[MaxGhenis]

Fixes #9707.

What was wrong

MCA 15-30-2120(3)(b)(i) subtracts "interest from obligations of the United States government and exempt-interest dividends attributable to that interest" from federal taxable income. Form 2 reports the subtraction on Schedule I, Part I: line 11 in 2024 (instructions, PDF p. 25) and line 9 in 2025 (instructions, PDF p. 23). The 2024 and 2025 entries of gov.states.mt.tax.income.subtractions.subtractions left out us_govt_interest_person, so from 2024 the model taxed that interest. The 2024 case in mt_us_govt_bond_interest.yaml expected 0, so the suite recorded the bug.

Each row below comes from a Simulation run on main (61d9e85) and on this branch:

Household	Year	Main: Montana taxable income / tax	This PR	Form 2 by hand
Single, wages 50,000, Treasury interest 1,000	2024	36,400 / 1,901.60	35,400 / 1,842.60	35,400 / 1,842.60
Same household	2025	35,250 / 1,826.55	34,250 / 1,767.55	34,250 / 1,767.55
Joint, wages 80,000, spouse's Treasury interest 3,000	2025	51,500 / 2,532.10	48,500 / 2,355.10	48,500 / 2,355.10
Single, wages 10,000, Treasury interest 10,000	2024	5,400 / 253.80	0 / 0	0 / 0

Changes

• subtractions.yaml: add us_govt_interest_person to the 2024 and 2025 lists (2026 uses the 2025 list), with the statute and form line in comments, and cite MCA 15-30-2120(3)(b)(i).
• mt_us_govt_bond_interest.yaml: the 2024 case now expects 5,000; a new 2025 case also expects 5,000.
• New mt_taxable_income.yaml: 14 Form 2 cases for 2024–2026. Each starts from household inputs (wages, medical expenses, mortgage interest, taxes paid, interest) and runs through the federal model, so it also checks which federal amounts Montana reads. Comments carry the worksheet and Form 2 arithmetic.
• New test_mt_us_govt_interest_subtraction.py: a Hypothesis test of the invariants below.

The rest of the 2024+ base

The task was to check Montana's whole 2024+ base. #10038 (merged 2026-11-07) rebuilt it from federal taxable income, with the QBI add-back (MCA 15-30-2120(2)(i)) and the capped state income tax add-back ((2)(j)). Its 2024+ cases, like main's other Montana cases, mostly enter federal amounts (adjusted_gross_income, itemized_taxable_income_deductions, tax_unit_itemizes, salt_deduction, standard_deduction) as inputs. This PR's cases start from household inputs instead, with values hand computed from the 2024 and 2025 Form 2, the revised 2024 Worksheet A and the 2025 Worksheet B (instructions, PDF p. 22). On main:

• the 10 cases without US government interest pass unchanged. They cover medical and SALT-capped itemizers, the standard-deduction limit on the add-back, the QBI exclusion, the 2025 move of the add-back to Schedule I, the enhanced senior deduction (counted once), the 2025 SALT phase-down, and 2026 rolling conformity with the §68 limitation;
• the 4 US-interest cases fail, and they pass here.

I also checked three things in the code:

• Dependents. mt_taxable_income_joint.formula_2024 sums mt_additions and mt_subtractions over the head and spouse only. That matches federal AGI: irs_gross_income zeroes every income source of a tax-unit dependent, so a dependent's interest never reaches the return.
• The old interest exemption. mt_interest_exemption_person is 0 from 2024, because gov.states.mt.tax.income.exemptions.applies is false from 2024.
• Other readers of mt_subtractions. mt_agi_joint, mt_agi_indiv and the two taxable Social Security helpers also read it, so for a household with US government interest the legacy mt_agi now nets that interest too. None of them reaches 2024+ Montana tax:
  • formula_2024 reads none of them;
  • from 2024 mt_income_tax_before_refundable_credits_unit takes the joint computation, and mt_agi_indiv applies only where married_filing_separately_on_same_return_allowed holds; that parameter turns false in 2024;
  • the legacy deductions that read mt_agi_joint return 0 or the federal amounts from 2024 (state_specific_deduction_applies and the child care deduction's in_effect turn false in 2024; misc_floor_applies turned false in 2018);
  • taxsim_state_agi, and its alias state_agi, report federal AGI for Montana from 2024 (states_using_federal_agi).

Not in this PR

• Gating the pre-2024 Montana deduction variables to 2023. formula_2024 reads none of them, so gating them changes no 2024+ tax. state_standard_deduction and state_itemized_deductions still read them; Harmonize state_standard_deduction and state_itemized_deductions coverage #8275 and Montana: obsolete *_for_federal_itemization copies put a state-withholding proxy and the repealed federal-tax deduction into state_itemized_deductions (TAXSIM v35) #9806 track that.
• Montana additions other than the state income tax add-back. From 2024 mt_additions holds only mt_other_additions, an input, so the model leaves out, for example, interest on other states' bonds (MCA 15-30-2120(2)(a)). That needs its own issue.

Tests

• The 17 Montana YAML cases pass: 14 in mt_taxable_income.yaml and 3 in mt_us_govt_bond_interest.yaml.
• Mutation check: with main's subtraction list, 6 cases fail (the 4 US-interest cases and the 2024 and 2025 bond cases) and 11 pass.
• test_mt_us_govt_interest_subtraction.py passes: a worked test, then 10 derandomized Hypothesis examples plus a pinned set.

Invariants

For every household and each year from 2024 to 2026, let u be the US government interest and TI₀ Montana taxable income without the subtraction:

1. Accounting: Montana taxable income falls by exactly min(u_eff, TI₀), where u_eff = u when the head or spouse holds the bonds and 0 when a dependent does. The dependent case follows from federal AGI by design (see "Dependents" above).
2. Monotone: Montana income tax does not rise.
3. Bound: Montana taxable income stays at or above zero.

The committed test pins the cases that matter: the zero floor binds, a dependent holds the bonds, and interior cuts, single and joint. A wider local run also passed: 104 households a year (12 random draws of 8 households plus the 8 pinned ones). In 2024, 2025 and 2026 the floor bound 2, 3 and 5 times, dependents held bonds 18, 23 and 26 times, and interior cuts occurred 10, 10 and 12 times.

Microsimulation impact

Pending: 2025 and 2026, default dataset, main against this branch. us_govt_interest_person has no formula, and the certified default dataset (populace_us_2024.h5, sha256 6496cc43…, which matches DEFAULT_DATASET_SHA256) has no column for it among its 378, so every record's subtraction stays at 0. I'll replace this section with the measured results.

Coordination

#10713 (Montana military retirement) and #10696 (railroad retirement) also edit subtractions.yaml, in hunks apart from this one.

Axiom

axiom: MCA 15-30-2120(3)(b)(i) encoded-correct for TY2026 (rulespec-us us-mt/policies/income_tax/resident_core_liability_pipeline.yaml, companion direct title 15 modifications and state tax addback) | TheAxiomFoundation/rulespec-us#2148 queued for TY2024–2025

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