An Act To Exempt Military Pensions for Future Military Retirees from State Income Tax
Maine Legislature, Session 122, LD 0972
Committee: Taxation
Sponsors: EBERLE, DAVIS, BLANCHARD, CUMMINGS, DAIGLE, FLOOD, PINEAU, BRENNAN, ROSEN
Amends: 36 MRSA §5122

Legislative Document 
:\0. 972 
H.P.682 
House of Representatives. February ::-+. ::005 
An Act To Exempt Military Pensions for Future Military Retirees 
from State Income Tax 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative EBERLE of South Portland. 
Cosponsored by Senator DAVIS of Piscataquis and 
/}l~d /J?71j~ 
MILLICENT ~1. ~1a('FARL-\:\D 
Ckrk 
Representatives: BLANCHARD of Old Town, CUMMINGS of Portland, DAIGLE of 
Arundel, FLOOD of Winthrop, McKENNEY of Cumberland, PINEAU of Jay, Senators: 
BRENNAN of Cumberland, ROSEN of Hancock. 
I', 11l1ed • 'll I ~ .• :\ ~ led [',II'n 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §5122. sub-§2. 1[M, as amended by PL 2003, c. 
391, §5, is further amended to read: 
3R 
M. 
For 
each individual 
who 
is 
a 
primary 
benefits under an employee retirement plan, 
is the lesser of: 
recipient of 
an amount that 
(1) 
Six thousand dollars reduced by the total amount 
of 
the 
individual's 
social 
security 
benefits 
and 
railroad retirement benefits paid by the United States, 
but not less than $0. 
The reduction does not apply to 
benefits paid under a military retirement plan; 
e~ and 
(2) 
The 
aggregate 
of 
retirement plans included 
adjusted gross income. 
benefits 
under 
employee 
in the individual's federal 
For purposes of this paragraph, the following terms have the 
following 
meanings. 
"Pr imary 
recipient" 
means 
the 
individual upon whose earnings the employee retirement plan 
benefits 
are 
based 
or 
the 
surviving 
spouse 
of 
that 
individual. 
"Employee retirement plan" means 
a stateT or 
federal 
e~-mi~4~aFY retirement plan or any other retirement 
benefit plan established and maintained by an employer for 
the benefit of its employees under the Code, Section 40l(a), 
Section 403 
or Section 457(b), 
except that distributions 
made pursuant to a section 457(b) plan are not eligible for 
the deduction provided by this paragraph if they are made 
prior 
to 
age 
and 
are 
not 
part 
of 
a 
series 
of 
substantially equal periodic payments made for the life of 
the primary recipient or the joint lives of the primary 
recipient 
and 
that 
recipient's 
designated 
beneficiary. 
"Employee retirement plan" does not include 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, 
a military retirement plan as 
defined 
in 
paragraph 
U 
or 
an 
ineligible 
deferred 
compensation 
plan 
under 
Section 
(f) 
of 
the 
Code. 
Benefits under an employee retirement plan do not include 
distributions that are subject to the tax imposed by the 
Code, 
Section 
72(t). 
"Military 
retirement 
plan" 
means 
benefits received as a result of service in the active or 
reserve components of the Army, Navy, Air Force, Marines or 
Coast Guard; 
Sec. 2. 36 MRSA §5122. sub-§2, 1[Q, as corrected by RR 2003, c. 
1, §38, is amended to read: 
Page l-LR1178(1) 
LO 
~2 6 
~~ n 
.10 
• 
705, 
Q. 
A fraction of any amount previously added back by the 
taxpayer 
to 
federal 
adjusted 
gross 
income 
pursuant 
to 
subsection 1, paragraph N. 
(1) 
With respect to property first placed in service 
during taxable years beginning in 2002, the adjustment 
under this paragraph is available for each year during 
the 
recovery 
period, 
beginning 
years 
after 
the 
beginning of the taxable year during which the property 
was first placed in service. 
The fraction is equal to 
the amount added back under subsection L 
paragraph N 
with respect to the property, divided by the number of 
years in the recovery period minus 2. 
(2) 
With 
respect 
to 
all 
other 
property, 
for 
the 
taxable year 
immediately 
following 
the 
taxable year 
during which the property was first placed in service, 
the fraction allowed by this paragraph is equal to 5q" 
of the amount added back under subsection 1, paragraph 
N wi th respect to the property. 
For each subsequent 
taxable year during the recovery period, the fraction 
is 
equal 
to 
95% 
of 
the 
amount 
added 
back 
under 
subsection 1, paragraph N with respect to the property, 
divided by the number of years in the recovery period 
minus 2. 
In the case of property expensed pursuant to Section 179 of 
the Code, 
the 
term "recovery period" means 
the recovery 
period that would have been applicable to the property had 
Section 179 not been applied; aBe 
Sec. 3. 36 MRSA §5122. sub-§2. ~T. as amended by PL 2003, c. 
§12 and affected by §14, is further amended to read: 
T. 
For income tax years beginning on or after January 1, 
2002 
and before January 1, 
2004, 
an amount equal to the 
total premiums spent for long-term care insurance policies 
certified under Title 24-A, section 5075-A as long as the 
amount subtracted is reduced by the long-term care premiums 
claimed as an itemized deduction pursuant to section 5125. 
For income tax years beginning on or after January 1, 2004, 
an amount equal to the total premiums spent for qualified 
long-term care insurance contracts certified under Title 
24-A, section 5075-A, as long as the amount subtracted is 
reduced by any amount claimed as a deduction for federal 
income tax purposes in accordance with the Code, 
Section 
162(1) 
and by the long-term care premiums claimed as 
an 
itemized deduction pursuant to section 5125T ; and 
Sec. 4. 36l\IRSA ~5122. sub-§2. 1fV is enacted to read: 
lJ. 
For tax years beginning on or after January 1, 2006 and 
for military personnel retiring on or after January 1, 20061 
an amount equal to benefits paid under a military retirement 
plan. 
For purposes of this paragraph, "military retirement 
j?lan" means benefits received as a result of service in the 
acti .. 'e or reser'v"e components of the Armi', Navi', Air force L 
Marines or Coast Guard. 
SVMMARY 
This bill exempts from the state income tax all military 
1'5 
pension benefits for military personnel retiring on or after 
January 1, 
2006 
received by 
a 
Maine resident as 
a 
result of 
ser-;ice in the acti'v'e or reserve components of the Army, Navy, 
Air Force, Marines or Coast Guard. 
Since the effect of this bill 
is to totally exempt military pension benefits after January 1, 
2006, the express exclusion of military pension benefits from the 
offset for social security and railroad retirement benefits from 
the deduction allowed for other pension plans is removed. 
II