(1) An employer is not allowed to claim both a Montana credit and a deduction for the same insurance premium dollars paid.

(a) If the employer is not claiming a federal small business health insurance credit, the deduction claimed on the federal return is reduced by an amount equal to twice the Insure Montana credit claimed by the taxpayer when arriving at income for Montana purposes. For example, an employer determined to be eligible for $4,000 in tax credit must reduce their deduction for premiums by $8,000 ($4,000 x 2).

(b) If the employer is claiming a federal small business health insurance tax credit, their federal deduction may be reduced or completely eliminated. When the federal deduction is reduced for this reason, the deduction only needs to be further reduced for Montana purposes if the federal reduction is less than the Montana reduction that would otherwise be called for in (1)(a). For example, if an employer reduced their federal deduction by $5,000 and they are claiming an Insure Montana credit of $3,000, the reduction on the Montana return is $1,000 ($3,000 x 2 = $6,000 gross reduction less $5,000 federal reduction).

(c) The reduction of the deduction by an employer that is a C corporation must be made by entering the appropriate amount on Form CIT, line 2(f), "Premiums used to calculate the Insure Montana Credit".

(d) The reduction of the deduction by an employer that is a sole proprietor must be made by entering the appropriate amount on Form 2, Schedule I, "Montana Additions to Income Federal Adjusted Gross Income".

(e) The reduction of the deduction by an employer that is an S corporation must be made by entering the appropriate amount on Form CLT-4S, line 15c, "Other additions", and on the Montana Schedule K-1s of the shareholders, line 3, "Other additions".

(f) The reduction of the deduction by an employer that is a partnership or a limited liability company that is taxed as a partnership must be made by entering the appropriate amount on Form PR-1, line 16c, "Other additions", and on the partners' or members' Montana Schedule K-1s, line 3, "Other additions".

(2) An employee who receives premium assistance payments, whether paid to the employee or to an insurance company on behalf of the employee, cannot include the amount of the insurance premiums paid with the assistance payments in determining the amount of unreimbursed medical expenses they can claim as an itemized deduction on either their federal or Montana income tax returns.