An Act To Improve the Educational Opportunity Tax Credit
Maine Legislature, Session 130, LD 0798
Committee: Taxation
Sponsors: POULIOT
Amends: 20-A MRSA §12541, 36 MRSA §199-C, 36 MRSA §2535, 36 MRSA §5122, 36 MRSA §5217-D, 36 MRSA §5217-E

Legislative Document
No. 798
S.P. 70
In Senate, March 5, 2021
An Act To Improve the Educational Opportunity Tax Credit
Reference to the Committee on Taxation suggested and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator POULIOT of Kennebec.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  20-A MRSA §12541, sub-§4, as enacted by PL 2007, c. 469, Pt. A, §1, is 
amended to read:
4.  Educational opportunity tax credit.  "Educational opportunity tax credit" means 
the tax credit provided for in Title 36, section 5217-D, except that, for tax years beginning 
on or after January 1, 2022, "educational opportunity tax credit" means the tax credit 
provided for in Title 36, section 5217-E.
Sec. 2.  20-A MRSA §12541, sub-§8, as enacted by PL 2013, c. 525, §5, is amended 
to read:
8.  Qualified employee.  "Qualified employee" has the same meaning as in Title 36, 
section 5217‑D, subsection 1, paragraph E, except that, for tax years beginning on or after 
January 1, 2022, "qualified employee" has the same meaning as in Title 36, section 5217-E, 
subsection 1, paragraph G.
Sec. 3.  20-A MRSA §12541, sub-§9, as enacted by PL 2013, c. 525, §6, is amended 
to read:
9.  Qualified individual.  "Qualified individual" has the same meaning as in Title 36, 
section 5217‑D, subsection 1, paragraph G, except that, for tax years beginning on or after 
January 1, 2022, "qualified individual" has the same meaning as in Title 36, section 5217-E, 
subsection 1, paragraph H.
Sec. 4.  36 MRSA §199-C, sub-§3, as amended by PL 2015, c. 328, §2, is further 
amended to read:
3.  Specific tax expenditure review.  By June 1, 2021 2024, the committee shall 
review the income tax credit under section sections 5217-D and 5217-E to determine 
whether the credit should be retained, repealed or modified. The committee shall consider 
information provided by the Office of Tax Policy within the bureau and the Department of 
Education pursuant to Title 20-A, section 12545.
Sec. 5.  36 MRSA §2535, as enacted by PL 2017, c. 211, Pt. C, §1, is amended to 
read:
§2535.  Credit for educational opportunity
A taxpayer is allowed a credit against the tax otherwise due under this chapter as 
determined under section 5217-D or 5217-E.
Sec. 6.  36 MRSA §5122, sub-§2, ¶FF, as amended by PL 2013, c. 525, §14, is 
further amended to read:
FF.  To the extent included in federal adjusted gross income, student loan payments 
made by the taxpayer's employer directly to a lender on behalf of a qualified employee 
in accordance with section 5217-D or 5217-E, whether or not the employer claims, or 
could claim, the credit provided by section 5217‑D, subsection 5 or section 5217-E, 
subsection 4;
Sec. 7.  36 MRSA §5122, sub-§2, ¶UU is enacted to read:
UU.  To the extent included in federal adjusted gross income, student loan payments 
made directly to a lender on behalf of the taxpayer by a student loan repayment program 
funded by a nonprofit foundation and administered by the Finance Authority of Maine 
for residents of the State employed by a business located in the State.
Sec. 8.  36 MRSA §5217-D, sub-§6 is enacted to read:
6.  Application.  Except for the credit allowed with respect to the carry-over of unused 
credit amounts pursuant to subsection 2, paragraph A, the credit allowed under this section 
does not apply to tax years beginning on or after January 1, 2022.
Sec. 9.  36 MRSA §5217-E is enacted to read:
§5217-E.  Credit for student loan repayment
For tax years beginning on or after January 1, 2022, a qualified individual or the 
employer of a qualified employee is allowed a credit for education loan payments as 
computed under this section against the taxes imposed under this Part.
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings.
A.  "Accredited Maine community college, college or university" has the same 
meaning as in Title 20-A, section 12541, subsection 1.
B.  "Accredited non-Maine community college, college or university" means an 
institution located outside the State that is accredited by a regional accrediting 
association or by one of the specialized accrediting agencies recognized by the United 
States Secretary of Education.
C.  "Education loan payment" means a loan payment paid during the taxable year for 
eligible education loans.
D.  "Eligible education loan" means a loan obtained by a qualified individual for 
attendance by that qualified individual at an accredited Maine community college, 
college or university or accredited non-Maine community college, college or university 
to obtain an associate, bachelor's or graduate degree.  "Eligible education loan" 
includes a refinanced loan or consolidated loan if the refinanced loan or consolidated 
loan remains separate from other debt, except for debt incurred in an educational 
program, but only in proportion to the portion of the education loan payment that is 
otherwise eligible under this section.  "Eligible education loan" does not include a loan 
obtained from a person related to the qualified individual or from any person by reason 
of a loan under any qualified employer plan or under a contract referred to in the Code, 
Section 72(p)(5).  For purposes of this paragraph, a person is considered related to the 
qualified individual if that person meets the criteria listed in the Code, Section 267(b) 
or Section 707(b)(1).  As used in this paragraph, "qualified employer plan" has the 
same meaning as in the Code, Section 72(p)(4)(A).
E.  "Employer" has the same meaning as "employing unit" as defined in Title 26, 
section 1043, subsection 10.
F.  "Part time," as that term refers to employment, means employment that on average 
during the taxable year consists of a workweek of at least 16 hours but less than 32 
hours.
G.  "Qualified employee" means an employee who is employed at least part time and 
who is a qualified individual.
H.  "Qualified individual" means an individual, including the spouse filing a joint return 
with the individual under section 5221, who is eligible for the credit provided in this 
section. An individual is eligible for the credit if the individual:
(1)  Attended and obtained an associate, bachelor's or graduate degree from an 
accredited Maine community college, college or university or an accredited non-
Maine community college, college or university;
(2)  Was a resident individual for the entire taxable year; and
(3)  Meets one of the following conditions:
(a)  The individual worked during the taxable year:
(i)  At least part time in this State for an employer or as a self-employed 
individual; or
(ii)  At least part time in a position on a vessel at sea;
(b)  The individual was deployed for military service in the United States 
Armed Forces, including the National Guard and the Reserves of the United 
States Armed Forces.  As used in this division, "deployed for military service" 
has the same meaning as in Title 26, section 814, subsection 1, paragraph A; 
or
(c)  The individual was a spouse of an individual who meets the requirements 
of either division (a) or division (b).
I.  "Resident individual" means an individual:
(1)  Who is domiciled in this State; or
(2)  Who is not domiciled in this State, but maintains a permanent place of abode 
in this State and spends in the aggregate more than 183 days of the taxable year in 
this State, unless the individual is a member of the Armed Forces of the United 
States.
J.  "Seasonal employment" has the same meaning as in Title 26, section 1251 and in 
rules adopted pursuant to that section.
K.  "Term of employment" includes all months when the individual is actually 
employed and includes time periods when the individual is on leave or vacation.  A 
term of employment extends to the full year for an individual working for an employer 
that customarily operates only during a regularly recurring period of 9 months or more 
during the taxable year. For an individual working for an employer that customarily 
operates only during a regularly recurring period of less than 9 months during the 
taxable year, including seasonal employment, a term of employment extends only to 
months during which the individual is actually working.
2.  Credit allowed.  A qualified individual or an employer of a qualified employee is 
allowed a credit against the tax imposed by this Part in accordance with the provisions of 
this section. The credit is created to implement the Job Creation Through Educational 
Opportunity Program established under Title 20-A, chapter 428-C.
A.  A taxpayer may claim a credit based on education loan payments actually made to 
a relevant lender or lenders under this section only with respect to education loan 
payment amounts paid by the taxpayer during that part of the taxable year that the 
qualified individual worked in this State. Forbearance or deferment of education loan 
payments does not affect eligibility for the credit under this section. An individual who 
worked in this State for any part of a month of the taxable year is considered to have 
worked in this State for the entire month.
B.  The credit under this section may not reduce the tax otherwise due under this Part 
to less than zero, except that for an individual eligible to receive a refundable credit 
under section 5217-D for a tax year beginning prior to 2022, the credit under this 
section is refundable for tax years beginning before January 1, 2024. 
C.  A taxpayer entitled to a credit for any taxable year may carry over and apply to tax 
liability for any one or more of the next succeeding 5 years the portion, as reduced from 
year to year, of any unused credits.
3.  Calculation of the credit; qualified individuals.  Subject to subsection 2, the credit 
with respect to a qualified individual is equal to the lesser of:
A.  The amount paid on eligible education loans during the taxable year; and
B.  Fifteen percent of the outstanding eligible education loan debt determined on the 
date the first education loan payment is made after the degree is earned.
4.  Calculation of the credit; employers.  Subject to subsection 2, the credit with 
respect to a taxpayer that is an employer making education loan payments directly to a 
lender during the taxable year on behalf of a qualified employee is equal to the lesser of:
A.  The amount paid by the employer on behalf of the qualified employee on eligible 
education loans during the taxable year during the term of employment; and
B.  Twenty percent of the outstanding eligible education loan debt determined on the 
date of the first education loan payment made after December 31, 2021.
If the qualified employee is employed on a part-time basis during the taxable year, the 
credit with respect to that employee is limited to 50% of the credit otherwise determined 
under this subsection.
Sec. 10.  Application. Those sections of this Act that amend the Maine Revised 
Statutes, Title 36, section 5122, subsection 2, paragraph FF and that enact Title 36, section 
5122, subsection 2, paragraph UU apply to tax years beginning on or after January 1, 2022.
Sec. 11.  Appropriations and allocations.  The following appropriations and 
allocations are made.
FINANCE AUTHORITY OF MAINE
Educational Opportunity Tax Credit Marketing Fund Z174
Initiative: Provides funds to market the Job Creation Through Educational Opportunity 
Program throughout the State.
GENERAL FUND
2021-22
2022-23
   All Other
$75,000
$75,000
__________
__________
GENERAL FUND TOTAL
$75,000
$75,000
SUMMARY
This bill makes the current income tax credit for educational opportunity inapplicable 
to tax years beginning on or after January 1, 2022, and creates a new simplified tax credit 
for student loan repayment applicable to tax years beginning on or after January 1, 2022.  
It provides that taxpayers who were eligible for a refundable credit under the credit for 
educational opportunity may continue to receive a refundable credit for tax years beginning 
before January 1, 2024.
1.  A qualified individual must be a full-year Maine resident who has obtained an 
associate, bachelor's or graduate degree from an accredited Maine or non-Maine 
community college, college or university and who works at least part time in Maine or on 
a vessel at sea or is deployed for military service in the United States Armed Forces during 
the taxable year.
2.  Loans obtained from related persons, such as family members, and certain 
businesses, trusts and exempt organizations, do not qualify for the credit.
3.  The credit may not reduce the tax due to less than zero.
4.  The credit for qualified individuals is the lesser of the amount paid on eligible 
education loans during the taxable year and 15% of the outstanding eligible education loan 
debt on the date the first education loan payment is made after a degree is earned.
5.  The credit for employers is the lesser of the amount paid by an employer on behalf 
of a qualified employee during the taxable year during the term of employment and 20% 
of the outstanding eligible education loan debt on the date the first education loan payment 
is made after December 31, 2021.
6.  The credit is available to the spouse of an individual eligible for a credit even if the 
spouse is not employed.
7.  Income tax deductions are provided for student loan payments made directly to a 
lender by an employer on behalf of a qualified employee and payments made directly to a 
lender on behalf of a taxpayer by a student loan repayment program funded by a nonprofit 
foundation and administered by the Finance Authority of Maine for residents of the State 
employed by a business located in the State.
8.  The annual credit may include loan amounts paid in excess of the amount due during 
a taxable year.  Credits in excess of those that may be used during a taxable year may be 
carried over for the next succeeding 5 years.
The bill also provides funds to market the Job Creation Through Educational 
Opportunity Program.