Governor to submit bill to conform with federal tax code
Gov. Paul LePage is crafting legislation to make sure Maine's income tax policies conform to federal tax law, which underwent significant changes last month when Congress passed the $1.8 trillion Omnibus Bill that made a number of tax breaks permanent while extending others for specified periods of time.
Under current law, Maine conforms to the Internal Revenue Code through Dec. 31, 2014, with some exceptions specifically contained in Maine income tax law. The Maine Legislature must review the changes made to the code since that date, including the changes made by Congress in December to determine to what extent Maine will continue to conform to federal law.
In a release explaining his intention to create tax conformity, the governor's office reported that Richard W. Rosen, commissioner of the Maine Department of Administrative and Financial Services, is consulting with the presiding officers of the Maine Legislature “to gauge their interest in conforming to benefit Maine taxpayers and small business.” At the same time, the Office of Tax Policy is preparing options for what to include in that bill and how any tax breaks will be paid for, since the state budget, unlike the federal budget, must be balanced and must match any revenue reductions with corresponding cuts in spending.
The governor's office stated that Sen. Earle McCormick, R-Kennebec, and Rep. Adam Goode, D-Bangor, have agreed to sponsor a bill conforming Maine to the federal tax law changes and continuing Maine's Capital Investment Credit, which is tied to federal bonus depreciation. Rosen said the Legislature has shown bipartisan support for tax conformity in the past.
“Conformity with the federal tax code makes it easier for small businesses to comply with our tax laws and provides needed tax relief to Maine's teachers, college students, and homeowners,” he said in the release.
Among the provisions of the $650 billion federal tax extenders package identified by the governor's office as having an impact on Maine taxpayers:
- The above-the-line deduction of up to $250 for teacher classroom expenses, which Congress made permanent.
- The Section 179 business expense deduction, also made permanent, which allows small businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. The annual cap, which had been set at $25,000 in prior federal legislation, has been increased and made permanent at $500,000 per year and is being indexed for inflation.
The federal package also extended federal tax items affecting itemized deductions for mortgage insurance and a deduction for higher education expenses, according to the governor's office.
The governor's office indicated that Rosen has instructed the Maine State Tax Assessor to prepare for the adoption of the department's conformity legislation. Assuming the tax conformity bill is adopted and signed into law, Maine tax forms and instructions for 2015 will be updated to be consistent with the legislation. On the other hand, if whatever legislation that's finally enacted differs from the department's proposal, the governor's office stated, “Maine Revenue Services will inform taxpayers of those tax items and describe what taxpayers will need to do in order to correctly file their 2015 tax returns or to correct returns already filed.”
In other words, stay tuned.
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