An Act To Amend the Laws Governing the Deduction of Pensions, Retirement Benefits and other Income from State Income Tax
Maine Legislature, Session 121, LD 0583
Committee: Taxation
Sponsors: CLOUGH, CRESSEY, BENNETT, ANDREWS, BOWLES, CARR, DAVIS, JOY, MURPHY, STANLEY
Amends: 36 MRSA §5122

Legislative Document 
No. 583 
H.P.446 
House of Representatives, February 11,2003 
An Act To Amend the Laws Governing the Deduction of Pensions, 
Retirement Benefits and other Income from State Income Tax 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative CLOUGH of Scarborough. 
/JJ~/J?~ 
MILLICENT M. MacFARLAND 
Clerk 
Cosponsored by Representative CRESSEY of Baldwin, Senator BENNETT of Oxford and 
Representatives: ANDREWS of York, BOWLES of Sanford, CARR of Lincoln, DAVIS of 
Falmouth, DUGA Y of Cherryfield, JOY of Crystal, MURPHY of Kennebunk, Senator: 
STANLEY of Penobscot. 
Printed on reeycled paper 
Be it enacted by the People of the State of Maine as follows: 
396, 
Sec. 1. 36 MRSA §5122, sub-§2, 1rM, as amended by PL 200L c. 
§34 and affected by §50, is further amended to read: 
M. 
Aa--affi9Qa~T--f9~ For each taxpayer 
who 
is 
a 
primary 
recipient of benefits under an employee retirement plan or 
who is 65 years of age or older on the last day of the 
taxable year who 
has interest, dividends or net capital 
gains taxable in this State that are included in federal 
adjusted gross income modified as otherwise provided by this 
section, an amount that is the lesser of: 
(1) 
S~H-~~-~~~aF&-~~~~~-£Re-~~~~-am9QH~ 
9f-£Re-~~ma~y-~~~~~~~~~~~~~~-b9a9f1~&-aHa 
~a~1~9aa-~e£i~emeR£-~~~~-~~~-~-Ya1~ge-S~a~e6T 
SQt;-.fl-e-t.--1e-&s--t.ban·-$G The following amounts reduced by 
the total 
amount 
of 
the primary recipient's social 
security benefits and railroad retirement benefits paid 
by the United States, but not less than $0, for each 
tax 
year 
beginning 
in 
the 
following 
years. 
The 
reduction does 
not 
apply to benefits paid under 
a 
military retirement planf-e~~ 
( a) 
2003, $8,000; 
( b) 
2004, $9,000; 
( c) 
2005, $10,000j 
( d) 
2006, $11,000; 
ill 2007, $12,000; 
(0 
2008, $13,500; 
i9..L 2009, $15,000; 
( h) 
2010, $16,500; and 
{ i} 
2011, ;U8,000. 
For tax years beginning January 1, 2012, the deduction 
under this subparagraph is equal to the amount of the 
maximum social security benefit reduced by the total 
amount 
of 
social 
security 
benefits 
and 
railroad 
retirement benefits actually received by the taxpayer, 
but not less 
than 
$0. 
The 
State 
Tax 
Assessor 
by 
September 15th of each year shall determine the amount 
of the deduction and incorporate the change, if any, 
into the income tax forms, instructions and withholding 
tables for the taxable year; or 
(2) 
The taxpayer's aggregate of interest. dividends, 
net capital gains taxable in this State and pension 
benefits received ey as 
the primary recipient under 
employee 
retirement 
plans 
and 
included 
in 
federal 
adjusted gross income modified as otherwise provided by 
this section. 
Items of interest, dividends 
and net 
capi tal gains income from jointly owned accounts mus t 
be apportioned egually among owners of the accounts. 
For purposes of this paragraph, "employee retirement plan" 
means a state, federal or military retirement plan or any 
other retirement benefit plan established and maintained by 
an employer for the benefit of its employees under Section 
401(a), 
Section 
or 
Section 
457(b) 
of 
the 
Code..-
!!Emp*eyee--r-e-t-i-r~--fI"1-<Hl·'.!..-4ee£---n<H:--,iRe*Re.e.L an individual 
retirement account under Section 408 of the Code, a Roth IRA 
under 
Section 
408A 
of 
the 
Code, 
a 
rollover 
individual 
retirement 
account, 
a 
simplified 
employee 
pension 
under 
Section 
408(k) 
of 
the 
Code 
or 
an 
ineligible 
deferred 
compensation plan under Section 457 (f) of the Code. 
For 
purposes of this paragraph, "military retirement plan" means 
benef i ts received as a result of service in the active or 
reserve components of the Army, Navy, Air Force, Marines or 
Coast 
Guard. 
For 
purposes 
of 
this 
paragraph, 
"primary 
recipient" means the pension recipient upon whose earnings 
the pension is based or the surviving spouse of such 
a 
person; 
Sec. 2. Application. 
This Act applies to tax years beginning 
on or after January 1, 2003. 
SUMMARY 
Current law provides a deduction from the state income tax 
for the first $6,000 of income from certain public, private and 
military pensions. 
This bill increases the deduction to $8,000 for tax years 
beginning January 1, 2003 and then by $1.000 each subsequent year 
until 2008. 
Beginning with tax years beginning January L 
2008. 
the deduction is increased by $1,500 per year until 2012. when 
the amount of the deduction is $18.000. 
Beginning with tax years 
beginning January 1, 2012, the amount of the deduction is equal 
to the amount of the maximum federal tax exemption for social 
security 
benefits 
reduced 
by 
any 
social 
security 
benefits 
actually received 
by the 
taxpayer. 
This bill also 
includes 
interest, 
definition 
the income 
taxable in 
ordinary 
dividends 
and 
capital 
gains 
within 
the 
of retirement income included in the calculation of 
tax deduction for retirement income if those items are 
this State and at least one taxpayer included on the 
tax return is at least 65 years of age.