allocations

PART D
SUMMARY
This Part makes the following changes to the individual and corporate income taxes:
Section 1 removes the provisions directing the Treasurer of State to deposit surcharge
revenue in the Fund to Advance Public Kindergarten to Grade 12 Education and removes the
references to Title 36, section 5111, subsection 6 from Sec. 1 of IB 2015. c. 4, An Act to
Establish the Fund to Advance Public Kindergarten to Grade 12 Education.
Sections 2 through 9 reduce the individual income tax rates over three years. The current
rate structure consists of 5.8%, 6.75%, and 7.15% taxable income brackets. The proposed
taxable income brackets for tax years beginning in 2018 and 2019 are 2.75% and 3.15% of
Maine taxable income. The proposed income tax rate for tax years beginning on or after January
1, 2020 is 2.75% of Maine taxable income.
Sections 10 and 12 amend the income tax surcharge enacted by the citizens of Maine as
part of IB 2015. c. 4, An Act to Establish the Fund to Advance Public Kindergarten to Grade 12
Education. The changes delay the tax years to which the surcharge applies from tax years
beginning on or after January 1, 2017 to tax years beginning on or after January 1, 2018. It
removes the provisions related to the transfer of surcharge revenue to the Fund to Advance
Public Kindergarten to Grade 12 Education. The proposal also applies the surcharge to all
individual income tax taxpayers, including fiduciary income tax taxpayers, regardless of taxable
income amount. It further provides that notwithstanding 20-A MRSA §15697, sub-§2, the
changes may be immediately acted upon in any manner by the Legislature. In addition, it repeals
the provision that indicates that the surcharge must be imposed and collected regardless of
whether the income tax brackets in this section are changed, replaced or eliminated by an act of
the Legislature or by a measure approved by voters pursuant to the Constitution of Maine.
Section 11 increases the maximum Maine pension income deduction for non-military
retirement plan benefits from $10,000 to $35,000 over a 5-year period beginning with the 2017
tax year. The $35,000 deduction amount that applies to tax years beginning after 2021 is subject
to an annual inflation adjustment.
Sections 13 and 14 reduce the corporate income tax rates for tax years beginning on or
after January 1, 2018. The current rate structure for taxable corporations consists of 3.5%,
7.93%, 8.33% and 8.93% taxable income brackets; the proposed rate structure for tax years
beginning on or after January 1, 2018 consists of 3.5%, 7.93% and 8.33% tax rate brackets.
Section 15 eliminates the corporate alternative minimum tax for tax years beginning after
December 31, 2016.
Section 16 removes, for tax years beginning after 2017, the add-back of trade, capital and
business losses included in federal gross income for the purposes of calculating income for the
sales tax fairness credit.
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