Mainers already have begun filing their tax returns, but the Legislature has yet to decide whether it will adopt at the state level a group of tax breaks being offered by the federal government.

Lawmakers on both sides of the aisle say they support applying the same federal tax breaks passed in December to Maine’s 2015 income tax, costing the state an estimated $19 million. All are breaks that were offered in 2014.

Still, Democrats and Republicans disagree on whether the extension should be approved for 2015 returns only, or on a more permanent basis. Until the Legislature decides which approach to take, Mainers are relatively safe to assume they are entitled to the same tax breaks as in 2014 when filing their state returns, officials said.

“There is one important caveat,” said David Heidrich, a spokesman for the Department of Administrative and Financial Services: Lawmakers could conceivably fail to reach an agreement and pass the tax break extensions.

Republicans said adopting the tax breaks for individuals and businesses on a long-term basis would give them a sense of certainty that their tax burden will not increase in the future.

“It is important that we adopt this tax policy for the long term, and not just make a temporary fix, because businesses and all Maine citizens need to know that we are serious about not raising their tax liability and, in effect, their cost of living here and doing business,” Maine Senate President Michael Thibodeau, R-Winterport, said in a written statement.


Democrats said they oppose the long-term increase because it would tie up an additional $19 million in Maine’s biennial budget that could be used to meet more pressing needs. Instead, the tax breaks should be reauthorized next year by the Legislature.

“We have an ongoing crisis in Riverview (Psychiatric Center), dangerous overcrowding in our state’s jails, rising property taxes, debilitating substance abuse in our communities, and inadequate funding for our children’s schools,” Rep. Adam Goode, D-Bangor, House chairman of the Taxation Committee, said in a statement. “Funding tax conformity fully for one year is a fiscally responsible way to get Mainers the tax credits they need while still leaving room to address our other priorities.”


The bill that would update Maine’s tax code to conform to the new federal code is L.D. 1564, introduced in the Legislature in response to the recent changes Congress made to federal tax guidelines.

Two competing recommendations on the bill, one from Republicans and one from Democrats, were forwarded Monday by the Taxation Committee to the Appropriations and Financial Affairs Committee, which is expected to meet Tuesday to discuss the funding offsets it will require. The bill will then go to the full Legislature.

The majority report, approved by Republican members of the Taxation Committee, and the minority report, approved by Democrats, recommend identical state income tax breaks for 2015. Those include a $250 tax deduction for K-12 educators for school-related expenses paid out of their own pockets, and a tax break that helps small businesses by extending a higher maximum deduction for depreciable assets.


The proposed tax breaks for 2015 are extensions of temporary tax breaks created by the federal government that had expired in 2014.

In December, Congress passed the Protecting Americans from Tax Hikes Act of 2015, which revived several expired personal and business tax breaks. Some were extended for two more years, while others were made permanent. They include:

Tax-free treatment of principal-residence mortgage debt forgiven by lenders, extended to 2016.

Deduction of up to $250 for K-12 educator expenses, made permanent.

 Tax-free status for charitable donations taken from individual retirement accounts, made permanent.

Higher “Section 179” deduction rules for businesses’ depreciable assets, made permanent.

Federal income tax deduction for college tuition payments also was extended through 2016, but Maine does not apply the deduction to state income tax. Lawmakers plan to add it for 2016, but only the Republican proposal would put it in writing immediately.


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