An Act To Eliminate the State Income Tax on Maine Public Employees Retirement System Pensions
Maine Legislature, Session 130, LD 1145
Committee: Taxation
Sponsors: WARREN, MIRAMANT, CUDDY, DUNPHY, ROEDER, RAFFERTY
Amends: 36 MRSA §5122

Legislative Document
No. 1145
H.P. 823
House of Representatives, March 22, 2021
An Act To Eliminate the State Income Tax on Maine Public 
Employees Retirement System Pensions
Received by the Clerk of the House on March 18, 2021.  Referred to the Committee on 
Taxation pursuant to Joint Rule 308.2 and ordered printed pursuant to Joint Rule 401.
ROBERT B. HUNT
Clerk
Presented by Representative WARREN of Hallowell.
Cosponsored by Senator MIRAMANT of Knox and
Representatives: CUDDY of Winterport, DUNPHY of Old Town, ROEDER of Bangor, 
WARREN of Scarborough, Senator: RAFFERTY of York.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §5122, sub-§2, ¶M-2, as amended by PL 2017, c. 170, Pt. H, 
§3, is further amended to read:
M-2.  For tax years beginning on or after January 1, 2016:
(1)  For each individual who is a primary recipient of retirement plan benefits, the 
reduction is the sum of:
(a)  Excluding military retirement plan benefits and, for tax years beginning on 
or after January 1, 2021, uncovered civil service retirement plan benefits, an 
amount that is the lesser of:
(i)  The aggregate of retirement plan benefits under employee retirement 
plans or individual retirement accounts included in the individual's federal 
adjusted gross income; and
(ii)  The pension deduction amount 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; and
(b)  An amount equal to the aggregate of retirement benefits under military 
retirement plans and, for tax years beginning on or after January 1, 2021, 
uncovered civil service retirement plans included in the individual's federal 
adjusted gross income; and
(2)  For purposes of this paragraph, the following terms have the following 
meanings.
(a)  "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.
(b)  "Individual retirement account" means an individual retirement account 
under Section 408 of the Code, a Roth IRA under Section 408A of the Code, 
a simplified employee pension under Section 408(k) of the Code or a simple 
retirement account for employees under Section 408(p) of the Code.
(c)  "Military retirement plan" means retirement plan benefits received as a 
result of service in the active or reserve components of the United States Army, 
Navy, Air Force, Marines or Coast Guard.
(d)  "Pension deduction amount" means $10,000.
(e)  "Primary recipient" means the individual upon whose earnings or 
contributions the retirement plan benefits are based or the surviving spouse of 
that individual.
(f)  "Retirement plan benefits" means employee retirement plan benefits, 
except pick-up contributions for which a subtraction is allowed under 
paragraph E, reported as pension or annuity income for federal income tax 
purposes and individual retirement account benefits reported as individual 
retirement account distributions for federal income tax purposes.  "Retirement 
plan benefits" does not include distributions that are subject to the tax imposed 
by the Code, Section 72(t);.
(g)  "Uncovered civil service retirement plan" means retirement plan benefits 
received under Title 5, Part 20, or a similar retirement plan of another state 
government, a local government or the Federal Government, as a result of 
service that is considered noncovered service under 42 United States Code, 
Section 415(a)(7)(A)(ii);
SUMMARY
Retirement benefits under state, local or federal government retirement plans that are 
based on employment compensation for which contributions are not made to the federal 
Social Security system result in reductions in the amount of Social Security benefits that a 
retiree is eligible to receive under the federal windfall elimination provision.  This bill 
provides an income tax exemption for those retirement benefits.