RCYL: Recycle Credit/Deduction (2025)
Montana · Montana DOR · Used for tax years 2025
Montana Form RCYL calculates the recycle credit for qualifying machinery and equipment and the additional deduction for purchases of recycled material. It also reports a partner’s or S corporation shareholder’s share of the recycle credit.
Who files this form
Form RCYL is used to claim Montana’s recycle credit or deduction. The credit is available to qualifying individuals, C corporations, S corporations, and partnerships.
To qualify for the credit:
- The machinery or equipment must be purchased on or after the first day of the current tax year and before the last day of that tax year.
- It must be located and operating in Montana on the last day of the tax year.
- It must be used primarily for qualifying collection or processing of reclaimed material, manufacturing finished products from reclaimed material, or treating soils contaminated by hazardous waste.
- The taxpayer must own an interest directly or through a pass-through entity and operate the equipment as the primary user on the last business day of the year.
Equipment used to produce energy from reclaimed material does not qualify. The person who generated the reclaimed material may not claim the credit.
Partners and S corporation shareholders use Part I to report their share of the credit. Businesses claiming the additional deduction for purchases of recycled material use Part V.
What you'll need
- Basic information: Your name as shown on your Montana tax return and your FEIN or SSN.
- Partners and shareholders: Your Montana Schedule K-1 (PTE), which provides your share of the credit, plus the partnership’s or S corporation’s business name and FEIN.
- Equipment credits in Parts III or IV: A copy of the sales receipt, any equipment pamphlets, and supporting information explaining what the equipment is and how it is used. You also need the purchase date and equipment cost.
- Specialized mobile equipment used in multiple states: The number of days used in Montana and total days used everywhere.
- S corporations and partnerships filing paper returns: A separate statement identifying each owner and their portion of the credit, in addition to Form RCYL.
- Recycled-material deduction: The type and cost of material purchased and a manufacturer’s or supplier’s statement showing the amount of recycled material in the material or product.
How to file
For paper returns, individuals and C corporations claiming the credit must include a completed Form RCYL with their tax return. S corporations and partnerships filing paper information returns must include Form RCYL and a separate statement identifying each owner and their share of the credit.
Complete the applicable parts:
- Part I: Enter the credit passed through from a partnership or S corporation. Complete a separate Form RCYL for each entity providing a credit.
- Part II: Answer the equipment qualification questions if claiming your own equipment credit.
- Parts III and IV: Describe the equipment and calculate the credit. Part III covers equipment used in Montana. Part IV covers qualifying specialized mobile equipment used both in and out of Montana. Attach the required equipment documentation.
- Part IV, line 8: Combine the credits from Parts III and IV, up to $125,000, and enter the amount on your tax return. The credit cannot exceed your tax liability.
- Part V: Enter the type and cost of recycled material purchased, multiply the cost by 10%, and enter the additional deduction on your tax return. Include the manufacturer’s or supplier’s statement.
The supplied text does not provide a mailing address or e-file directions.
Common mistakes
- Continuing after a disqualifying answer: Stop the credit calculation if Part II says you do not qualify. You may still go to Part V to claim the recycled-material deduction if eligible.
- Completing unnecessary credit sections: If you complete Part I, do not complete Parts II, III, or IV unless you have additional credits not received from a partnership or S corporation.
- Combining pass-through entities on one form: Use a separate Form RCYL for each partnership or S corporation providing a credit.
- Exceeding the limits: Do not enter equipment costs above $1,000,000 in Parts III or IV. The combined credit cannot exceed $125,000 or your tax liability.
- Claiming ordinary transportation equipment: Transportation equipment is excluded unless it is specialized so that it can only collect and process reclaimable material.
- Using the wrong trade-in basis: If you previously received a credit on equipment traded in, calculate the new credit using the cost after the trade-in reduction.
- Claiming an unsupported transaction: The Department of Revenue may disallow a credit from a sale or lease whose overriding purpose is not qualifying collection, processing, or manufacturing.
Questions people ask
Can I get a refund or carry unused credit to another year?
No. The credit is limited to your individual or corporate income tax liability. Any excess is not refundable and cannot be carried back or forward.
How is the equipment credit calculated?
The rates are 25% of the first $250,000 of qualifying equipment cost, 15% of the next $250,000, and 5% of the next $500,000. The combined credit is capped at $125,000 and cannot exceed your tax liability.
What if specialized mobile equipment is used outside Montana too?
The credit is prorated using the number of days the equipment was used in Montana divided by the total days it was used everywhere. Use Part IV.
Can I claim the deduction even if I do not qualify for the equipment credit?
Yes, if you meet the deduction requirements. Part V allows an additional deduction equal to 10% of recycled-material purchases that are otherwise deductible as Montana business expenses. The products must contain recycled material at a level consistent with industry standards or standards established by the federal Environmental Protection Agency. Include a manufacturer’s or supplier’s statement showing the recycled-material content.