An Act To Rebalance Maine's Tax Code
Maine Legislature, Session 122, LD 1595
Committee: Taxation
Sponsors: WOODBURY, PERRY
Amends: 36 MRSA §332, 36 MRSA §5, 36 MRSA §5219-H, 36 MRSA §5219-N, 36 MRSA §5224-A, 36 MRSA §5124, 36 MRSA §5126, 36 MRSA §5218, 36 MRSA §5219-S, 36 MRSA §5122, 36 MRSA §5200-A, 36 MRSA §4062, 36 MRSA §6201, 36 MRSA §6207, 36 MRSA §1752, 36 MRSA §1760, 36 MRSA §2557, 36 MRSA §1811, 36 MRSA §2551, 36 MRSA §2552, 36 MRSA §4641-A, 36 MRSA §4641-B, 36 MRSA §5219-Y, 36 MRSA §4365, 36 MRSA §4365-E, 36 MRSA §4365-F, 36 MRSA §4366, 36 MRSA §4403, 28-A MRSA §1652

Legislative Document 
No. 1595 
H.P. 1131 
House of Representatives, April 26, 2005 
An Act To Rebalance Maine's Tax Code 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative WOODBURY of Yarmouth. 
Cosponsored by Senator PERRY of Penobscot. 
Printed on recycled paper 
17/~ 
/J1.71!d£~ 
MILLICENT M. MacFARLAND 
Clerk 
Be it enacted by the People of the State of Maine as follows: 
PART A 
Sec. A-I. I MRSA §8I5, first" as enacted by PL 2001, c. 328, 
§2, is amended to read: 
Notwithstanding any other provision of law, if an entity 
that has 
taken property by eminent 
domain fails to use the 
property for the project or purpose for which that property was 
taken, the condemnee or the condemnee' s heirs have a right of 
first refusal to purchase the property as 
provided in this 
section. 
The right may be exercised at a price equal to the 
total compensation paid to the condemnee for the taking plus an 
adjustment for any improvements made to the property and for 
changes in inflation based upon the Consumer Price Index 
as 
Qej;iReQ--:i-n--~it,.l-e-~.g"7-~t;.iG-a--.e4G~7--&Ubse-ot-.iQ.n..-;!,. 
The right of 
first refusal automatically terminates once the property is used 
for the project or purpose for which that property was taken. 
The purpose of a 
taking may be passive in nature, 
including 
conservation or preservation. As used in this section, "Consumer 
Price Index" means the average over a 
l2-month period of the 
National Consumer Price Index, not seasonally adjusted, published 
monthly by the United States Department of Labor, Bureau of Labor 
Statistics and designated as the "National Consumer Price Index 
for All Urban Consumers - United States City Average." 
Sec. A-2. 36 MRSA §332I, sub-§2, as enacted by PL 2001, c. 
688, §8, is amended to read: 
2. 
Method of calculation; inflation index defined. 
The 
inflation index for 2003 is 1.118, representing annual inflation 
adjustments for the years 1999 to 2002, inclusive. 
Starting in 
2004 
and every year thereafter, 
the inflation index is the 
Consumer Price Index as-Qe~iBeQ-~~~~~~r-&~&seet,.19R-;!, for 
the 
calendar 
year 
ending 
on 
the 
December 
31st 
immediately 
preceding the calculation date, divided by the Consumer Price 
Index for the prior calendar year. 
As used in this subsecti..ruh 
"Consumer Price Index" means the average over a l2-month period 
of the National Consumer Price Index, not seasonally adjusted, 
published monthly by the United States Department of 
Labor, 
Bureau of 
Labor 
Statistics and 
designated 
as 
the 
"National 
Consumer Price Index for All Urban Consumers - United States City 
Average." 
Sec. A-3. 36 MRSA §5Il1, as amended by PL 1999, c. 521, Pt. 
B, §l and affected by §ll and amended by c. 731, Pt. T, §§1 to 7, 
is repealed. 
I 
• 
Sec. A-4. 36 MRSA §Slll-A, as repealed and replaced by PL 
1987, c. 819, §3, is repealed. 
Sec. A-S. 36 MRS A §Slll-C is enacted to read: 
§5111 C. 
Imposition and rate of tax 
1. 
Resident. 
A tax is 
imposed for 
each taxable year 
beginning on or after January 1, 2006 on the Maine taxable income 
of every resident individual of this State. 
The amount of the 
tax is 6'lt.. 
2. 
Nonresident. 
A tax is imposed for each taxable year on 
~he Maine adjusted gross income of every nonresident individual. 
The amount of the tax eguals the tax computed under this section 
and 
chapter 
8Q5, 
as 
it~e non~~sident were 
a 
resident, 
multiplied by the ratio of the individual's Maine adjusted gross 
income, as defined in section 5102, subsection 1 C, paragraph a, 
to the nonresident's entire federal adjusted gross 
income as 
modified by section 5122. 
Sec. A-6. 36 MRSA §SI60, as amended by PL 2003, c. 390, §35, 
is further amended to read: 
§5160. 
Imposition of tax 
The tax is imposed, at the 
~ates I.2J;.e provided by section 
§lll 5111-C 
for 
siR~*e resident individuals, 
upon 
the 
Maine 
taxable income of estates and trusts. The tax must be paid by the 
fiduciary. 
Sec. A-7. 36 MRSA c. SIS, as amended, is repealed. 
Sec. A-S. 36 MRSA §S217-A. as amended by PL 2003, c. 673, 
Pt. JJ, §4 and affected by §6, is further amended to read: 
§5217-A. Income tax paid to other taxing jurisdiction 
A resident individual is allowed a credit against the tax 
otherwise due under this Part, 
e*e*HQiR~--~h&-~~-~~~~--9y 
seet.ie~--§.a.g.6--GT for the amount of income tax imposed on that 
individual for the taxable year by another state of the United 
States, a political subdivision of any such state, the District 
of Columbia or any political subdivision of a foreign country 
that is analogous to a state of the United States with respect to 
income subject to tax 
under this Part that is derived from 
sources 
in that taxing jurisdiction. 
In determining whether 
income 
is derived 
from 
sources in another 
jurisdiction, 
the 
assessor may not employ the law of the other jurisdiction but 
shall instead assume that a statute equivalent to section 5142 
applies 
in that 
jurisdiction. 
The 
credit, 
for 
any 
of 
the 
specified taxing jurisdictions, may not exceed the proportion of 
the tax otherwise due under this Part, 
eHelysiR~-~~~~-impeses 
sy--see~i9R--96G&-GT that the 
amount 
of 
the 
taxpayer's 
Maine 
adjusted gross 
income 
derived 
from 
sources 
in 
that 
taxing 
jurisdiction bears to the taxpayer's entire Maine adjusted gross 
income: except that, when a credit is claimed for taxes paid to 
both a state and a political subdivision of a state, the total 
credit allowable for those taxes does not exceed the proportion 
of the tax otherwise due under this Part, 
eHel\olEli~--t-he--~8H 
impeses--hjL--se.«-i-E>n--96G&-GT that the amount of the taxpayer '. s 
Maine adjusted gross income derived from sources in the other 
state bears to the taxpayer's entire Maine adjusted gross income. 
Sec. A-9. 36 MRSA §5219-H, as repealed and replaced by PL 
2003, c. 673, Pt. F, §l and affected by §2, is amended to read: 
§5219-H. Application of credits against taxes 
1. Meaning of tax. 
Whenever a credit provision in chapter 
822, other than section 5219-W, allows for a credit "against the 
tax otherwise due under this Part," "against the tax imposed by 
this Part" or similar language, "tax" means all taxes under this 
Part, except the miRimym--t~-imp9seEl-~-~~~~-9~Q~-~-~-the 
taxes imposed by chapter 827. 
2. Meaning of tax liability. 
Whenever a credit provided for 
in chapter 822 is limited by reference to tax liability, "tax 
liability" means the tax liability for all taxes under this Part, 
except the miRimYm--t~-impeseEl-~-~~~~-9~Q~-~-~-the taxes 
imposed by chapter 827. 
Sec. A-10. 36 MRSA §5219-N, sub-§2. ,A, as enacted by PL 1997, 
c. 557, Pt. E, §l and affected by §2 and Pt. G, §l, is amended to 
read: 
A. 
An individual who is claimed as a dependent on another 
individual's income tax returnt-8Rsi 
Sec. A-lI. 36 MRSA §5219-N, sub-§2, ,8, as amended by PL 2003, 
c. 673, Pt. JJ, §5 and affected by §6, is repealed. 
Sec. A-12. 36 MRSA §5224-A, as amended by PL 1989, c. 596, 
Pt. J, §5, is further amended to read: 
§5224-A. 
Return of part-year resident 
If an individual 
changes that individual's status as 
a 
resident individual or nonresident individual during the taxable 
year, the individual shall file a nonresident return pursuant to 
• 
• 
• 
section 5220, subsection 2. 
That individual's tax 
SAa~~ IDY£t be 
computed, pursuant to section 
9~~~ 5l11-C, subsection - 4-
2., as 
if that individual were a nonresident individual, except that the 
numerator 
of 
the 
apportionment 
ratio 
sAa~~--ee--eemp~~seg--e' 
comprises 
the 
individual's 
Maine 
adjusted 
gross 
income, 
as 
defined in section 5102, subsection 1-C, paragraph A, 
for the 
portion of the taxable year during which that individual was a 
residentT plus that individual's Maine adjusted gross incomeL 
as 
defined in section 5102, subsection l-C, paragraph B, 
for the 
portion of the taxable year during which that individual was a 
nonresident. The part-year resident sAa~~ 1£ also ee entitled to 
the 
credit provided 
by 
section 
5217-A, 
computed 
as 
if the 
individual's Maine adjusted gross income for the entire year we~e 
comprised only e' that portion wA~eA .th.gj;, is attributed to the 
portion of the year during which that individual was a resident. 
Sec. A·l3. 36 MRSA c. 841, as amended, is repealed. 
Sec. A·14. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTB 
Sec. B·l. 36 MRSA §5124·A, first~, as amended by PL 2005, c. 
12, Pt. P, §5, is further amended to read: 
The standard deduction of a resident individual is equal to 
the standard deduction as determined in accordance with the Code, 
Section 63, except that for tax years beginning after 2002 12Y..t. 
before 2006, the Code, Section 63(c)(2) must be applied as if the 
basic standard deduction is $5,000 in the case of a joint return 
and 
a 
surviving spouse and $2,500 in the case of a married 
individual filing a separate return. 
Sec. B·2. 36 MRSA §5126, as amended by PL 2001, c. 583, §16, 
is further amended to read: 
§5126. Personal exemptions 
~er-~££~~~-yeaFs-ee~ififiifi~-~~F-af~e~-~~-~r-199g 
e~~-~~~-~~~-lT--~~~~r-~-Ees~geR~--~~~~-~~-a~~eweg 
$6T4gg-fe~-ea€~-~~~~~~~~-~~~~-~~p&F~y-e~a~ms-'er 
~Ae--&&~~-~~--fer--~r&~-~~-~aH-~~r-~~-~Ae 
~aHpayer-iS-€Jaime4-~-~~~~~~-F&&~F&r--~eF-~Reeme 
~aH--yeaFs-~~~-~-e~--a'~er-~a&~aFY--~r-~~-e~~--ee'e~e 
JaR~a~y-17-~QQQ7-a-~~~-~~~i~~-~~~~-$~r~~~-~eF-eaeA 
eHemp~~eR-~~-~~e--1RQ1~1Q~a~-~~~1r-€la4ms--~~-~~-~aHae~e 
year--~~-~~~ad--~Reeme-~~~-~~~~7--~R~ess-~~-~~~~--~s 
e;J,aimeg-.as-~-gepeRgeR~-~-ano-t-he-r--rel;~rRT 
For income tax years 
beginning on or after January 1, 2000 but before January 1, 2006, 
a resident individual is allowed $2, 8S0 for each exemption that 
the individual properly claims for the taxable year for federal 
income 
tax 
purposes, 
unless 
the 
taxpayer 
is 
claimed 
as 
a 
dependent on another return. 
~~ars beginning on or after 
~anuary 1, 2006, a resident individual is allowed the same amount 
allowed under Section 151 of the Code for each exemption that the 
individual properly claims 
for 
the 
taxable year 
for 
federal 
income 
tax 
purposes, 
unless 
the 
taxpayer 
is 
claimed 
as 
a 
dependent on another return. 
Sec. B-3. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTC 
Sec. C-l. 36 MRSA §5218, sub-§l, as amended by PL 200S, c. 12, 
Pt. L, §2, is further amended to read: 
1. 
Resident taxpayer. 
A resident individual is allowed a 
credit against the tax otherwise due 
under this Part in the 
amount of 2S'\. of the federal tax credit allowable for child and 
dependent care expenses in the same tax year, except that for tax 
years beginning in 2003 to 6999 l.Q.Q..5., 
the applicable percentage 
is 21.S'\. instead of 2S'\.. 
Sec. C-2. 36 MRSA §5218. sub-§2, as amended by PL 200S, c. 12, 
Pt. L, §3, is further amended to read: 
2. 
Nonresident 
or 
part-year 
resident 
taxpayer. 
A 
nonresident 
individual 
is 
allowed 
a 
credit 
against 
the 
tax 
otherwise due under this Part in the amount of 2S'\. of the federal 
tax 
credit 
allowable 
for 
child 
and 
dependent 
care 
expenses 
multiplied by the ratio of the individual's Maine adjusted gross 
income, as defined in section S102, subsection 1-C, paragraph B, 
to the individual's entire federal adjusted gross 
income, 
as 
modified by section S122, except that for tax years beginning in 
2003 to a9Q§ 200S, the applicable percentage is 21.5% instead of 
2S'\.. 
Sec. C-3. 36 MRSA §5218, sub-§2-A, as amended by PL 200S, c. 
12, Pt. L, §4, is further amended to read: 
2-A. 
Part-year resident taxpayer. 
An individual who files 
a 
return as 
a 
part-year resident in accordance with section 
5224-A is allowed a credit against the tax otherwise due under 
this Part in the 
amount of 
2S", 
except that for 
tax years 
beginning in 2003 to 69Q§ ~ 
the applicable percentage is 21.5'\. 
SO 
instead of 2S", of the federal tax credit allowable for child and 
Page S-LR2080 (l) 
• 
.... 
dependent care expenses multiplied by a ratio, the numerator of 
which is the individual's Maine adjusted gross income as defined 
in section 5102, subsection l-C, paragraph A for that portion of 
the taxable year during which the individual was a resident plus 
the 
individual's 
Maine 
adjusted gross 
income 
as 
defined 
in 
section 5102, subsection l-C, paragraph B for that portion of the 
taxable year during which the individual was a nonresident and 
the 
denominator 
of which is the individual's entire federal 
adjusted gross income, as modified by section 5122. 
Sec. C-4. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTD 
Sec. D-l. 36 MRSA §5219-S, as amended by PL 2003, c. 20, Pt. 
GG, §l, is further amended by adding at the end a new paragraph 
to read: 
For tax 
t..altpayer 
is 
otherwise due 
income credit 
years beginning on or after January L 
2006, 
a 
allowed 
a 
refundable 
credit 
against 
the 
taxes 
under this Part equal to 
25~ of the federal earned 
for the same taxable year. 
Sec. D-2. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTE 
Sec. E-l. 36 MRS A §5122, sub-§l, ,N, as amended by PL 2005, c. 
12, Pt. P, §2 and affected by §10, is further amended to read: 
N. 
With respect to property placed in service during the 
taxable 
year, 
an 
amount 
equal 
to 
the 
net 
increase 
in 
depreciation or expensing attributable to: 
(1) For taxable years beginning on or after January 1, 
2002 
but 
prior 
to 
January 
1, 
2006, 
a 
30~ bonus 
depreciation deduction claimed by the taxpayer pursuant 
to Section 101 of the federal Job Creation and Worker 
Assistance Act of 2002, Public Law 107-147 with respect 
to property placed in service during the taxable year; 
(2) For taxable years beginning on or after January 1, 
2002 
but 
prior 
to 
January 
1, 
2006, 
a 
50~ bonus 
depreciation deduction claimed by the taxpayer pursuant 
to Section 201 of the federal Jobs 
and Growth Tax 
Relief Reconciliation Act of 2003, Public Law 108-27 
with respect to property placed in service during the 
taxable year; and 
(3) For taxable years beginning on or after January 1, 
2003 but prior to January 1, 6998 2006, the increase in 
aggregate cost claimed under Section 179 of the Code 
pursuant to Section 202 of the federal Jobs and Growth 
Tax 
Relief 
Reconciliation Act 
of 
2003, 
Public 
Law 
108-27 
or 
pursuant 
to 
Section 
of 
the 
federal 
American Jobs Creation Act of 2004, Public Law 108-357; 
Sec. E-2. 36 MRSA §5122, sub-§l, ~W, as amended by PL 2005, c. 
12, Pt. P, §3, is repealed. 
Sec. E-3. 36 MRSA §5200-A, sub-§l, ~N, as amended by PL 2005, 
c. 12, Pt. P, §7 and affected by §10, is further amended to read: 
N. 
With respect to property placed in service during the 
taxable 
year, 
an 
amount 
equal 
to 
the 
net 
increase 
in 
depreciation or expensing attributable to: 
(1) For taxable years beginning on or after January 1, 
2002 
but 
prior 
to 
January 
1, 
2006, 
a 
30% 
bonus 
depreciation deduction claimed by the taxpayer pursuant 
to Section 101 of the federal Job Creation and Worker 
Assistance Act of 2002, Public Law 107-147 with respect 
to property placed in service during the taxable year; 
(2) For taxable years beginning on or after January 1, 
2002 
but 
prior 
to 
January 
1, 
2006, 
a 
50% 
bonus 
depreciation deduction claimed by the taxpayer pursuant 
to Section 201 of the federal Jobs 
and Growth Tax 
Relief Reconciliation Act of 2003, Public Law 108-27 
with respect to property placed in service during the 
taxable year; and 
(3) For taxable years beginning on or after January 1, 
2003 but prior to January 1, 6998 ~, the increase in 
aggregate cost claimed under Section 179 of the Code 
pursuant to Section 202 of the federal Jobs and Growth 
Tax 
Relief 
Reconciliation Act 
of 
2003, 
Public 
Law 
108-27 
or 
pursuant 
to 
Section 
of 
the 
federal 
American Jobs Creation Act of 2004, Public Law 108-357; 
Sec. E-4. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTF 
Sec. F-l. 36 MRSA §4062, sub-§l-A, 1JA, 
as 
repealed 
and 
replaced by PL 2005, c. 12, Pt. N, 
§1 and affected by §4, is 
amended to read: 
A. 
For the estates of decedents dying after December 31, 
2002, "federal credit" means the maximum credit for state 
death taxes determined under the Code, Section 2011 as of 
December 31, 2002 exclusive of the reduction of the maximum 
credit contained in the Code, Section 2011(b)(2); the period 
of limitations under the Code, 
Section 2011(c); 
and the 
termination 
provision 
contained 
in 
the 
Code, 
Section 
2011(f). 
The federal taxable estate is to be determined 
using the applicable Code as of the date of the decedent' s 
death, except that: 
(1) 
The state death tax deduction contained in the 
Code, Section 2058 is to be disregarded; 
t6}-~~-~»i~i&G-~~~~--i&-~e-~-Qe~eEmiReQ-~-tae 
beQeT-SeetieR-6Q1Q-as-ef-geeemeeF-~lT-6QQQt 
(3) For the estates of decedents dying after December 
31, 2004, the federal taxable estate must be decreased 
by an amount equal to the value of Maine qualified 
terminable 
interest property in the estate of 
the 
decedent; and 
(4) For the estates of decedents dying after December 
31, 2004, the federal taxable estate must be increased 
by an amount equal to the value of Maine elective 
property in respect of the decedent; and 
Sec. F-2. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PART G 
Sec. G-l. 36 MRSA §6201, sub-§l, as amended by PL 2005, c. 2, 
Pt. E, §l and affected by §§7 and 8, is further amended to read: 
1. 
Benefit base. 
"Benefit base" 
means 
property 
taxes 
accrued or rent constituting property taxes accrued. 
In the case 
of 
a 
claimant 
paying 
both 
rent 
and 
property 
taxes 
for 
a 
homestead, benefit base means both property taxes accrued and 
rent constituting property taxes accrued. 
The benefit base may 
not exceed 
$~TQQQ--~!,---6-i~~--aeliseae:lQs--and--~.Q.OO....-feF 
aeliseaeles-wita-6-eF-meFe-memeeFs $5,000. 
Sec. G-2. 36 MRSA §6207, sub-§l, ,A-l, as amended by PL 2005, 
c. 2, Pt. E, §4 and affected by §§7 and 8, is further amended to 
read: 
A-I. 
Fifty percent of that portion of the benefit base that 
exceeds 
4"1, but does not exceed 8"1, of income plus 100"1, of 
that portion of the benefit base that exceeds 8"1, of income 
to a maximum payment of $dTGGG $3,000. 
Sec. G-3. Application. 
This Part applies to applications for 
benefits filed on or after August 1, 2006. 
PARTH 
Sec. H-l. 36 MRSA §1752, sub-§§l-H and 1-1 are enacted to read: 
I-B. 
Amusements. 
"Am'y'§'ements" 
includes fees 
cha~~£ 
admission to sports and recreational activities; theaters and 
public 
entertainment: 
commercial 
amusements: 
commercial 
participant amusements: 
sightseeing: 
spectator sports; movies, 
plays, 
concerts, 
museums, 
art 
g~lleries, fairs 
and 
sporti~ 
events; and arcades, amusement rides, theme parks, water slides, 
golf courses, 
bowling alleys. 
pool halls, skating rinks, 
ski 
lifts. rafting and boat trips and guide services or any fees 
charged for hire of such services when no admission fees will be 
charged to the spectators or participants and fees charged for 
rental of recreational eguipment and facilities. 
1-1. 
Business 
support 
services. 
"Business 
SIJPP.Q.tl 
services" 
includes 
contracted 
services 
for 
business 
administrative 
SIJPPort; 
facilities; 
emplQyment 
stg!JJ_n9L 
transcription: travel arrange.-rnent and reservations: 
inve_~tigation 
and security; maintenance, management and repair to commercial 
buildings 
and 
dwellings; 
lawn 
and 
landscaping 
services; 
and 
collection, management and remediation of waste. 
Sec. H-2. 36 MRSA §1752, sub-§3-F is enacted to read: 
3-[. 
Home car_e services. 
"HolJle care services" includes, 
when performed with regard to residential property, 
paintin~ 
papering and interior decorating; lawn and landscaping services: 
swimming pool installation, 
repair, 
cleaning and maintenance; 
locksmith, 
alarm and security services; 
waste 
management 
and 
remediation services; and disinfection and pest extermination and 
control. 
Sec. H-3. 36 MRSA §1752, sub-§5-C is enacted to read: 
, 
... 
t 
5-C. 
Information se~_yi~s. 
"Information services" includes 
services of newspaper publishers; periodicals publishers; book 
publisheI'~lectronic publishern database, directory and other 
publishers; video and sound recording producers; data processing 
service providers; contracted computer programers: 
and website 
development and maintenance providers. 
Sec. H-4. 36 MRSA §1752, sub-§§S-C and S-D are enacted to read: 
1l=c.. 
Personal 
ca~~_li~_:r~~d&tl~_. 
"Personal 
care 
services" 
includes services provided by barbers, beauticians, manicurists, 
~~ttoo 
artists, 
body 
~~ers, 
massage 
th~rapists, 
reflexologists, tanning salons. exercise and fitness centers and 
dance instructors and dance studios. 
8-D_. __ rer$2P_a.l--PJ,:ope.x:~~_IiEt~Jlices. 
"Personal 
property 
.s_ervices" 
includes 
cleaning, 
repair, 
moving, 
rentaL 
storage, 
maintenance and improvement of personal property. including motor 
vehicles. 
watercraft, 
snowmobiles, 
all-terrain 
vehicles, 
appliances. 
bicycles. 
jewelry, 
cameras, 
timepieces, 
firearms, 
!]lusical 
instruments~lectronic and electrical goods, furniture L 
rugs, upholstery and antiques. 
"Personal property seryices" does 
not include the rental of items subject to a tax under chapter 
~ 
Sec. H-5. 36 MRSA §1752, sub-§14, ,A, as enacted by PL 1987, 
c. 497, §24, is amended to read: 
A. 
"Sale price" includes: 
(1) 
Services whieh and labor, whether included in the 
.s9.lil--P-I"j,ce __ ~_fll1arately charged or stated that are a 
part of a retail sale; and 
(2) 
All receipts, cash, credits and property of any 
kind or nature and any 
amount for which credit is 
allowed by the seller to the purchaser, without any 
deduction on account of the cost of the property sold, 
the cost of the materials used, labor or service cost, 
interest paid, losses or any other expenses. 
Sec. H-6. 36 MRSA §1752, sub-§14, ,8, as amended by PL 2003, 
c. 673, Pt. V, 
§16 and affected by §29, is further amended to 
read: 
B. 
"Sale price" does not include: 
(1) 
Discounts allowed and taken on sales; 
(2) 
Allowances in cash or by credit made upon the 
return of merchandise pursuant to warranty; 
(3) 
The price of property returned by customers, when 
the full price is refunded either in cash or by credit; 
t4+--~~~~~-~eeeiveQ-~~--~~-9~-~~~~-iR 
iRs~alliR§-~-~~H~~F-~e~ai~iR§-~~~~rt~-S9lQT 
if-se~a~a~9ly-eRa~§eQ-9~-S~a~eQt 
(5) 
Any 
amount charged or collected, 
in lieu of a 
gratuity or tip, 
as 
a 
specifically stated service 
charge, when that amount is to be disbursed by a hotel, 
motel, restaurant or other eating establishment to its 
employees as wages; 
(6) 
The amount of any 
on or with respect to 
upon 
the 
retailer 
or 
tax imposed by the United States 
retail sales, whether imposed 
the 
consumer, 
except 
any 
importers', alcohol or tobacco excise 
manufacturers', 
tax; 
(7) 
The cost of transportation from the retailer's 
place of business or other point from which shipment is 
made directly to the purchaser, 
provided that those 
charges are separately stated and the transportation 
occurs by means of common carrier, contract carrier or 
the United States mail; 
(8 ) 
The 
fee 
imposed 
by 
Title 
10, 
section 
1169, 
subsection 11; 
(9) 
The fee imposed by section 4832, subsection 1; or 
(10) 
The lead-acid battery deposit imposed by Title 
38, section 1604, subsection 2-B. 
Sec. H-7. 36 MRSA §1752, sub-§17-B. as enacted by PL 2003, c. 
673, 
Pt. 
V, 
§19 
and affected by 
§29, 
is 
repealed 
and 
the 
following enacted in its place: 
17-8. 
Tpable service. 
"Taxable service" means: 
A. 
Rental of living quarters in a hotel, rooming house or 
tourist or trailer camP: 
B. 
Transmission and distribution of electricity: 
c. 
Rental or lease of an automobile: 
'\ 
D. 
Sale of prepaid calling service: 
E. 
Amusements: 
F. 
Personal care services: 
G. 
Escort, dating and ~rsonal introduction services: 
H. 
Flower 
and balloon delivery 
and other 
services to 
demonstrate personal appreciation: 
I. 
Taxidermy services: 
J. 
Flight and driving instruction: 
K. 
Rental for recreational purposes of boat moorings, boat 
slips and ~d'bCks; 
L. 
Cleaning, storage and repair of clothing and shoes: 
M. 
Personal property services: 
N. 
Pet grooming and kennel services: 
o. 
Veterinary services not associated with farm livestock; 
P. 
Home care servi~ 
o. 
Business support services; 
R. 
Advertising s~rvices in intrastate media; 
"""'--
S. 
Personal 
tra~tation services and courier seryices, 
including taxicab and limousine services; 
T. 
Warehousing and storage services: 
U. 
Information services; and 
V. 
Rental of safe deposit boxes. 
Sec. H-8. 36 MRSA §1760, sub-§3, as amended by PL 1991, c. 
824, Pt. A, §73, is repealed. 
Sec. H-9. 36 MRS A §1760, sub-§5 is repealed. 
Sec. H-IO. 36 MRSA §1760, sub-§5-A, as amended by PL 1975, c. 
623, §57, is repealed. 
Sec. H-11. 36 MRSA §1760, sub-§6, ,,8, as amended by PL 1991, 
c. 846, §18 and PL 2003, c. 689, Pt. B, §6, is repealed. 
Sec. H-12. 36 MRSA §1760, sub-§9, as amended by PL 1977, c. 
686, §1, is repealed. 
Sec. 8-13. 36 MRSA §1760, sub-§9-B, as amended by PL 1999, c. 
657, §21, is repealed. 
Sec. 8-14. 36 MRSA §1760, sub-§9-C, as enacted by PL 1977, c. 
686, §2, is repealed. 
Sec. H-15. 36 MRS A §1760, sub-§14 is repealed. 
Sec. 8-16. 36 MRS A §1760, sub-§16, as amended by PL 2003, c. 
689, Pt. B, §6 and c. 705, §4 and affected by §14, is repealed. 
Sec. H-17. 36 MRSA §1760, sub-§24 is repealed. 
Sec. 8-18. 36 MRSA §1760, sub-§31, "A, as amended by PL 2005, 
c. 12, Pt. S, §1, is further amended to read: 
A. 
For use by the purchaser directly and primarily in the 
production of tangible personal property intended to be sold 
or leased ultimately for final use or consumption or in the 
production of 
tangible 
personal 
property pursuant 
to 
a 
contract with the United States Government or any agency 
thereofT-~~--~-~Ae-€a~e-~--&a~&-e€€H££iB~-~~~-~-~GT 
6GG+T-~~-tae-~~~~-e~-~~~-aBe-~~1~i~~-e~eae€ast 
si~Ba~s-~-~~~€a~~--&~a~ieB&-~~l~~-HBee£-~~-~~-e~ 
~eeel'a~-~-a.t-i.€}f}f!h-~r--t--+~. 
This exemption applies even 
if the purchaser sells the machinery or equipment and leases 
it back in a sale and leaseback transaction. 
This exemption 
also applies whether the purchaser agrees before or after 
the purchase of the machinery or equipment to enter into the 
sale and leaseback transaction and whether the purchaser's 
use of the machinery or equipment in production commences 
before or after the sale and leaseback transaction occurs; 
and 
Sec. H-19. 36 MRSA §1760, sub-§34, as repealed and replaced by 
PL 1981, c. 163, §4, is repealed. 
Sec. 8·20. 36 MRSA §1760, sub-§39, as enacted by PL 1977, c. 
686, §3, is repealed. 
Sec. H-21. 36 MRSA § 1760, sub-§42, as amended by PL 2001, c. 
439, Pt. ppp, §l and affected by §2, is repealed. 
Sec. H-22. 36 MRSA §1760, sub-§43, as amended by PL 1983, c. 
828, §6, is repealed. 
Sec. H-23. 36 MRSA §1760, sub-§44, as reallocated by PL 1983, 
c. 562, is repealed. 
Sec. H-24. 36 MRSA §!760, sub-§46, as repealed and replaced by 
PL 2003, c. 451, Pt. AA, §1, is repealed. 
Sec. H-25. 36 MRSA §1760, sub-§47-A, as corrected by RR 1995, 
c. 2, §95, is repealed. 
Sec. H-26. 36 MRSA §1760, sub-§49, as repealed and replaced by 
PL 1999, c. 499, §1, is repealed. 
Sec. H-27. 36 MRSA §1760~ sub-§50, as enacted by PL 1983, c. 
859, Pt. M, §§6 and 13, is repealed. 
Sec. H-28. 36 MRSA §1760, 8ub-§5J, as repealed and replaced by 
PL 1985, c. 737, Pt. A, §95, is repealed. 
Sec. H-29. 36 MRSA §1760, sub-§53, as enacted by PL 1985, c. 
737, Pt. A, §97, is repealed. 
Sec. H-30. 36 MRSA §1760, sub-§55, as enacted by PL 1985, c. 
788, §1, is repealed. 
Sec. H-31. 36 MRSA §1760, sub-§56, as amended by PL 1989, c. 
533, §7, is repealed. 
Sec. H-32. 36 MRSA §1760, sub-§57, as enacted by PL 1987, c. 
343, §5, is repealed. 
Sec. H-33. 36 MRSA §1760, sub-§59, as amended by PL 1989, c. 
700, Pt. A, §169, is repealed. 
Sec. H-34. 36 MRSA §J760, sub-§60, as amended by PL 1997, c. 
545, §1, is repealed. 
Sec. H-35. 36 MRSA §1760, sub-§62, as repealed and replaced by 
PL 1989, c. 502, Pt. A, §129, is repealed. 
Sec. H-36. 36 MRSA §J760, sub-§63, as enacted by PL 1989, c. 
502, Pt. A, §130, is repealed. 
Sec. H-37. 36 MRSA §1760, sub-§65, as amended by PL 1993, c. 
670, §6, is repealed. 
II 
Sec. H-38. 36 MRSA §1760, sub-§66, as enacted by PL 1989, c. 
502, Pt. B, §47 and c. 581, §20 and repealed and replaced by c. 
8~1. ~-J, is repealed. 
Sec. 8-39. 36 MRSA §1760. sub-§o7, as enacted by PL 1989, c. 
501, Pt. P, §30 and c. 533, §8 and repealed and replaced by c. 
871, §13, is repealed. 
Sec. 11-40. 36 MRSA §1760, sub-§69, as enacted by PL 1989, c. 
533, §8, is repealed. 
Sec. H-41. 36 MRSA §1760, sub-§70. as enacted by PL 1989, c. 
533, §8 and amended by c. 871, §14, is repealed. 
Sec. H-42. 36 MRSA §1760, sub-§72, as amended by PL 1999, c. 
708, §30, is repealed. 
Sec. H-43. 36 MRSA §1760, sub-§77, as enacted by PL 1993, c. 
532, §1, is repealed. 
Sec. H-44. 36 MRSA §1760, sub-§84, as enacted by PL 2001, c. 
95, §6, is repealed. 
Sec. H-45. 36 MRSA §1760, sub-§85, as reallocated by RR 2001, 
c. 1, §45, is repealed. 
Sec. H-46. 36 MRSA §2557, sub-§3, as enacted by PL 2003, c. 
673, Pt. V, §25 and affected by §29, is repealed. 
Sec. H-47. 36 MRSA §2557. sub-§§8 to 29. as enacted by PL 2003, 
c. 673, Pt. V, §25 and affected by §29, are repealed. 
Sec. H-48. Effective date. 
This Part takes effect January 1, 
2006. 
PART I 
Sec. 1-1. 36 MRSA §1811. first 1[. as amended by PL 2001, c. 439, 
Pt. TTTT, §2 and affected by §3, is further amended to read: 
A tax is imposed on the value of all tangible personal 
property and taxable services sold at retail in this State. 
The 
rate of tax is 1% l.Q'\, on the value of liquor sold in licensed 
establishments as defined in Title 28-A, section 2, subsection 
15, in accordance with Title 28-A, chapter 43; 
1% 
10'\, on the 
value of rental of living quarters in any hotel, rooming house or 
tourist or trailer camp; 
IG% 
20~ on the value of rental for a 
period of less than one year of an automobile; 1% ~ on the value 
of prepared food; and 9% 
4~o on the value of all other tangible 
... 
personal property and taxable services. 
Value is measured by the 
sale price, except as otherwise provided. 
Sec. 1-2. 36 MRSA §1811, 3rd 1[, as repealed and replaced by PL 
2003, c. 510, Pt. C, §12 and affected by §13, is amended to read: 
Rental or lease of an automobile for one ye~r or more must 
be taxed at the time of the lease or rental transaction at §% 4% 
of the fOllowing: 
the total monthly lease payment multiplied by 
the number of payments in the lease or rental, the amount of 
equity involved in any trade-in and the value of any cash down 
payment. 
Collection 
and 
remittance 
of 
the 
tax 
is 
the 
responsibility 
of 
the 
person 
that 
negotiates 
the 
lease 
transaction with the lessee. 
Sec. 1-3. 36 MRSA §2551, sub-§2, as amended by PL 2005, c. 12, 
Pt. TTT, §2 and affected by §4, is further amended to read: 
2. 
Cable 
and satellite television services. 
"i:Kt:eReee 
eaB±e 
~ble and satellite television services" means all cable 
and satellite television service 
t:Rat:--i&-~-~~~~-~e--t:Re 
miRim\,\ffi-seF .... iee that can be purchased from a cable or satellite 
television supplier, including the use of associated equipment 
for which a charge is made. It does not include installation of 
the associated equipment for which a separate charge is levied. 
Sec. 1-4. 36 MRSA §2552. sub-§l, as amended by PL 2005, c. 12, 
Pt. VV, §§2 and 3 and Pt. TTT, §3 and affected by §4, is further 
amended to read: 
1. Rate. 
A tax at the rate of §% 4% is imposed on the value 
of the following services sold in this State: 
A. 
EKt:eReee-eaB±e Cable and satellite television services; 
B. 
Fabrication services; 
C. 
Rental of video media and video equipment; 
D. 
Rental of furniture, 
audio media and audio equipment 
pursuant to a rental-purchase agreement as defined in Title 
9-A, section 11-105; 
E. 
Telecommunications services; 
F. 
The 
installation, 
maintenance 
or 
repair 
of 
telecommunications equipment; 
G. 
Private nonmedical institution services; aRe 
Page l6-LR2080(1) 
H. 
Community support servicesT_~ 
I. 
Internet service access. 
Sec. 1-5. Effective date. 
This Part takes effect January 1, 
2006. 
PART J 
Sec. J-l. 36 MRSA §4641-A, sub-§l, ~A, as enacted by PL 2001, 
c. 559, Pt. I, §3 and affected by §15, is amended to read: 
A. 
The rate of the 
fractional 
part 
of 
transferred. 
tax 
$500 
is $6T6G is. 00 
of 
the 
value 
for 
of 
each $500 or 
the 
property 
Sec. J-2. 36 MRSA §4641-A, sub-§2, ~A, as enacted by PL 2001, 
c. 559, Pt. I, §3 and affected by §15, is amended to read: 
A. 
The rate of the tax is $6T6G ~ 
for each $500 or 
fractional part of $500 of the value of the real property 
owned by the entity and located in this State. 
\ 
Sec. J-3. 36 MRSA §4641-B. sub-§4. as amended by PL 2005, c. 
12, Pt. H, §1, is further amended to read: 
4. 
Distribution of State's share of proceeds. 
The State 
Tax Assessor shall pay all net receipts received pursuant to this 
section to the Treasurer of State, and shall at the same time 
provide the Treasurer of State with documentation showing the 
amount 
of 
revenues 
derived 
from 
the 
tax 
imposed 
by 
section 
4641-A, subsection 1 and the amount of revenues derived from the 
tax imposed by section 4641-A, subsection 2. 
The Treasurer of 
State shall credit lta 75% of the revenues derived from the tax 
imposed by section 4641-A, subsection 1 to the General Fund and 
shall monthly pay the remaining lta 25 % 
of such revenues to the 
Maine State Housing Authority, which shall deposit the funds in 
the Housing Opportunities for Maine Fund created in Title 30-A, 
section 4853, except that in fiscal year 2003-04, 
fiscal year 
2004-05, fiscal year 2005-06 and fiscal year 2006-07, $7,500,000 
of the remaining lt6-eE-~Re6e revenues must be transferred to the 
General Fund before any payments are made to the Maine State 
Housing Authority. 
The Treasurer of State shall credit to the 
General Fund all of the revenues derived from the tax imposed by 
section 4641-A, subsection 2. 
Sec. J-5. Application. 
This Part applies to transfers of real 
property occurring on or after January 1, 2006. 
PARTK 
Sec. K-l. 36 MRSA §5219-Y is enacted to read: 
§52l9-Y. 
Principal residence transfer credit 
A taxpayer who 
tral).sfeLl> property that was the taxpayer's 
permanent residence or who purchases property for that taxpayer's 
permanent residence, 
as defined in section 681, is allowed a 
.rej:unqab1e 
cre_dit_gq~in~J;.h~g~lJ'l.t~osed under this Part equal 
to 50% of the tax paid by the taxpayer under section 4641-A. 
Sec. K-2. 
Application. 
This 
Part 
applies 
to 
tax 
years 
beginning on or after January 1, 2006. 
PARTL 
Sec. L-l. 36 MRSA §4365. as amended by PL 2003, c. 705, §6, 
is further amended to read: 
§4365. Rate of tax 
A tax is imposed on all cigarettes imported into this State 
or held in this State by any person for sale at the rate of -4+ 
mills for each cigarette. 
Payment of the tax is evidenced by 
the affixing of stamps to the packages containing the cigarettes. 
Sec. L-2. 36 MRSA §4365-E, as enacted by PL 2001, c. 439, Pte 
SSSS, §2, is repealed. 
Sec. L-3. 36 MRSA §4365-F is enacted to read: 
§4365-F. 
"pp,lj,ca,tj,pn of_cigaI;'ett_e _tax ri;lte increase 
effective January 1. 2006 
The following provisions apply to cigarettes held for resale 
on January 1, 2006. 
1. 
Stamped rate. 
Cigarettes stamped at the rate of 47 
mills per cigarette and held for resale after December 31, 2005 
are subject to tax at the rate of 75 mills per cigarette. 
2. 
Liability. 
A person possessing cigarettes for resale is 
liable for the differenc~ween the tax rate of 75 mills per 
cigarette and the tax rate of 50 mills per cigarette in effect 
before January 1, 
200J5_~t~!lJ.l2§_ indicating payment of the tax 
imposed by this section must be affixed to all packages of 
cigarettes lltld for resale as of January 1, 
20~ except that 
~igarettes held in vending machines 
as 
of that date 
do 
not 
reguire that stamp. 
3. 
Vending 
machiD~!i. 
Notwiths!;.j;w..ding any other 
prov~s~on 
9.J 
this chapter, 
it-----.is----P~E;tS\.lJll~Ld_tha~.l~~jgare.t~t~-----'Len.<:ling 
machines are filled to capacity on January L 
2006 and that the 
j;.~ imposed by this se..ction must be reported on that basis. 
A 
credit against this inventory tax must be allowed for cigarettes 
~ped at the rat~Qf 75 mills per cigarette placed in vending 
machines before January 1, 2006. 
4. 
Paynaent. 
Pa-YIDent of the tax imposed by this section 
must 
be 
made 
to 
the 
State 
Tax 
Assessor 
by 
March 
1, 
2006, 
accompanied by forms prescribed by the assessor. 
Sec. L·4. 36 MRSA §4366·A, sub·§2, ~~B and C, as enacted by PL 
2001, c. 439, Pt. SSSS, §3, are amended to read: 
B. 
For stamps at the face value of 47 mills sold prior to 
July 1, 2002, 2.16%; aRe 
C. 
For stamps at the face value of 47 mills sold on or 
after July 1, 2002, 
2.03%T~ 
Sec. L·5. 36 MRSA §4366·A, sub·§2, ~~D and E are enacted to 
read: 
D. 
For stamps 
a.t_.th.e---.t:~~e value of 75 mills sold prior to 
January 1, 2006, 1.62%; and 
E. 
For stamps at the face value of 75 mills sold on or 
after January 1, 2006, 1.52%. 
Sec. L·6. 36 MRSA §4366.D, as enacted by PL 2001, c. 450, Pt. 
D, §1, is repealed. 
Sec. L·7. 36 MRSA §4403, sub·§l, as amended by PL 1989, c. 
588, Pt. D, §4, is further amended to read: 
1. 
Smokeless tobacco. 
A tax is imposed on all smokeless 
tobacco, including chewing tobacco and snuff, at the rate of 50% 
of the wholesale sales price beginning October 1, 1989; 
55% of 
the wholesale sales price beginning January 1, 1991; aRe 62°1;, of 
the wholesale sales price beginning July 1, 1991; and 100% of the 
wholesale sales price beginning January 1, 2006. 
Sec. L·8. 36 MRSA §4403, sub-§2, as amended by PL 1989, c. 
588, Pt. 
D, 
§4, is repealed and the following enacted in its 
place: 
"1 
i 
2. 
Cigars; Qth~t9haccQ~_t_~s imposed on cigars, pipe 
t~cco and other tobacco intended for 
smoking at the rates 
specified in this subsection: 
2006. 
A. 
On cigars, 25% of the wholesale sales price beginning 
January 1, 2006; and 
B. 
On pipe tobacco and other tobacco intended for smoking, 
100% of the wholesale sales price beginning January 1, 2006. 
Sec. L·9. Effective date. 
This Part takes effect January 1, 
PARTM 
Sec. M·l. 28-A MRSA §1652. sub-§I, as repealed and replaced 
by PL 1987, c. 342, §116, is amended to read: 
1. 
Excise tax on malt liquor. An excise tax is imposed on 
the privilege of manufacturing and selling malt liquor in the 
State. 
The 
Maine manufacturer or importing wholesale licensee 
shall pay an excise tax of 69¢ ~ 
per gallon on all malt liquor 
sold in the State. 
Sec. M·2. 28-A MRSA §1652, sub-§2, as amended by PL 1997, c. 
767, §4, is further amended to read: 
2. 
Excise tax on vine and hard cider. 
An excise tax is 
imposed on the privilege of manufacturing and selling wine in the 
State. 
The Maine manufacturer or importing wholesale licensee 
shall pay an excise tax of 6Q¢ II per gallon on all wine et:sef' 
{;saR 
.aDQ sparkling wine manufactured in or imported into the 
StateT-~-pef'-~l~~-eR-~I~--spaf'**iR~-~~-~aRQ~aet:Qf'ee-~~-ef' 
impef't;ee-~~~~~-St:at:e and 69¢ Sl per gallon on all hard cider 
manufactured in or imported into the State. 
Sec. M·3. Effective date. 
This Part takes effect January I, 
2006. 
SUMMARY 
This bill makes 
major 
changes 
to Maine's 
tax structure 
beginning January 1, 2006. 
Part A changes the existing graduated income tax program 
into a flat tax rate of 6% and corrects cross-references. 
Part A 
also repeals the alternative minimum tax. 
Part B ties the standard deduction and personal exemption to 
the same amount as the federal standard deduction and personal 
exemption and eliminates the so-called "marriage penalty." 
Part 
C 
restores 
the 
income 
tax 
credit 
for 
child 
care 
expenses to 25% of the federal tax credit. 
Part D increases the earned income tax credit to 25% of the 
federal earned income credit and makes it refundable. 
Part E conforms the deductibility of health savings accounts 
and business expensing with federal law. 
Part F increases the exemption for estates under the estate 
tax to the same amount as under federal law. 
Part G amends the Maine Residents Property Tax Program, also 
known as the circuit breaker program, 
by raising the maximum 
benefit 
from 
$2,000 
to 
$3,000 
and increasing to 
$5,000 
the 
maximum property taxes and rent constituting property taxes that 
may be considered in calculating the benefit. 
Part 
H 
repeals 
certain 
exemptions 
application of the sales and use tax. 
and 
expands 
the 
Part I decreases the general sales tax rate and the service 
provider tax from 5°'0 to 4°'0. 
Part I 
also increases the rate of 
sales tax imposed on: 
1. 
Liquor sold in licensed establishments from 7% to 10%; 
2. 
Lodging in a hotel, rooming house or tourist or trailer 
camp from 7% to 10%; 
3. 
The rental of a motor vehicle for less than one year 
from 10% to 20%; and 
4. 
Prepared food from 7% to 8%. 
Part J increases the real estate transfer tax from $2.20 per 
$500 to $5.00 per $500. 
Part K provides a credit of 50% of the real estate transfer 
tax paid on a permanent residence. 
Part L increases the tax on cigarettes by SOt to $1.50 per 
pack, the tax on smokeless tobacco products from 62°,<> to 100°,<> of 
the wholesale price, the tax on cigars from 16% to 25% of the 
wholesale price and the tax on other tobacco products from 16% to 
100% of the wholesale sales price. 
Part M increases the excise tax on malt liquor from 25¢ per 
gallon to 50¢ per gallon, on wine from 30¢ per gallon to $1 per 
gallon and on hard cider from 25¢ per gallon to $1 per gallon. 
, 
'-