel Tax Exemption

Biodiesel producers that produce biodiesel from waste vegetable oil feedstock are exempt from the state special fuel tax. Waste vegetable oil is used cooking oil gathered from restaurants or commercial food processors. Biodiesel producers must annually register with the Montana Department of Transportation and report biodiesel production and consumption by February 15 of the following year. (Reference Montana Code Annotated 15-70-401 and 15-70-405)

Biodiesel Production Facility Tax Credit

Businesses and individuals are eligible for a tax credit of up to 15% of the cost of constructing and equipping a facility to be used for biodiesel or bio-lubricant production. Additionally, a tax credit is available for property used primarily to crush oilseed crops for purposes of biodiesel production. The facility or equipment must be in operation before January 1, 2015. The business or individual may claim either production tax credit in the two tax years before production begins or in any tax year in which production occurs. The credit may be carried forward seven years and must be returned if the facility ceases operations within five years of claiming the credit. (Reference Montana Code Annotated 15-32-701 and 15-32-702)

Laws and Regulations

Fuel-Efficient Vehicle Acquisition Requirements

All vehicles purchased for state agency use must meet or exceed the current federal Corporate Average Fuel Economy standard and agencies must develop and implement programs to reduce fuel consumption in agency vehicles. Certain state vehicles are exempt from these requirements. (Reference Montana Code Annotated 2-17-416 and 2-17-417)

Ethanol Fuel Blend Use Requirement

State government agencies and universities owning or operating motor vehicles capable of using ethanol-blended gasoline must take all reasonable steps to ensure that the operators of those vehicles fuel with ethanol-blended gasoline if it is commercially available within the vehicle's operating area and competitively priced as compared to conventional gasoline. (Reference Montana Code Annotated 2-17-414)

Compressed Natural Gas (CNG) and Propane Tax

Retail sales for CNG and liquefied petroleum gas (propane) used to operate vehicles are subject to a modified tax based on energy content. CNG is taxed per 120 cubic feet, measured at 14.73 pounds per square inch absolute base pressure. (Reference Montana Code Annotated 15-70-711)

Compressed Natural Gas (CNG) and Propane Dealer License

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

Low-Speed Electric Vehicle (EV) Access to Roadways

A low-speed EV may operate only on highways with posted speed limits up to 25 miles per hour (mph) and may not cross a highway with a posted speed limit greater than 45 mph. A low-speed EV must have four wheels, reach speeds of at least 20 mph but not more than 40 mph, and may only be operated by a person with a low-speed restricted driver's license. A low-speed EV must comply with Title 49 of the Code of Federal Regulations, section 565. (Reference Montana Code Annotated 61-1-101, 61-5-122, 61-8-378)

Medium-Speed Electric Vehicle (EV) Access to Roadways

A medium-speed EV may operate only on highways with posted speed limits up to 45 miles per hour (mph). A medium-speed EV must be treated as a light-duty vehicle for purposes of titling and registration. A medium-speed vehicle is one that has a maximum speed of 45 mph, a gross vehicle weight rating of 5,000 pounds or less, and complies with Title 49 of the Code of Federal Regulations, section 565. (Reference Montana Code Annotated 61-1-101 and 61-8-377)