(1) A Montana resident is allowed a nonrefundable credit against the resident's Montana income tax liability for:

(a) income taxes paid to another state or foreign country on income which is also subject to Montana income tax;

(b) tax years beginning after December 31, 2000, the pro rata share of income taxes paid by an S corporation in which the resident is a shareholder to another state or foreign country on income, which is subject to Montana income tax as provided in Title 15, chapter 30, MCA; and

(c) tax years beginning after December 31, 2002, the distributive share, stated separately or non-separately, of income taxes paid by a partnership, which is to another state or foreign country on income, which is subject to Montana income tax as provided in Title 15, chapter 30, MCA.

(2) The credit is allowed under the following conditions and limitations:

(a) the credit is allowed only with respect to an income tax imposed by law and actually paid. An income tax is a tax measured by and imposed on net income and, in the case of an S corporation or partnership, includes an excise tax or franchise tax that is imposed on and measured by the net income of the entity. The credit is not allowed for other taxes such as, but not limited to, franchise or license taxes or fees not measured by net income, gross receipts taxes, gross sales taxes, capital stock taxes, or property, transaction, sales, or consumption taxes. The credit is not allowed for penalty or interest paid in connection with an income tax;

(b) in the case of a taxpayer who either becomes or ceases to be a Montana resident during the taxable year, the credit is allowed only with respect to income earned during the fractional part of the year the taxpayer was a resident of this state;

(c) the credit is allowed only with respect to an income tax, which the taxpayer does not claim as a deduction in determining Montana taxable income; and

(d) the credit is allowed only if the state or foreign country imposing the income tax liability does not allow the taxpayer a credit for Montana income tax liability incurred with respect to the income derived within such state or foreign country.