An Act To Provide Tax Treatment Consistency for Limited Liability and S Corporations
Maine Legislature, Session 123, LD 2049
Committee: Taxation
Sponsors: BRAUTIGAM, PERRY, CUMMINGS, DILL, HILL, PILON, PIOTTI, SAMSON, BOWMAN, HOBBINS

Legislative Document 
No. 2049 
H.P.1433 
House of Representatives, December 21,2007 
An Act To Provide Tax Treatment Consistency for Limited Liability 
and S Corporations 
(EMERGENCY) 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Received by the Clerk of the House on December 19, 2007. Referred to the Committee on 
Taxation pursuant to Joint Rule 308.2 and ordered printed pursuant to Joint Rule 401. 
Presented by Representative BRAUTIGAM of Falmouth. 
Cosponsored by Senator PERRY of Penobscot and 
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MILLICENT M. MacFARLAND 
Clerk 
Representatives: Speaker CUMMINGS of Portland, DILL of Cape Elizabeth, HILL of York, 
PILON of Saco, PIOTTI of Unity, SAMSON of Auburn, Senators: BOWMAN of York, 
HOBBINS of York. 
Printed on recycled paper 
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Emergency preamble. Whereas, acts and resolves of the Legislature do not 
become effective until 90 days after adjournment unless enacted as emergencies; and 
Whereas, Maine tax law does not place a corporate tax on limited liability 
companies and S corporations, so-called "pass-through entities," but rather imposes the 
tax on the partners of limited liability companies or members of S corporations; and 
Whereas, the State of New Hampshire has adopted an entity system of taxation and 
imposes an entity tax on limited liability companies and S corporations; and 
Whereas, current interpretation of Maine tax law prevents Maine Revenue Services 
from crediting partners of a limited liability company and members of an S corporation 
their share of the entity's tax paid to the State of New Hampshire; and 
Whereas, the State of Massachusetts does recognize the New Hampshire entity tax 
on pass-through entities as personal income tax; and 
Whereas, Maine's current position on this issue places Maine in an uncompetitive 
position for Maine residents; and 
Whereas, in the judgment of the Legislature, these facts create an emergency within 
the meaning of the Constitution of Maine and require the following legislation as 
immediately necessary for the preservation of the public peace, health and safety; now, 
therefore. 
Be it enacted by the People of the State of Maine as follows: 
Sec. L 
MRSA §S217-A, as amended by PL 2003, c. 673, Pt. JJ, §4 and 
affected by §6, is repealed and the following enacted in its place: 
§S217-A. Income tax paid to other taxing jurisdiction 
1. Definitions. As used in this section. unless the context otherwise indicates. the 
following tenus have the following meanings. 
A. 
"Creditable income tax" means a tax imposed 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 detenuining 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. 
B. "Member" has the same meaning as in section 5250-B, subsection 1, paragraph A. 
C. "Pass-through entity" has the same meaning as in section 5250-B, subsection 1, 
paragraph C. 
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2. Credit. A resident individual is allowed a credit against the tax otherwise due 
under this Part, excluding the tax imposed by section S203-C, for the amount of 
creditable income tax for the taxable year imposed on: 
A. That individual; or 
B. 
A pass-through entity of which the individual is a member to the extent the 
creditable income tax is imposed on that member's distributive share or pro rata 
share, as the case may be, of the pass-through entity's income. 
3. Limitation. The credit allowed under this section for any of the specified taxing 
jurisdictions may not exceed the proportion of the tax otherwise due under this Part, 
excluding the tax imposed by section 5203-C, 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, 
excluding the tax imposed by section 5203-C, that the amount of the taxpayer's Maine 
ill!iusted gross income derived from sources in the other state bears to the taxpayer's 
entire Maine adjusted gross income. 
Sec. 2. Application. This Act applies to tax years beginning on or after January I, 
2008. 
Emergency clause. 
In view of the emergency cited In the preamble, this 
legislation takes effect when approved. 
SUMMARY 
This bill allows a member of a pass-through entity, such as a limited liability 
company or S corporation, to receive an income tax credit against taxes imposed on that 
member's distributive share or pro rata share of the pass-through entity's income.