An Act To Provide Tax Benefits for Sale of Leased Land Used as a Primary Residence
Maine Legislature, Session 122, LD 0700
Committee: Taxation
Sponsors: DAVIS, CLARK, BRYANT, CLUKEY, HASTINGS, MILLS, NUTTING, WOODCOCK, ANNIS, BOWLES
Amends: 36 MRSA §5122, 36 MRSA §5200-A, 36 MRSA §5200

Legislative Document 
No. 700 
S.P.237 
In Senate, February 10,2005 
An Act To Provide Tax Benefits for Sale of Leased Land Used as a 
Primary Residence 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Senator DAVIS of Piscataquis. 
Cosponsored by Representative CLARK of Millinocket and 
JOY J. O'BRIEN 
Secretary of the Senate 
Senators: BRYANT of Oxford, CLUKEY of Aroostook, HASTINGS of Oxford, MILLS of 
Somerset, NUTTING of Androscoggin, WOODCOCK of Franklin, Representatives: ANNIS of 
Dover-Foxcroft, BOWLES of Sanford. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §5122, sub-§2, ~Q, as corrected by RR 2003, c. 
1, §38, is amended to read: 
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 1, 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 50" 
of the amount added back under subsection 1, paragraph 
N with 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; ana 
Sec. 2. 36 MRSA §5122, sub-§2, 1fT, as amended by PL 2003, c. 
705, §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. 3. 36 MRSA §5122, sub-§2. ~U is enacted to read: 
U. 
Capital gains from the sale of property to a person who, 
at the time of the sale, is leasing the property for use as 
a primary residence. 
Sec. 4. 36 MRSA §5200-A. sub-§2, ~L, as amended by PL 2003, c. 
20, Pt. EE, §3, is further amended to read: 
L. 
An 
amount 
equal 
to 
the 
absolute 
value 
of 
any 
net 
operating loss arising from a tax year beginning or ending 
in 2001 for which federal taxable income was increased under 
subsection 1, paragraph M and that, pursuant to Section 102 
of the federal Job Creation and Worker Assistance Act of 
2002, Public Law 107-147, was carried back more than 2 years 
to the taxable year for federal 
income tax purposes, but 
only to the extent that: 
(1) Maine taxable income is not reduced below zero; 
(2) The taxable year 
the 
year 
in 
which 
allowable 
federal 
operating losses; and 
is either 
the 
loss 
period 
within 2 years prior to 
arose 
or 
within 
the 
carry-over 
of 
net 
for 
(3) 
The 
amount 
has 
not 
been previously 
used 
as 
a 
modification pursuant to this subsection; aBe 
Sec. 5. 36 MRSA §5200.-A. sub-§2. ~M. as repealed and replaced 
by PL 2003, c. 479, §6, is amended to read: 
M. 
A fraction of any amount previously added back by the 
taxpayer to federal taxable 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 1, 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 500 
of the amount added back under subsection 1, paragraph 
N with 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, 
di vided 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 appliedT ; and 
Sec. 6. 36 MRSA §S200-A. sub-§2. ~p is enacted to read: 
p. 
Capital gains from the sale of property to a person who, 
at the time of the sale, is leasing the property for use as 
a primary residence. 
Sec. 7. Application. 
This Act applies to tax years beginning 
on or after January 1, 2005. 
U 
SUMMARY 
This bill provides an income tax exemption for capital gains 
for the seller when the sale of property is to a person who, at 
the time of the sale, is leasing the property for 
use as 
a 
primary residence.