(1) A Montana resident is allowed a nonrefundable credit against the resident's Montana income tax liability for:
(a) income taxes they paid to another state or foreign country on income which is also subject to Montana income tax;
(b) the resident shareholder's pro rata share of income taxes paid by an S corporation to another state or foreign country on income that is subject to Montana income tax as provided in Title 15, chapter 30, MCA; and
(c) the resident partners' distributive share of income taxes paid by a partnership to another state or foreign country on income that 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 that the taxpayer does not claim as a deduction in determining Montana taxable income;
(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; and
(e) the credit is allowed for taxes paid to a foreign country only to the extent the taxes paid exceed either:
(i) the amount claimed under IRC section 904(a) plus any carryback and carryover amount allowed under IRC section 904(c); or
(ii) the amount claimed under IRC section 904(k).
(3) The credit against income taxes is claimed on the Montana tax return for the same year that the taxpayer reports the income associated with the tax paid to the other state or country. Because the Montana credit is nonrefundable and any unused credit may not be used in another tax year, taxes that for federal income tax purposes are deemed paid or accrued in a carryback or carryover year must be removed before calculating the Montana foreign tax credit.
(4) The credit cannot be claimed by an individual for taxes paid to another state or country by an estate or trust.
(5) If a taxpayer amends the amount of income reported to the other state or a foreign country on which the Montana credit was based, the taxpayer shall file an amended Montana tax return to recalculate the credit allowed.