An Act To Increase Relief Provided under the Homestead Property Tax Exemption
Maine Legislature, Session 123, LD 1242
Committee: Taxation
Sponsors: ROTUNDO
Amends: 36 MRSA §685, 36 MRSA §1811

Legislative Document 
No. 1242 
S.P.428 
March 8, 2007 
An Act To Increase Relief Provided under the Homestead Property 
Tax Exemption 
Reference to the Committee on Taxation suggested and ordered printed. 
Presented by Senator ROTUNDO of Androscoggin. (BY REQUEST) 
Printed on recycled paper 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §685, sub-§2, as amended by PL 2005, c. 2, Pt. F, §4 and 
affected by §5, is repealed and the following enacted in its place: 
2. Entitlement to reimbursement by the State; calculation; use of Homestead 
Exemption Surchaq:e Fund. The state reimbursement to municipalities for tax revenue 
lost by reason of the homestead exemptions under this subchapter is determined pursuant 
to this subsection. 
A. There is established in the bureau the Homestead Exemption Surcharge Fund, a 
non lapsing account into which the Treasurer of State shall deposit the revenue 
generated by section 1811, subsection 4. 
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B. The assessor annually shall determine the amount of revenue in the Homestead 
Exemption Surcharge Fund and calculate the percentage of state reimbursement. In 
determining the percentage of reimbursement, the assessor shall start with a 
minimum reimbursement of 50% and then use the revenue in the fund to increase the 
percentage of reimbursement above 50%. 
C. A municipality that has approved homestead exemptions under this subchapter 
may recover from the State a percentage of the taxes lost bv reason of the exemptions 
upon proof in a form satisfactory to the bureau as calculated annually pursuant to 
paragraph B. The bureau shall reimburse the Unorganized Territory Education and 
Services Fund the same percentage of taxes lost by reason of the exemption as it 
reimburses municipalities. The percentage of reimbursement mav not be less than 
50%. 
Sec. 2. 36 MRSA §1811, as amended by PL 2003, c. 510, Pt. C, § 12 and affected 
by § 13 and amended by c. 673, Pt. V, §23 and affected by §29, is repealed and the 
following enacted in its place: 
§1811. Sales tax 
1. Personal property and services. A tax is imposed on the value of all tangible 
personal property and taxable services sold at retail in this State. The rate of tax is: 
A. Seven percent on the value of liquor sold in licensed establishments as defined in 
Title 28-A, section 2, subsection 15, in accordance with Title 28-A, chapter 43: 
B. Seven percent on the value of rental of living quarters in any hoteL rooming house 
or tourist or trailer camp. 
C. 
Ten percent on the value of rental for a period of less than one vear of an 
automobile; 
D. Seven percent on the value of prepared food; and 
E. 
Five percent on the value of all other tangible personal property and taxable 
services. 
Value is measured by the sale price, except as otherwise provided. 
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2. Gas, water and electricity. The tax imposed upon the sale and distribution of 
gas, waler or electrici!y by any public utility, the rates for whi(~h sale and distribution are 
established by the Public Utilities Commission, must be added to the rates so established. 
A tax may not be imposed upon the sale or use of electrical energy, or water stored for 
the purpose of generating electrici!y, when the sale is to or by a wholly owned subsidiary 
by or to its parent corporation, except for electrical energy or water purchased for resale 
to or by such wholly owned subsidiary. 
3. Rental or lease of automobile for one year or more. Rental or lease of an 
automobile for one year or more must be taxed at the time of the lease or rental 
transaction at 5% of the following: the total monthly lease payment multiplied by the 
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number of payments in the lease or rental, the amount of equity involved in any trade-in 
and the value of any cash down payment. Collection and remittance of the tax is the 
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responsibili!y of the person that negotiates the lease transaction with the lessee. 
4. Homestead property tax exemption surcharge. In addition to the tax imposed 
pursuant to subsection l, paragraph E, an additional tax is imposed at the rate of 1 % of 
the value of tangible personal property and taxable services subject to tax under 
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subsection I, paragraph E. Revenue generated by this subsection must be deposited by 
the Treasurer of State in the Homestead Exemption Surcharge Fund, a dedicated account 
established in section 685, subsection 2 and maintained and used by the bureau to 
reimburse municipalities for lost revenue due to the homestead propertv tax exemption as 
specified in section 685, subsection 2. 
Sec. 3. Application. That section of this Act that repeals and replaces the Maine 
Revised Statutes, Title 36, section 685, subsection 2 applies to property tax years 
beginning on or after April 1, 2008. 
SUMMARY 
This bill establishes an additional 1% general sales tax. The revenue generated by the 
additional tax is used to increase the state reimbursement to municipalities to more than 
50% of the tax revenue lost by those municipalities due to the Maine homestead property 
tax exemption program . 
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