An Act To Allow a Tax Credit for College Loan Repayments Transmitted to the Clerk of the 123rdMaine Legislature by the Secretary of State on April 11,2007 and ordered printed. Prl1l1t:'d tin rttycletl paper 17/~'1J?~
Maine Legislature, Session 123, LD 1856
Amends: 36 MRSA §5217-D

Legislative Document 
No. 1856 
I.B.2 
House of Representatives, April 12, 2007 
An Act To Allow a Tax Credit for College Loan Repayments 
Transmitted to the Clerk of the 123rdMaine Legislature by the Secretary of State on 
April 11,2007 and ordered printed. 
Prl1l1t:'d tin rttycletl paper 
17/~'1J?~ 
MILLICENT M. MacFARLAND 
Clerk 
:: 
Be it enacted by the People of the State of Maine as follows: 
PART A 
Sec. A-I. 20-A MRS A c. 428-C is enacted to read: 
CHAPTER 428-C 
JOB CREATION THROUGH EDUCATIONAL OPPORTUNITY 
PROGRAM 
§~2541. Definitions 
As used in this chapter, unless the context otherwise indicates, the following tenns 
have the following meanings. 
1. Accredited Maine junior college, college or university. "Accredited Maine 
junior college, college or university" means: 
A. Any campus of the Maine Community College System; 
B. Any campus of the University of Maine System; 
C. The Maine Maritime Academy; 
D. Any educational institution that is located in this State and has authorization to 
confer an associate degree or a bachelor's degree, in accordance with sections 10704 
and 10704-A; 
E. Any educational institution that is located in this State and is exempted from 
chapter 409 under section 10708, subsections 1 and 2; and 
F. Any educational institution that is located in this State and is operating under a 
certificate of temporary approval from the state board under section 10703, to the 
extent that a student is ultimately able either to obtain an associate or a bachelor's 
degree at that institution or to transfer to and obtain a degree from an institution 
described in paragraphs A to E. 
2. 
Benchmark loan payment. 
"Benchmark loan payment" means the figure 
described in section 12542, subsection 2, paragraph C. 
3. Educational institution. "Educational institution" has the same meaning as in 
section 10701, subsection 3. 
4. Educational opportunity tax credit. "Educational opportunity tax credit" means 
the tax credit provided for in Title 36, section 5217-D. 
5. Maine resident. "Maine resident" means an individual who qualifies for Maine 
residence under Title 21-A, section 112. 
6. Opportunity contract. "Opportunity contract" means the contract described in 
section 12542, subsection 3. 
7. 
Principal cap. 
"Principal cap" means the cap described in section 12542, 
subsection 2. 
§12542. Program established 
1. Program created; goals. The Job Creation Through Educational Opportunity 
Program, referred to in this chapter as "the program," is created to reimburse education-
related costs for Maine residents who obtain an associate degree or a bachelor's degree in 
this State, and live, work and pay taxes in this State thereafter. The program is designed 
to achieve the following goals: 
A. Promote economic opportunity for people in this State by ensuring access to the 
training and higher education that higher-paying jobs require; 
B. Bring more and higher-paying jobs to this State by increasing the skill level of 
this State's workforce; 
:15 
C. Offer educational opportunity and retraining to individuals impacted by job loss, 
'16 
workplace injury, disability or other hardship; 
D. Keep young people in this State through incentives for educational opportunity 
and creation of more high-paying jobs; and 
E. 
Accomplish all of the goals in this subsection with as little bureaucracy as 
possible. 
2. Principal cap. The principal cap limits the loan principal that can serve as the 
basis for claiming the educational opportunity tax credit. The cap is based on in-state 
tuition and mandatory fees for either the Maine Community College System or the 
University of Maine System, depending on whether the opportunity contract is for pursuit 
of an associate degree or of a bachelor's degree, respectively. 
A. For an individual earning a degree from the Maine Community College System or 
from the University of Maine System, the relevant financial aid office shall certify, 
once the individual has earned the degree, whether or not the total principal of loans 
the individual received as part of that individual's financial aid package exceeds the 
cost of in-state tuition and mandatory fees incurred in pursuit of the degree. That cost 
constitutes the principal cap for such an individual. 
B. 
For an individual earning a degree from any other accredited Maine junior 
college, college or university, the relevant financial aid office shall certify, once the 
individual has earned the degree, whether or not the total principal of loans the 
individual received as part of that individual's financial aid package exceeds the 
published in-state tuition and mandatory fees for full-time enrollment in the Maine 
Community College System or in the University of Maine System, depending on 
whether the degree is an associate degree or a bachelor's degree, respectively, during 
the relevant years. The published in-state tuition and mandatory fees constitute the 
principal cap for such an individual. If the individual has not attended full time 
throughout the pursuit of that individual's degree, an appropriate principal cap must 
be determined in a manner consistent with the principles set out in this subsection. 
C. For an individual whose student loans exceed the principal cap, a bepchmark loan 
payment must be calculated as follows. The financial aid office shall calculate what 
the monthly payment would be on a loan for the amount of the principal cap, to be 
paid over 10 years, at the interest rate offered for federal Stafford loans under 20 
United States Code, Section lO77a, during the individual's last year of enrollment. 
The benchmark loan payment must be specified on the individual's opportunity 
contract. 
3. Opportunity contract. The state board shall draft an opportunity contract for use 
in enrolling individuals in the program. The terms of the opportunity contract must 
require an individual who wishes to participate in the program to: 
A. Certify that that individual is a Maine resident; 
B. Agree to attend and to obtain a specified degree, either an associate degree or a 
bachelor's degree, from an accredited Maine junior college, college or university. The 
individual need not obtain the degree from the institution in which that individual 
originally enrolled, so long as all course work toward the degree is performed at 
accredited Maine junior colleges, colleges or universities; 
C. Agree to live in this State while pursuing the degree. The individual shall also 
agree to live in this State after obtaining the degree during any period when that 
individual seeks to take advantage of the educational opportunity tax credit; 
D. 
Agree to maintain records relating to loan payments claimed under the 
educational opportunity tax credit for 5 years after those payments are claimed; and 
E. With respect to educational loans, agree to the following: 
(1) The individual may claim the educational opportunity tax credit only with 
respect to loans that are part of that individual's financial aid package and that 
have a term of at least 8 years; 
(2) If the individual in any way accelerates repayment, the individual forfeits any 
right to claim an educational opportunity tax credit for that taxable year or any 
future taxable year; and 
(3) The individual may refinance said loans only if they remain separate from 
other debt and if the effect of the refinancing is to decrease both the annual 
repayment and the total remaining indebtedness. 
In exchange for the consideration outlined in paragraphs B to E, the State shall agree to 
permit the individual to take advantage of the educational opportunity tax credit. 
The opportunity contract must leave space for the accredited Maine junior college, 
college or university to certify that the individual has obtained the relevant degree, and to 
certify whether or not the loan principal that the individual incurs in pursuing the relevant 
degree exceeds the principal cap. 
4. Administration. The program must be administered as follows. 
A. Any Maine resident who gains admission to an accredited Maine junior college, 
college or university and who receives financial aid in the fonn of loans must have 
the opportunity to participate in the program. The financial aid office of the relevant 
institution shall offer to such individuals the chance to sign an opportunity contract 
with the State. The financial aid office shall retain the opportunity contract until the 
individual obtains the degree. 
B. 
When the individual obtains the degree, the individual shall specify on the 
opportunity contract the source, principal amount, interest rate and tenn of any loans 
that are part of the individual's financial aid package. The opportunity contract must 
contain certification that the individual has obtained the relevant degree and must 
specify whether the individual's loans exceed the principal cap and, if appropriate, 
what the benchmark loan payment is. The individual shall then file the opportunity 
contract with the Secretary of State. Every accredited Maine junior college, college 
and university shall develop procedures to facilitate this process, in consultation with 
the Secretary of State. 
C. When the individual files the opportunity contract with the Secretary of State 
pursuant to paragraph B, that individual becomes eligible to claim the educational 
opportunity tax credit, subject to the requirements of this chapter and of Title 36, 
section 5217-D. The individual may thereafter take advantage of any forbearance or 
defennent provisions in the relevant loan agreements without forfeiting the right to 
claim the educational opportunity tax credit when the individual resumes repayment. 
5. 
Effective date; participation bv individual already enrolled in degree 
program. The program must commence for the first semester that begins after the 
effective date of this chapter. Maine residents who when the program commences are 
enrolled in an associate or a bachelor's degree program at an accredited Maine junior 
college, college or university may participate. subject to the same essential tenns as other 
program participants. When such an individual obtains the relevant degree, it must be 
specified in the individual's opportunity contract what percentage of the course work 
completed in pursuit of the degree was perfonned while the individual was participating 
in the program. The principal cap and benchmark loan payment must be calculated in the 
ordinary way as provided in this chapter, but the individual must then apply the 
percentage in this subsection to actual payments or to the benchmark loan payment, 
whichever applies, in determining the amount the individual can claim under the 
educational opportunity tax credit for a given year. 
§12543. Effect on funding of higher education 
It is the intent of the Legislature that neither the existence of the program nor the 
benefits provided under the educational opportunity tax credit serve as justification to 
decrease other funds appropriated or allocated to accredited Maine junior colleges, 
colleges or universities, including institutions in the Maine Community College System 
and the University of Maine System, or to other higher education programs. 
j 
~ 
~, 
~ 
I • 
, 
! 
§12544. Rules 
The state board shall, in accordance with section 3, adopt rules, which are routine 
technical rules pursuant to Title 5, chapter 375, subchapter 2-A, as necessary to carry out 
the purposes of this chapter. 
PARTB 
Sec. B-1. 36 MRSA §5217-D is enacted to read: 
§5217-D. Credit for educational opportunity 
1. Definitions. As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings. 
A. 
"Benchmark loan payment" has the same meamng as in Title 20-A, section 
12541, subsection 2. 
B. "Employer" has the same meaning as the term "employing unit," as defined in 
Title 26, section 1043, subsection 10. 
., 
C. "Full time" employment means employment with a normal workweek of 32 hours 
or more. 
D. "Part time" employment means employment with a normal workweek of between 
and 32 hours. 
E. "Qualified employee" means an employee who is eligible for the credit provided 
in this section and who is employed at least part time. 
F. "Opportunity contract" means the contract described in Title 20-A, section 12542, 
subsection 3. 
G. 
"Opportunity program participant" means an individual who enters into an 
opportunity contract with the State, obtains the specified degree and complies with 
the requirements under Title 20-A, section 12542, subsections 3 to 5. 
H. "Resident individual" has the same meaning as in section 5102, subsection 5. 
I. "Seasonal employment" has the same meaning as in Title 26, section 1251 and in 
regulations promulgated thereunder. 
J. 
"Term of employment" includes all months when the individual is actually 
employed. It includes time periods when an individual is on leave or vacation. It 
extends to the full year for individuals working for employers who customarily 
operate only during a regularly recurring period of 9 months or more in a calendar 
year. For individuals working for employers who customarily operate only during 
regularly recurring periods of less than 9 months in a calendar year, including 
seasonal employment, the term of employment extends only to time periods when the 
individual is actually working. 
2. Credit allowed. A taxpayer constituting an opportunity program participant or an 
employer of a qualified employee is allowed a credit against the tax imposed by this Part 
for each taxable year under the terms established in this section. The credit is created to 
implement the Job Creation Through Educational Opportunity Program established under 
Title 20-A, chapter 428-C. 
The credit may not reduce the tax otherwise due under this Part to less than zero. A 
taxpayer entitled to the credit for any taxable year may carry over and apply to the tax 
liability for anyone or more of the next succeeding 10 years the portion, as reduced from 
year to year, of any unused credits. More than one taxpayer may claim a credit based on 
loan payments actually made to a relevant lender or lenders to benefit a single 
opportunity program participant, but no 2 taxpayers may claim the credit based on the 
same payment. 
3. Calculation of the credit. The following provisions govern the calculation of the 
credit in this section. 
A. If the relevant opportunity program participant's opportunity contract limits the 
amount of the credit to a benchmark loan payment, and the relevant opportunity 
program participant's actual monthly payment due is higher than that amount, then 
the credit claimed may not exceed the product of the benchmark loan payment and 
the number of months in which the taxpayer made loan payments. 
B. If the relevant opportunity program participant's opportunity contract certifies that 
the principal for the relevant loans is at or below the level of the principal cap, or if 
the relevant opportunity program participant's actual monthly payment is below the 
benchmark loan payment, the taxpayer may claim a credit based only on regularly 
scheduled loan payments actually made. 
C. If the credit is claimed on behalf of an individual who was already enrolled in an 
associate or a bachelor's degree program at an accredited Maine junior college, 
college or university, as defined in Title 20-A, section 12541, subsection 1, on the 
commencement of the Job Creation Through Educational Opportunity Program under 
Title 20-A, chapter 428-C, the percentage figure listed in the opportunity contract, as 
specified under Title 20-A, section 12542, subsection 5, must be applied to the 
amount determined under paragraph A or B. 
4. Conditions for an opportunity program participant claiming the credit. An 
opportunity program participant may claim the credit only if the participant is a resident 
individual. The participant may claim the credit based only on regular payments made 
during months in which the individual was working for an employer located in this State. 
A married couple filing jointly under Title 36, section 5221 may claim the credit only to 
the extent that the spouse on whose behalf the credit is claimed meets these requirements. 
5. Conditions for an employer claiming the credit. A taxpayer constituting an 
employer may claim the credit under this section under the following circumstances. The 
employer may undertake to make partial or full loan payments directly to the relevant 
lender or lenders on behalf of a qualified employee, having taken reasonable steps to 
ascertain that the employee is in fact a qualified employee, and may claim a credit based 
on amounts that came due and were paid by the employer during the term of employment. 
To receive the credit, the employer must retain for 5 years any proof of eligibility that the 
employee or independent contractor provides. 
The employer may claim a credit for the amount that the qualified employee could have 
claimed during any months when the qualified employee was employed, had the qualified 
employee "made the partial or full loan payments instead, under conditions where the 
qualified employee had sufficient income to claim the full credit for the taxable year. If 
the qualified employee is employed only on a part-time basis, the employer may claim a 
credit only up to half of the total that the qualified employee could have claimed had the 
qualified employee made all payments and earned sufficient income to claim the full 
credit for the taxable year, but the amount the employer claims must still be based on 
amounts actually paid. 
An employer claiming this credit on behalf of a qualified employee for a taxable year 
may not simultaneously claim a credit under section 5219-V on the behalf of the same 
employee. 
SUMMARY 
This initiated bill provides a tax credit to reimburse educational loan payments for 
any Maine resident who earns an associate degree or a bachelor's degree in Maine, and 
lives, works and pays taxes in Maine after earning that degree. Under an agreement with 
the State, a Maine resident who earns an associate degree or a bachelor's degree from an 
accredited Maine junior college, college or university may take advantage of the credit. 
The person may claim the credit for payments made during each year that person lives 
and works in Maine. If the person lives and works in Maine, that person's employer may 
make the loan payments and claim the credit. The credit is limited to what the person 
actually pays in loan payments or to what would be necessary to pay for an education in 
the University of Maine System or Maine Community College System, whichever is less.