Maine tweaks taxes on COVID-related telework for out-of-state companies
Photo / Maureen Milliken
The state Department of Financial Services and Gov. Janet Mills have released guidance and proposed legislation that will ensure those working from home for out-of-state companies because of the COVID-19 pandemic don't get double-taxed.
The Maine Department of Administrative and Financial Services has offered guidance, and will introduce legislation in January, to help residents and businesses avoid tax problems that could arise from unplanned remote working during the pandemic. That's a risk particularly regarding work for out-of-state businesses.
Maine is also looking for ways to ease the tax burden faced by those paying student loans.
“Maine people who have been able to work remotely, along with the businesses that have encouraged and supported teleworking efforts, are doing their part to protect us from the spread of this dangerous virus,” Gov. Janet Mills said in a news release.
“It is my hope that my administration’s actions will provide a measure of certainty and relief for now, and I look forward to working with the Legislature in January to ensure Mainers avoid unintended tax burdens caused by COVID-19."
Kirsten Figueroa, DAFS commissioner, said that the moves by the Mills administration "remove many unknowns for those who have found themselves up against tax policy that was not developed with a pandemic in mind."
Remote working for out-of-state company
In the case of Maine residents who worked from home during COVID-19 but who otherwise work out-of-state for an out-of-state employer, the Mills administration will introduce legislation in January to ensure the workers avoid double taxation.
The legislation will ask that a tax credit be allowed for income tax paid to other jurisdictions if the other jurisdiction is asserting an income tax obligation for the same income, despite the employee no longer physically working in that jurisdiction because of COVID-19.
Mills has also instructed Maine Revenue Services to use its administrative authority to allow Maine residents who, because of the pandemic, work remotely for an out-of-state company to maintain the same withholding and estimated tax payment status used before the state of emergency.
She has also instructed Maine Revenue Services to use its administrative authority to abate penalties, upon request, for any Maine resident taxpayer who owes an estimated income tax payment as a result of suddenly working in Maine as a result of the COVID-19 state of emergency.
Out-of-state businesses with Maine remote workers
MRS also said that out-of-state businesses not otherwise subject to tax in Maine, but that have employees who worked or are working at home in Maine as a result of COVID-19, don't necessarily have to establish corporate income tax or sales and use tax nexus in the state. One or more employees teleworking in Maine as a result of COVID-19 is not by itself grounds for the nexus, the MRS said.
MRS is also extending the 2019 Maine filing deadlines for corporate income tax returns (Form 1120-ME) and franchise tax returns (Form 1120B-ME) to Nov. 16, with no late filing penalties.
The business-related actions are in keeping with the statutory authority for administrative action by the state tax assessor, the release said.
Maine student loan tax credit relief
Maine residents who are making payments on student loans amid the COVID-19 pandemic and would like to take advantage of the Educational Opportunity Tax Credit (known as the Opportunity Maine tax credit), may claim it for completed student loan payments, even if their loans were subject to deferment or forbearance, the MRS said.
That includes federal student loans placed into automatic forbearance by the federal CARES Act, as long as all other eligibility criteria are met, according to the release.
Mills' administration plans to introduce legislation in January that will allow Maine residents who were employed in the state before or during the pandemic and who became unemployed as a result of COVID-19, but who are still making student loan payments, to also take advantage of the tax credit.
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