AUGUSTA — The ability of Mainers and businesses to claim a group of tax breaks offered by the federal government on their 2015 tax filings continues to hang in the balance at the State House.

Democrats on the Legislature’s budget-writing committee voted 6-5 Wednesday to support a $16.8 million proposal that would allow Mainers to claim the tax breaks on their 2015 state tax returns. Republicans, backed by Gov. Paul LePage, opposed the vote and continued to push for a two-year extension, which would cost the state $38.4 million, while making some of the tax breaks permanent. Both sides say they support the so-called tax conformity proposal, but are deadlocked over the duration of the extension, with Democrats wanting only a one-year extension while Republicans want two years.

They also are split on the economic development value of bonus depreciation, an initiative that allows businesses to take larger upfront tax deduction for certain purchases such as office equipment or other capital investments. Bonus depreciation deductions are traditionally offered by Congress to encourage businesses to grow and invest during economic downturns, but their efficacy is debated.

The issue is central to a debate that could unfold as soon Thursday when the conformity proposal is expected to be introduced in the Republican-controlled Senate. Republicans appear united behind the two-year extension, thereby setting the stage for a clash with the Democratic-controlled House of Representatives. If the two sides cannot resolve their differences, the conformity bill will stall and Mainers will not be able to claim the tax breaks on their 2015 state returns.

The budget committee’s vote was preceded by a discussion that will likely foreshadow the floor debates.

Rep. Robert Nutting, R-Oakland, said the state will become an outlier if it doesn’t conform.


“Democrats are under the impression that this is their money to do with as they please. It’s not their money,” Nutting said. “It belongs to the people of Maine and we should be letting them keep it. Retroactively conforming for just one year not only sends the wrong message, but it guarantees we will be right back here next year having the same debate while the Maine people and businesses are in limbo waiting to file their taxes.”

Democrats said that they’d put together a compromise.

“We’re giving the governor what he wants, businesses what they want for this year,” said Erik Jorgensen, D-Portland, adding that it was too risky “to clear the cupboard” and risk being unable to fund other initiatives.


A looming legislative election is further complicating compromise. Republicans have aggressively pushed the issue, releasing a series of statements that aligns with their traditional pro-taxpayer, pro-business rhetoric. Democrats have countered by saying that the state should conform to federal tax breaks this year, but be mindful of the costs of other pressing issues, including the ongoing drug crisis.

The tax breaks include a $250 tax deduction for K-12 educators for school-related expenses paid out of their own pockets and bonus depreciation. 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. The permanent breaks included the teacher expense deduction, tax-free status for charitable donations taken from individual retirement accounts and bonus depreciation. The tax-free treatment of principal-residence mortgage debt forgiven by lenders was extended to 2016.

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.

Democrats and Republicans are proposing one-time funding measures to pay for their respective extension plans. The Democratic plan would utilize $9.5 million from a fund designed to lower state taxes, $6.1 million from state treasury debt services and $1.8 million from a personal services account.

Republicans would utilize the same accounts in addition to several others to fund a two-year extension, including $3 million from an account to help municipalities pay for the consolidation of services, $3 million for school district consolidation and over $3 million from casino revenues.

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