AUGUSTA — In December, the federal Tax Cuts and Jobs Act became law. It represents the first major federal tax code overhaul since 1986 and has significant implications for Maine.

First, according to the Institute on Taxation and Economic Policy, the new law will provide $1 billion in federal tax relief to Mainers and Maine businesses in 2019. Second, Maine – like other states – must now determine to what extent we will align, or “conform,” our tax laws to the updated federal tax code. In recent years, Maine has largely conformed. Doing so provides significant benefits, including simplicity for filers and efficiency for tax administrators. Under conformity, businesses don’t need to worry about complying with different state and federal tax rules, and tax administrators benefit from relying on the federal tax code, federal rules and regulations and federal court decisions in overseeing Maine tax law.

To maintain the advantages of tax conformity, the LePage administration introduced the Conformity and Family Tax Relief Act. The bill recouples Maine’s tax laws to the updated federal code; it makes an important technical change to state tax law that averts a tax increase; and then it provides tax relief of about $60 million annually to Maine families. For businesses, it provides tax relief of more than $20 million in the current biennium.

Even more important for most Maine businesses is that they would not need to absorb the time, cost and administrative burden of complying with, and planning for, different state and federal tax laws. For context, the federal tax cut law makes significant changes to depreciation rules, to treatment of net operating losses and to deductibility of interest expenses. Based on those changes, failure to conform could create a situation in which companies maintain two depreciation schedules for each newly acquired asset; utilize net operating losses differently at the federal and state levels; and have different incentives at the federal and state levels to use debt financing.

Turning to tax relief, the Revenue Forecasting Committee’s latest report projects surplus revenue of more than $100 million in both the current biennium and the next one. This means state government expects to collect far more tax revenue than it originally estimated, and Gov. LePage believes we should return as much of that surplus to Maine taxpayers as possible.

The Conformity and Family Tax Relief Act would do so in the form of a new $500 child and dependent tax credit. For a married couple earning $50,000 per year with two children, the new credit would result in an annual tax cut of $542. Coupled with Gov. LePage’s proposal to provide meaningful student debt relief in the form of tax credits for eligible loan payments, these measures are designed to incentivize recent college graduates to remain in – or relocate to – our state and then stay, settle and raise their families here. For a state with the oldest median age in the country, implementing policy measures to address our demographic challenges is key to future growth and prosperity.

Some have suggested that the Legislature should wait until next year to address tax conformity, but that wouldn’t be advisable for several reasons. Delaying conformity would cause confusion for tax filers, who would not know the rules of the road for the current tax year until it is completed – significantly hampering tax planning and compliance efforts. It would further complicate matters for Maine Revenue Services, which would need to create tax forms at the eleventh hour next year, if we conformed then, and to plan to administer each aspect of the decoupled state code on its own for 2018.

Moreover, it is unrealistic to think that a new Legislature and new administration would turn immediately to tax conformity – having little or no background on the matter – and craft, debate and enact legislation in time for the 2019 tax filing season.

A final reason for conforming now is the significant one-time revenue that aligning corporate international tax policy with federal law would yield. Because of the federal tax cut law’s “deemed repatriation” provision, multinational corporations will pay a one-time tax on all foreign-held assets. By conforming this year, Maine stands to receive a $31 million slice of this tax payment; delaying conformity jeopardizes this revenue.

The LePage administration crafted the Conformity and Family Tax Relief Act to achieve bipartisan support. We believe it accomplishes two widely held goals: maintaining simplicity and efficiency in our tax structure and providing tax relief to Maine families. We look forward to continuing to work with legislators from both parties to enact this meaningful legislation.