Gov. Paul LePage will submit legislation next week that will conform to most of the federal tax changes made last month. Much of Maine’s income taxes are derived from federal tax returns and not matching federal changes makes filing state taxes more complicated.
The biggest costs to the state budget are for business equipment deprecation but the package will also allow teachers a deduction for classroom supplies they purchase, and that costs about $350,000.
In an interview with MPBN News, Finance Commissioner Richard Rosen said there is enough money to pay for the proposal within existing state financial resources.
“Funding for the $16.8 million will essentially arrive from un-appropriated surplus that’s available in the budget,” he said. “We received some revenue re-projections that were recently recognized, so there is capacity within the budget.”
Associate Finance Commissioner Mike Allen said many of the specific tax credits affect corporations and other business entities. He said about 100,000 of the more than 600,000 Mainers that file individual tax returns will be affected by the legislation the governor is proposing.
“Section 179, the teacher expense deduction and the private mortgage insurance [deduction] are the three that will primarily affect individual tax returns,” he said.
The governor is not proposing the state adopt all of the 48 federal provisions. Some do not apply and Rosen said the legislation is only proposing the state conform to tax provisions it has adopted in the past.
“Some of these we have never agreed to,” he said.
For example, the federal tax break for higher education expenses has never been part of the state code and the governor is not proposing to adopt that tax break in Maine for the 2014 tax year.
Allen said the legislation will also continue a tax credit that “sort of conforms” to the federal bonus depreciation provisions Congress extended last month. He said Maine allows a tax credit but only on equipment used in the state, so multistate corporations cannot claim bonus depreciation on equipment used in other states, only the equipment used in Maine.
“We have been doing that for three years now and the governor is proposing we continue to do that,” Allen said.
Rosen said lawmakers will get the legislation next week when the Legislature reconvenes.
