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> Laws & Rules > Tax Law Changes - 2009 Legislative Changes from the First Regular Session of the 124th Legislature (2009)Following are recent legislative changes that impact Maine state taxes, categorized by tax type. Click on a link below to locate the laws affecting that area.
Maine Revenue Services
INCOME/ESTATE TAXES
Administrative Provisions
Power of attorney. Maine Revenue Services is directed to create and post to the bureau's web site a simplified application for requesting a limited power of attorney. The limited power of attorney will allow bureau representatives to discuss taxpayer information with a designated representative of the taxpayer. Effective September 12, 2009. LD 1321, Resolve 2009, c. 126.
Set-off agreements. The assessor may enter into agreements with the IRS and with other states regarding mutual set-off agreements for the application of overpayments to the debts a taxpayer has with Maine, the IRS or another state, provided the agreement is a reciprocal agreement. Effective September 12, 2009. LD 1401, PL 2009, c. 361 § 5.
Subsequent offenses. Several separate criminal offense sections are consolidated into a single section that asserts that a subsequent offense under Title 36 will carry an increased criminal class of one level higher than was previously associated with that crime. These criminal offense provisions are applicable to all taxes administered under Title 36. Effective September 12, 2009. LD 1401, PL 2009, c. 361 §§ 6, 31, 32.
Restitution. For purposes of set-off of debt, the term “liquidated tax liability” is defined to include court-ordered monetary restitution due the bureau as a result of an imposed sentence. Effective September 12, 2009. LD 1401, PL 2009, c. 361 §§ 10, 30.
Economic Development Incentive Report. The annual report from taxpayers regarding economic development incentives is no longer required. The report was due from taxpayers receiving specified state benefits in excess of $10,000 during the previous year. Effective June 9, 2009. LD 1468, PL 2009, c. 337 §§ 5, 10, 11.
General
Conformity. Conformity with the Internal Revenue Code and amendments is extended to the Code as of February 17, 2009. Conformity with the Code applies unless otherwise stated in Maine law. Applies to tax years beginning on or after January 1, 2008 and to any prior years as specifically provided by the Code. See 36 MRSA § 111(1-A). LD #353, PL 2009, c. 213 § BBBB-1.
Individual Income Tax
Tax Reform – individual income tax changes. Recent tax reform legislation made numerous changes to the Maine individual income tax calculation beginning in 2010. For a detailed description of these changes, see www.maine.gov/revenue/incomeestate/1040/taxreformindividual.htm .
Estimated Tax for Individuals. Currently, taxpayers subject to the estimated tax requirement may elect to pay an amount equal to 100% of last year's income tax liability or 90% of the current year income tax liability in order to avoid the penalty for underpayment of estimated tax. Maine law is changed for a limited number of individual taxpayers to disallow use of the election to pay estimated tax based on the prior year's tax liability when an unusual event occurs, such as realization of a large, one-time capital gain. An unusual event occurs when taxable income for the estimated tax installment period exceeds the taxable income received during the same period in the prior tax year, by at least $500,000. The change applies to tax years beginning on or after January 1, 2009. 36 MRSA §§ 5228(1)(D), 5228(2), 5228(3), 5228(5)(D) and 5228(11). LD 45, PL 2009, c. 1, Part I.
Net operating losses. No NOL carryforward deductions are allowed on Maine returns for tax years beginning in 2009, 2010 and 2011. This includes no deductions for federal net operating loss carryforwards and no deductions for Maine recapture modifications related to denial of federal NOL carrybacks. Thus, the subtraction modification recapture of previously denied federal NOL carrybacks is disallowed and an addition modification is required equal to any federal carryforward amount. The disallowance of NOL deductions in 2009, 2010 and 2011 may be recaptured through subtraction modifications that will be allowed for tax years beginning after 2011. The recapture must be made during the federal carryover period plus the number of years the NOL deduction was disallowed. Effective May 28, 2009. 36 MRSA § 5122. LD 353, PL 2009, c. 213, Part ZZZ.
Bonus depreciation. Maine law has decoupled from the most recent extension of the federal bonus depreciation allowance. The decoupling is consistent with Maine statutory decoupling with bonus depreciation since the first federal enactment in 2002. The recapture of the denied depreciation is claimed in the same manner as the 2008 depreciation recapture. The addition modification in the year the asset is placed in service is the difference between the federal depreciation claimed and the depreciation that would have been allowed without the bonus depreciation allowance. In subsequent years, the recapture is equal to the depreciation that would have been allowed without bonus depreciation less the depreciation claimed at the federal level. Any aggregate difference between federal and Maine book value may be claimed as a modification in the year of disposition of an asset. Effective May 28, 2009. 36 MRSA § 5122. LD 353, PL 2009, c. 213, Part BBBB.
Discharge of indebtedness. A federal law change allows certain businesses to defer the recognition of gain due to the discharge of indebtedness occurring during the tax year. For tax years beginning in 2009 and 2010, Maine law decouples from this deferral through the requirement of an addition income modification. To avoid duplicating the income for Maine tax purposes, a deduction modification is allowed in future years when the income is claimed on the federal income tax return. Effective May 28, 2009. 36 MRSA § 5122. LD 353, PL 2009, c. 213, Part BBBB.
Indexing of individual income tax rate schedules. Adjustments will no longer be made to the individual income tax rate schedules when the cost of living adjustment factor is less than the factor calculated for the preceding year. Additionally, indexing of the individual income tax rate brackets must be reduced to produce tax revenue savings of $10,500,000 for the calendar year based on the most recent revenue projections of the Revenue Forecasting Committee. Applies to tax years beginning on or after January 1, 2009. See 36 MRSA § 5219-S. See LD #353, PL 2009, c. 213, Pt. WWW.
Unemployment Compensation. Unemployment compensation benefits received must be added back to adjusted gross income for Maine tax purposes to the extent that those payments are excluded from federal gross income in accordance with the Code, Section 85(c). Applies to tax years beginning on or after January 1, 2009. See 36 MRSA § 5122(1)(BB). LD #353, PL 2009, c. 213, § BBBB-4.
Standard Deduction – additional federal amounts for property tax and sales/excise tax on purchase of new vehicle. Individuals may not include in the Maine standard deduction the amount of real estate property taxes and/or sales/excise taxes paid on new motor vehicles that are claimed for federal income tax purposes pursuant to the Code, Sections 63(c)(1)(C) and 63(c)(1)(E). Applies to tax years beginning on or after January 1, 2008. See 36 MRSA § 5124-A. LD #353, PL 2009, c. 213, Pt. BBBB-9.
Earned Income Tax Credit. The Maine earned income tax credit, for tax years beginning in 2009 and 2010, is reduced from 5% of the federal credit to 4% of the federal credit. See 36 MRSA § 5219-S. LD #353, PL 2009, c. 213, Pt. BBBB-16. Requirement to File a Return. T he requirement to file a Maine income tax return for individuals who filed a federal income tax return solely to claim a federal earned income tax credit is removed. Additionally, the State Tax Assessor is authorized to identify by rule other exceptions to the requirement to file a Maine income tax return. See 36 MRSA § 5220(7). LD #1401, PL 2009, c.361, § 29. Pine Tree Development Zones. Several changes to the existing Pine Tree Development Zone program and revenue forecasting law are enacted.
Effective September 12, 2009. LD 1473, PL 2009, c. 461.
Fiduciary Income Tax
Tax Reform – fiduciary income tax changes. Recent tax reform legislation made changes to the Maine individual income tax rates and the Maine minimum tax beginning in 2010 that impact the Maine fiduciary income tax. For details, see www.maine.gov/revenue/incomeestate/1040/taxreformindividual.htm .
Corporate Income Tax
Apportionment. The corporate sales tax apportionment factor must now exclude from both the numerator and the denominator sales of tangible personal property that is delivered to a state where the taxpayer is not taxable. A taxpayer is taxable in another state if that state has jurisdiction to subject the taxpayer to a net income tax. Applies to tax years beginning on or after January 1, 2009. 36 MRSA § 5211. LD 353, PL 2009, c. 213, Part NN.
Net operating losses. No NOL carryforward deductions are allowed on the Maine return for tax years beginning in 2009, 2010 and 2011. This includes no deductions for federal net operating loss carryforwards and no deductions for Maine recapture modifications related to denial of federal NOL carrybacks. Thus, the subtraction modification recapture of previously denied federal NOL carrybacks is disallowed and an addition modification is required equal to any federal carryforward amount. The disallowance of NOL deductions in 2009, 2010 and 2011 may be recaptured through subtraction modifications that will be allowed for tax years beginning after 2011. The recapture must be made during the federal carryover period plus the number of years the NOL deduction was disallowed. Effective May 28, 2009. 36 MRSA § 5200-A. LD 353, PL 2009, c. 213, Part ZZZ.
Bonus depreciation. Maine law has decoupled from the most recent extension of the federal bonus depreciation allowance. The decoupling is consistent with Maine statutory decoupling with bonus depreciation since first federal enactment in 2002. The recapture of the denied depreciation is claimed in the same manner as the 2008 depreciation recapture. The addition modification in the year the asset is placed in service is the difference between the federal depreciation claimed and the depreciation that would have been allowed without the bonus depreciation allowance. In subsequent years, the recapture is equal to the depreciation that would have been allowed without bonus depreciation less the depreciation claimed at the federal level. Any aggregate difference between federal and Maine book value may be claimed as a modification in the year of disposition of an asset. Effective May 28, 2009. 36 MRSA § 5200-A. LD 353, PL 2009, c. 213, Part BBBB.
Discharge of indebtedness. A federal law change allows certain businesses to defer the recognition of gain due to the discharge of indebtedness occurring during the tax year. For tax years beginning in 2009 and 2010, Maine law decouples from this deferral through the requirement of an addition income modification. To avoid duplicating the income for Maine tax purposes, a deduction modification is allowed in future years when the income is claimed on the federal income tax return. Effective May 28, 2009. 36 MRSA § 5200-A. LD 353, PL 2009, c. 213, Part BBBB.
Pine Tree Development Zones. Several changes to the existing Pine Tree Development Zone program and revenue forecasting law are enacted.
Effective September 12, 2009. LD 1473, PL 2009, c. 461.
Withholding/Unemployment Taxes
Tax Reform – individual income tax changes. Recent tax reform legislation made numerous changes to the Maine individual income tax calculation beginning in 2010. Unless tax reform is repealed or delayed, the Maine withholding tables booklet for calendar year 2010 will be updated to reflect these changes. For a detailed description on tax reform, see www.maine.gov/revenue/incomeestate/1040/taxreformindividual.htm .
Estate Tax
Ongoing application of tax. The Maine estate tax will continue beyond 2009, despite what may occur with the federal estate tax. For deaths after December 31, 2009, the Maine estate tax will be calculated the same as for deaths occurring during 2009. 36 MRSA §§ 4062(1-A) & (1-B). LD 353, PL 2009, c. 213, Part E, §§ E-1 – E-2.
Prior taxable gifts. For deaths occurring on or after January 1, 2009, prior taxable gifts made within one year prior to death will be subject to the Maine estate tax and must be included in the decedent's Maine taxable estate. Prior taxable gifts subject to the Maine estate tax are those gifts in excess of the federal gift tax exclusion made within one year prior to death, but no earlier than January 1, 2008. 36 MRSA § 4062(2). LD 353, PL 2009, c. 213, Part E, § E-3.
Final federal determination. The State Tax Assessor 's authority to make adjustments to estate tax returns even in cases where a final federal determination has been issued is extended beyond 2009, except that t he changes by the assessor, if any, must be made within one year of the date the return was filed instead of witnin the prior law 2-year period . This change applies to estates of decedents dying on or after July 1, 2009. 36 MRSA § 4071. LD 353, PL 2009, c. 213, Part E, § E-5.
Discharge of liability. Maine Revenue Services is directed to create and post to the bureau's web site an application for discharge of personal liability of the personal representative of an estate. Further, the bureau is directed to report to the Taxation Committee, by 1/15/10, the differences in the requirements and procedures between the IRS and MRS for the discharge of liability for a personal representative of an estate. Effective September 12, 2009. LD 950, Resolves 2009, c. 101.
Maine Residents Property Tax and Rent Refund Program
Tax Reform – tax & rent refund program changes. Recent tax reform legislation made numerous changes to the Maine Residents Property Tax & Rent Refund Program beginning August 1, 2010. For a detailed description of these changes, see www.maine.gov/revenue/taxrelief/taxreformtnr.htm .
Reimbursement limitation. The Maine Residents Property Tax and Rent Refund “Circuit Breaker” program benefit is limited to 80% of the final benefit calculation for programs beginning August 1, 2009 and August 1, 2010. For these two program years, the maximum refund is $1,600. 36 MRSA § 6207(1)(B). LD 353, PL 2009, c. 213, Part XXX.
Business Equipment Tax Reimbursement Program
Reimbursement limitation. Reimbursement, through the Business Equipment Tax Reimbursement (“BETR”) program, of property taxes paid during calendar years 2008 and 2009 is limited to 90%. This affects application periods beginning August 1, 2009 and August 1, 2010. Effective May 28, 2009. 36 MRSA § 6652. LD 353, PL 2009, c. 213, Part U.
Pine Tree Development Zone Program
Statewide Pine Tree Development Zone. Several changes to the existing Pine Tree Development Zone program and revenue forecasting law are enacted.
Effective September 12, 2009. LD 1473, PL 2009, c. 461.
Base level of employment. A Pine Tree Development Zone business that endures a catastrophic occurrence and has a primary purpose of supporting an industry that supports commercial fishing, marine and boat building activities may adjust the base level of employment for purposes of the Pine Tree Development Zone benefits. A catastrophic occurrence is defined as an “accidental fire, flood, hurricane, windstorm, earthquake or other similar event.” The adjusted base level of employment is equal to 25% of the average number of employees over the three months prior to a catastrophic occurrence. Effective April 9, 2009. 36 MRSA § 6753(4). LD 271, PL 2009, c. 21.
SALES, FUEL & SPECIAL TAX DIVISION ---- General An Act to Implement Tax Relief and Tax Reform. LD 1495, PL 382. Part B broadens the sales tax base by including certain amusement, entertainment and recreation services; installation, repair and maintenance services; personal property services; and transportation and courier services. Part B also changes the point of imposition of sales tax related to leased property from the sale of that property to the leasing business to the lease payments by the consumer; and increases the sales tax on prepared food and lodging to 8.5% and the sales tax on rentals of automobiles of less than one year to 12.5%. The service provider tax is extended to residential interstate and international telecommunications service. It also establishes an airport transportation fee of $1 for each person transported to a commercial airport by taxicab or limousine and increases funding for tourism promotion. An Act to Make Minor Substantive Changes to the Tax Laws. LD 1401, PL 361. Section 18 modifies the sales tax exemption for watercraft sold to nonresidents to provide that the exemption applies as long as the watercraft is removed from the State within 30 days of sale. Section 19 r estores the “interstate commerce” sales tax exemption to its application by Maine Revenue Services prior to the Law Court's decision in John T. Cyr & Sons, Inc. v. State Tax Assessor , by codifying Maine Revenue Services Rule 318(3) and clarifying that the exemption is not limited only to situations when the Commerce Clause requires an exemption from the sales or use tax. Section 20 adds a provision to the service provider tax ensuring that the tax is paid when a taxable service is purchased for resale but is then used by the purchaser rather than being resold. Section 21 enacts an exemption from the service provider tax for sales to an incorporated nonprofit medical clinic, for consistency with a change to the sales and use tax law enacted in the First Regular Session of the 123rd Legislature. Sections 23-35 designate the document filed by a distributor when obtaining cigarette stamps as a tax return, allow a licensed distributor to sell unstamped cigarettes to another licensed distributor with appropriate documentation, and establish a consistent rule for treating certain tax law violations as a prior conviction when determining a sentence for a subsequent tax law violation. Section 27 allows a dealer owing no more than $1,000 per year for the tax on mahogany quahogs to file annual returns.
Sales/Use Tax An Act to Clarify the Sales Tax Exemption for Commercial Agricultural Crop Production. PL 450, Ch. 422. Expands the exemption for products used in commercial agricultural crop production to include products used for tree production (silviculture).
Resolve, to Review and Update Sales Tax Exemptions for Products Purchased for Agricultural Use . LD 74, Resolves Ch. 197. (1) Requires the Department of Agriculture, Food and Rural Resources to review relevant sales tax exemptions, and related MRS Rules and Bulletins, and to advise MRS by September 15, 2009 of any recommended changes. In particular, Department of Agriculture is to confer with the Department of Conservation on the advisability of including the growing of trees for harvest in the definition of "commercial agricultural crop production." (2) Requires MRS to provide the Dept. of Ag. with a description of the process used to notify the public, and retailers and wholesalers in particular, of amendments to the bureau's rules and revisions to the bureau's bulletins regarding products qualifying for sales tax exemptions or equipment and machinery eligible for a sales tax refund. MRS also provide a description on how it responds to requests for an interpretation of the statutes, rules or bulletins developed to implement the statutes. The bureau, in consultation with the department, shall develop a protocol for documenting requests for interpretations and responding to them. (No date specified for these three requirements.) (3) MRS must report the suggested changes to the Taxation and Agriculture Committees by January 15, 2010 and provide a comment on every change, along with suggested statutory language and a fiscal impact statement. MRS report must include a description of an improved protocol to respond to requests for interpretations. The recommendations may include revisions to Bulletins or Rules or convey a decision to adopt rules to clarify products eligible for the sales tax exemption and purchases eligible for a refund of sales tax. Effective May 4, 2009.
An Act to Recognize Maine Youth Camps. LD 479, PL 211. Amends the sales tax exemption for meals served by youth camps and enacts a new definition of that term in Title 22, which the sales tax statute now references.
An Act to Amend the Laws Regarding Mandatory Electronic Filing of Certain Tax Records LD 490, PL 12. With regard to electronic filing requirements that begin on April 1, 2009, directs MRS to continue the practice of leniency in granting waivers to any taxpayer who has difficulty in meeting the mandate requirements and to provide a clear explanation to taxpayers of the availability of waivers. MRS must report to the Taxation Committee by January 15th annually (but not after 1/1/15) regarding the status of electronic filing requirements and the number of waivers requested and granted. Effective April 21, 2009.
An Act to Amend the Rate of Tax on New Manufactured Housing. LD 906, PL 207. Changes the application of sales tax on sales of park model homes, from a 50% exemption to no exemption but allowing credit for trade-ins.
An Act to Increase Consumer Choice for Wine. LD 1008, PL 373. Allows direct shipment of wine but requires out-of-state sellers to register with MRS and collect and remit sales tax.
An Act to Simplify the Assessment of E-9-1-1 Surcharges on Prepaid Wireless Telecommunications Service. LD 1056, PL 400. Imposes a fee beginning January 1, 2010 on prepaid wireless service, to be collected by the State Tax Assessor in a manner consistent with sales tax collections. Assessor to ensure that all remitted prepaid wireless E-9-1-1 surcharges are deposited in the E-9-1-1 fund within 30 days of receipt. For prepaid wireless E-9-1-1 surcharges remitted during the period beginning January 1, 2010 and ending December 31, 2011, the Assessor may deduct an amount not to exceed 2% of remitted prepaid wireless E-9-1-1 surcharges to reimburse the direct costs of the Assessor for administering the collection and remittance of the prepaid wireless E-9-1-1 surcharges during that period.
Resolve, Relating to Review of Certain Changes in the Application of the Sales and Use Tax Law. LD 1120, Resolves Ch. 127. Requires the Assessor to consult with the Office of the Attorney General before implementing any change in policy, practice or interpretation of the sales and use tax law that would result in additional revenue in order to determine if the change represents a “policy shift” that “ought to be reviewed” by the Taxation Committee. The Office of the Attorney General shall provide information periodically to the Taxation Committee regarding the consultation process and, consistent with attorney-client privilege and any other legal privilege and legal confidentiality requirements, provide a brief summary of the issues for which a consultation was sought and the results of the consultation. The resolve contains a sunset date of 9/12/14.
Fuel Tax Biennial highway bill. LD 333, PL 413 . Part W: Revises the motor fuel excise tax statutes to impose full gasoline and diesel rates on any product containing at least 10% gasoline or diesel (E10 and B20, for example). Also revises the indexing statute to prevent any decrease in the rates effective 7/1/09. Bill effective June 16, 2009. An Act to Exempt from Taxation Biodiesel Fuel Produced for Personal Use. LD 1352, PL 288. Exempts from the excise tax biodiesel fuel that is produced by an individual and used by that individual or a member of that individual's immediate family. Other Biennial budget bill. LD 353, PL 21. Part H: Changes tax rate on smokeless tobacco for purchases on or after 7/1/09. Part KKK: Expands premium on bulk motor oil to include prepackaged motor oil (sold in containers of 5 gallons or less). Part PPP: Establishes the 2009 Tax Receivables Reduction Initiative.
Updated: August 13, 2009 |
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