An Act To Increase the State Income Tax Exemption for Retired Employees in the Maine State Retirement System and Other Pension Systems to the Same Level as That of Retirees under the Social Security System
Maine Legislature, Session 123, LD 0422
Committee: Taxation
Sponsors: MAZUREK, DAMON, BLANCHETTE, CRA YEN, FINCH, HOGAN, MARLEY, NORTON, PATRICK

Legislative Document 
No. 422 
H.P.338 
House of Representatives, January 29,2007 
An Act To Increase the State Income Tax Exemption for Retired 
Employees in the Maine State Retirement System and Other 
Pension Systems to the Same Level as That of Retirees under the 
Social Security System 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Representative MAZUREK of Rockland. 
Cosponsored by Senator DAMON of Hancock and 
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1?1.7J?~ 
MILLICENT M. MacFARLAND 
Clerk 
Representatives: BLANCHETTE of Bangor, CRA YEN of Lewiston, FINCH of Fairfield, . 
HANLEY of Gardiner, HOGAN of Old Orchard Beach, MARLEY of Portland, NORTON of 
Bangor, PATRICK of Rumford. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §S122, sub-§2, ~, as amended by PL 2005, c. 218, §53, is 
further amended to read: 
M. For each individual who is a primary recipient of pension benefits under an 
employee retirement plan, an amount that is the lesser of: 
(1) SiK tflSHSaRS sslIlH's FeSHeeS B~ tHe tstal afHsHnt sf tHe insivisHal's sseial 
seeHFity Benefits aRS railFsas FetiFefHent Benefits fJais B:" tHe Unites States, BHt 
net less tftan $Q. The maximum social security benefit 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, except that this reduction 
does not apply to benefits paid under a military retirement plan. The assessor by 
June 15th of each year shall determine the amount of the deduction and 
incorporate the change, if any, into the income tax forms, instructions and 
withholding tables for the taxable year; or 
(2) The aggregate of pension benefits under employee retirement plans included 
in the individual's federal adjusted gross income. 
For purposes of this paragraph, the following terms have the following meanings. 
"Primary recipient" means the individual upon whose earnings the employee 
retirement plan benefits are based or the surviving spouse of that individual. 
"Pension benefits" means employee retirement plan benefits reported as pension or 
annuity income for federal income tax purposes. "Employee retirement plan" means 
a state, federal or military retirement plan or any other retirement benefit plan 
established and maintained by an employer for the benefit of its employees under the 
Code, Section 401(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 55 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 
or an ineligible deferred compensation plan under Section 457(f) of the Code. 
Pension 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. "Maximum social security 
benefit," for the tax year beginning January 1, 2007 and ending December 31, 2007, 
equals $25,392. For tax years beginning on or after January 1, 2008, "maximum 
social security benefit" means the social security benefit adjusted for the cost of 
living pursuant to the Social Security Act, 42 United States Code, Section 215(b)(i); 
Sec. 2. Application. That section of this Act that amends the Maine Revised 
Statutes, Title 36, section 5122, subsection 2, paragraph M applies to tax years beginning 
on or after January 1,2007. 
SUMMARY 
Current law provides a deduction from the state income tax for the first $6,000 of 
income from certain public and private pensions. 
This bill increases the amount of the deduction to the amount of the maximum social 
security benefit reduced by any social security benefits and railroad retirement benefits 
actually received by the taxpayer. The deduction is required to be adjusted annually to 
reflect the annual cost-of-living adjustment in social security benefits.