AUGUSTA — The Legislature’s budget-writing committee quietly killed Gov. Paul LePage’s proposal to allow municipalities to tax larger nonprofit organizations on Wednesday.

The proposal, which was included in the governor’s original $6.57 billion budget plan, had met stiff opposition from Maine’s nonprofit sector and struggled to pick up political support among Democrats and Republicans in the Legislature. Members of the Taxation Committee had also come out against taxing nonprofits last month, so Wednesday’s vote by the Appropriations Committee was not surprising.

The budget will not be finalized until next month, and lawmakers have yet to settle some of the thorniest policy issues, including whether to reduce the income tax while raising the sales tax. However, lawmakers did not even discuss the nonprofit tax before voting unanimously to remove the nonprofit tax language and to repeal roughly a dozen obscure tax credits or exemptions.

The LePage administration originally proposed the nonprofit tax as a way for municipalities to recoup money towns would lose if the Legislature also agreed to the governor’s proposal to eliminate revenue sharing. Under the proposal, towns could collect property taxes from nonprofits with $500,000 or more of assessed value. Churches and government-owned entities would remain tax-exempt.

LePage has said that the proposal would primarily impact hospitals, private colleges and wealthier nonprofits. But summer camps, land conservation groups and social service organizations warned that the taxes could force them to close or to scale back programs that, in many cases, are not offered by the government.

The governor’s proposal to eliminate revenue sharing – the program that sends tax dollars back to towns to help pay for local services – has also received a chilly reception from lawmakers on both sides of the aisle because of strong opposition from municipal leaders in their districts.

The Appropriations Committee has yet to resolve some of the thorniest policy questions in the budget, including LePage’s proposals to reduce Maine’s income tax, eliminate the estate tax and increase the sales tax while applying it to more goods and services. The next fiscal year begins July 1.


Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.