An Act To Change the Maine Income Tax Rates
Maine Legislature, Session 122, LD 1240
Committee: Taxation
Sponsors: CRESSEY, NASS, AUSTIN, BIERMAN, BISHOP, HAMPER, JACOBSEN, LANSLEY, ANDREWS
Amends: 1 MRSA §815, 5 MRSA §1665, 36 MRSA §3321, 36 MRSA §5111, 36 MRSA §5111-A, 36 MRSA §5111-C, 36 MRSA §5122, 36 MRSA §5124, 36 MRSA §5125, 36 MRSA §5126, 36 MRSA §5160, 36 MRSA §5203-C, 36 MRSA §5216-C, 36 MRSA §5224-A, 36 MRSA §5250, 36 MRSA §5275

Legislative Document 
No. 1240 
H.P.858 
House of Representatives, March 10,2005 
An Act To Change the Maine Income Tax Rates 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative CRESSEY of Cornish . 
Cosponsored by Senator NASS of York and 
'7J'l~ m.7T/~~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: AUSTIN of Gray, BIERMAN of Sorrento, BISHOP of Boothbay, HAMPER 
of Oxford, JACOBSEN of Waterboro, LANSLEY of Sabattus, McLEOD of Lee, Senator: 
ANDREWS of York. 
Printed on recyc led paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 1 MRSA §815, first 1J, as enac ted 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 aright 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 
€le~iRe€l--i-n--~j,.t,.].e.-~~--se-G-t,.i-G-a--!i4Q-6T-~-l,o.n--l. 
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 "Nat.ional Consumer Price Index 
for All Urban Consumers - United States City Average." 
Sec. 2. 5 MRSA §1665. sub-§l, as amended by PL 2003, c. 451, 
Pt. X, §9, is further amended to read: 
1. 
Expenditure 
and 
appropriation 
requirements. 
On 
or 
before September 1st of the even-numbered years, all departments 
and other agencies of the State Government and corporations and 
associations receiving or desiring to receive state funds under 
the provisions of law shall prepare, in the manner prescribed by 
and on blanks furnished them by the State Budget Officer, and 
submit 
to 
the 
officer 
estimates 
of 
their 
expenditure 
and 
appropriation requirements for each fiscal year of the ensuing 
biennium contrasted with the corresponding figures of the last 
completed fiscal year and the estimated figures for the current 
fiscal 
year. 
The 
total 
General 
Fund 
appropriation 
requests 
submitted by each department and agency for each fiscal year may 
not exceed the General Fund appropriation of the previous fiscal 
year multiplied by one plus the average real personal income 
growth rate. 
For purposes of this subsection, 
"average real 
personal income growth rate" means the average for the prior 10 
calendar years, ending with the most recent calendar year for 
which data is available, of the percent change in personal income 
in this State for a calendar year, as estimated by the United 
States Department of Commerce, Bureau of Economic Analysis, less 
the percent change in the Consumer Price Index for that calendar 
Page l-LR166l(1} 
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, 
year. 
For purposes of this subsection, "Consumer Price Index" 
aas-~~~~&a&i~-a6-~~-~~~-l&r-~e€~~e~-~--~~~~~&-l 
means the average over a 12 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.: 
The 
expenditure 
estimates saall must be classified to set forth the data by 
funds, organization units, character and objects of expenditure. 
The organization units may be subclassified by functions 
and 
activities, or in any other manner, at the discretion of the 
State Budget Officer. 
Sec. 3. 36 MRSA §3321, 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-ge~4BeQ-~~~~~-~r-~~&&&e&ie&-l 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 subsection, 
"Consumer Price Index" means the average over a 12-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 
:lO 
Average. " 
,\2 
Sec. 4. 36 MRSA §5111. as amended by PL 1999, c. 731, Pt. T, 
§§1 to 7, is repealed. 
Sec. 5. 36 MRSA §5111-A. as repealed and replaced by PL 1987, 
c. 819, §3, is repealed. 
.18 
Sec. 6. 36 MRSA §5111-C is enacted to read: 
,~o 
§Slll-C. 
Imposition and rate of tax 
1. 
Reside~_t. 
A tax is 
imposed for 
each taxable year 
Qeginning on or after January 1, 2006 Qn the Maine tgxablg income 
of every resident individual of this State. 
If Mgine taxable 
in~ome is: 
A. 
Less than the federal poverty level, the tgx is $0; 
B. 
At 
least the 
federal 
poverty 
level 
but 
less 
than 
$50,000, the tax is 1%: 
c. 
At least $50,000 but less than $100,000, the tax is 5%; 
D. 
At least $100,000 but less than $1, 000,000, the tax is 
8%: and 
E. 
One million dollars or more, the tax is 10%. 
for purposes of this subsection, "federal poverty level" means 
the nonfarm income official poverty line for a family of the size 
involved, 
as defined by the federal Office of Management and 
Budget and revised annually in accordance with the United States 
Qmnibus 
Budget 
Reconciliation 
Act 
of 
1981, 
Section 
673, 
Subsection 2. 
2. 
Additional tax. 
Additionally, a tax is imposed for each 
taxable year beginning on or after January 1, 1989 on the Maine 
adjusted gross 
income 
of 
every 
nonresident 
individual. 
The 
amount of the tax e~uals the tax computed under this section and 
chapter 805, as if the nonresident were a resident, multiplied by 
the ratio of the individual's Maine adjusted gross income, 
as 
defined in section 5102, 
subsection 1-C, 
paragraph B, 
to the 
nonresident's entire federal adjusted gross income as modified by 
section 5122. 
Sec. 7. 36 MRSA §5122. sub-§2. fT. 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) 
aRa-~-~~-leB~-~eFm-~~-F£emi~m£--&~a~-~-aH 
itemiBea-aea~etieR-F~~s~aHt-te-seetieR-9l69. 
Sec. 8. 36 MRSA §5124·A. as amended by PL 2003, c. 479, §4, 
is repealed. 
• 
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.l4 
Sec. 9. 36 MRSA §5125, as amended by PL 2003, c. 390, §34, is 
repealed. 
Sec. 10. 36 MRSA §5126, as amended by PL 2001, c. 583, §16, 
is repealed. 
Sec. 11. 36 MRSA §5160, as amended by PL 2003, c. 390, §3 5, 
is further amended to read: 
§5160. Imposition of tax 
The tax is imposed, at the rates provided by section elll 
5111-C for single individuals, upon the Maine taxable income of 
estates and trusts. The tax must be paid by the fiduciary. 
Sec. 12. 36 MRSA §5203-C, sub-§I, 1JV, G and H, as enacted by 
PL 2003, c. 673, Pte JJ, §3 and affected by §6, are amended to 
read: 
F. 
"Regular income tax" means: 
(1) 
For resident individuals, estates and trusts, the 
amount derived by multiplying the applicable tax rate 
or rates by taxable income under section 5121 or 5163; 
(2) 
For nonresident individuals, estates and trusts, 
the amount derived by multiplying the applicable tax 
rate or rates by taxable income under section 5121 or 
5175, the result of which is adjusted for nonresident 
individuals 
1n 
accordance with section 
ell;!, 
5111-C, 
subsection -4-
~; or 
(3) 
For taxable corporations, 
the amount derived by 
mul tiplying the applicable tax rate or rates against 
Maine net income under section 5102, subsection 8. 
G. 
"Tentative alternative 
minimum 
taxable 
income" 
means 
federal alternative minimum taxable income: 
(1) 
Reduced by income that states are prohibited under 
federal law from subjecting to income tax to the extent 
included in federal alternative minimum taxable income; 
(2) 
Reduced by income, loss or deductions by which the 
State decreases federal adjusted gross income in the 
case of individuals or federal taxable income in the 
case of corporations, estates and trusts under section 
5122, 
seel;i9B-.e.,l-2.e..,-~-t-i~-3-~F--seel;i9B 5164, 5176 
or 
5200-A or 
as 
otherwise indicated by 
law to the 
extent included in federal alternative minimum taxable 
income; and 
(3) 
Increased by income, loss or deductions by which 
the State increases federal adjusted gross income in 
the case of individuals or federal taxable income in 
the 
case of corporations, 
estates 
and trusts 
under 
section 5122, 
see~ieR--~~~~r-~~--~-e~--seetieR 
5164, 5176 or 5200-A or as otherwise indicated by law 
to 
the 
extent 
not 
included 
in 
federal 
alternative 
minimum taxable income. 
H. 
"Tentative minimum tax" means: 
(1) 
Except 
case of a 
the sum of: 
as provided 
taxpayer other 
in subparagraph 
than a taxable 
(2), in the 
corporation, 
(a) 
An 
amount equal to 
7°'0 
of 
so much of the 
alternative minimum taxable 
income 
as 
does 
not 
exceed $175,000; plus 
(b) An amount equal to 7.6% percent of so much of 
the alternative minimum taxable income as exceeds 
$175,000. 
For a nonresident individual, the tentative minimum tax 
must 
be 
adjusted 
in 
accordance 
with 
section 
9±±± 
511l-C, subsection -4- £. 
(2) 
In the case of 
a 
married individual filing a 
separate return, the sum of: 
( a) 
An 
amount equal to 
7% 
of so much of the 
alternative minimum 
taxable 
income 
as 
does 
not 
exceed $87,500; plus 
(b) An amount equal to 7.6% percent of so much of 
the al ternati ve minimum taxable income as exceeds 
$87,500. 
For a nonresident individual, the tentative. minimum tax 
must 
be 
adjusted 
in 
accordance 
with 
section 
9±±± 
5ll1-C, subsection -4- £. 
(3) 
In 
the 
case 
of 
a 
taxable 
corporation, 
the 
tentative minimum tax for the taxable year is 5. 4'l-0 of 
the alternative minimum taxable income. 
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lU 
Sec. 13. 36 MRSA §5216-C, sub-§I, as enacted by PL 1999, c. 
475, §6 and affected by §7, is amended to read: 
1. 
Credit allowed. 
A taxpayer who contributes to a family 
development account reserve fund as defined in Title 10, section 
1075 is allowed a credit against the tax imposed by this Part 
equal to the lower of: 
A. 
Twenty-five thousand dollars; or 
B. 
Fifty percent of the amount contributed by the taxpayer. 
Only one credit may be claimed on each annual income tax return 
regardless of filing status. 
The 
credit allowed under this 
section may not reduce the tax to less than 0 and must be applied 
after allowance for all other eligible credits. 
-A-~~~-wa9 
e±a~ms-~-€~€~i~--~~F-~~~-see~~eR-~-£€~--&~a1m-~-~~em~gee 
eaaF~~aB±e-~-~-~ReeF-~~-~~~~--~F-~~-affie~a~-~--~ae 
e9R~F~B~~~eR-~aa~-~~a±iEiee-E9F-~ae-eFee~~T 
Sec. 14. 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±± must be 
computed, pursuant to section 9111 5111-C, subsection - 4-
~, as 
if that individual were a nonresident individual, except that the 
numerator 
of 
the 
apportionment 
ratio 
saa±±--Be--e9m~Fisee--9E 
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 income L 
as 
defined in section 5102, subsection 1-C, paragraph B, 
for the 
portion of the taxable year during which that individual was a 
nonresident. 
The part-year resident saall is also ae entitled to 
the 
credit 
provided 
by 
section 
5217-A, 
computed 
as 
if 
the 
individual's Maine adjusted gross income for the entire year weFe 
comprised only 9f that portion waiea that is attributed to the 
portion of the year during which that individual was a resident. 
Sec. 15. 36 MRSA §5250. sub-§2. as amended by PL 1997, c. 668, 
§§36 and 37, is repealed. 
Sec. 16. 36 MRSA §5275. first~, as enacted by P&SL 1969, c. 
154, §F, is amended to read: 
In 
addition 
to 
any 
other 
penalty provided 
by 
law, 
gA 
individual is liable for a penalty of $50 for each such statement 
if aay ~ 
individual in claiming a withholding allowance states: 
Sec. 17. 36 MRSA §5275, sub·§l, as enacted by P&SL 1969, c. 
154, §F, is amended to read: 
1. 
An amount less than wages. As the amount of the wages 
shown on Ris that individual's return for any taxable year an 
amount less than such wages actually shownT-e~ unless: 
A. 
Such 
litj,~t.eme!J.t did not result in a 
decrease in the 
amounts deducted and withheld; or 
B. 
The taxes imposed with respect to the individual under 
this Part for the succeeding taxable year do not exceed the 
sum of the payments of estimated tax that are considered 
payments on account of such taxes. 
Sec. 18. 36 MRSA §5275, sub·§2, as amended by PL 1979, c. 378, 
§44, is repealed. 
Sec. 19. 36 MRSA c. 841. as amended, is repealed. 
Sec. 20. Application. 
This Act applies to tax years beginning 
]0 
J2 
on or after January 1, 2006. 
SUMMARY 
This bill repeals the existing graduated 
and 
provides 
for 
graduated 
tax 
rates 
based 
without any deductions or personal exemptions. 
federal poverty level is exempt from the income 
income tax rates 
on 
a 
percentage 
Income below the 
tax. 
The tax rates are 1% for income less than $50,000; income of 
at least $50,000 but less than $100,000 is taxed at 5%; income of 
at least $100,000 but less than $1,000,000 is taxed at 8
0b; and 
income of $1,000,000 or more is taxed at 10%.