An Act to Amend Maine's Tax Laws
Maine Legislature, Session 131, LD 0457
Committee Amendment CA_A_S643 (Senate)
Amends: 5 MRSA §17806, 36 MRSA §5122, 36 MRSA §5403

COMMITTEE AMENDMENT " " to S.P. 211, L.D, 457, "An Act to Amend
Maine's Tax Laws"
Amend the bill by striking out the title and substituting the following:
'An Act to Phase Out the Pension Deduction Under the Income Tax and to Increase
the Cost-of-Iiving Adjustment for Certain Government Retirement Benefits for Fiscal
Year 2024-25'
Amend the bill by striking out everything after the enacting clause and inserting the
following:
'See. 1. 5 MRSA §17806, sub-§l, ^A, as amended by PL 2021,c.635, Pt. NN, §1,
is further amended to read:
A, Except as provided in paragraphs A-l. A-2 and. A-3 and A-4. whenever there is a
percentage increase in the Consumer Price Index from July 1st to June 30th, the board
shall automatically make an equal percentage increase in retirement benefits, beginning
in September, up to a maximum annual increase of 3%. Effective July 1, 2011, the
increase applies to that portion of the retirement benefit up to $20,000, which amount
must be indexed in subsequent years by the same percentage adjustments granted under
this section. Effective July 1,2022, the increase applies to that portion of the retirement
benefit up to $24,186.25, which amount must be indexed in subsequent years by the
same percentage adjustments granted under this section,
Sec. 2. 5 MRSA §17806, sub-§l, ^[A-4 is enacted to read:
A-4. For cost-of-living adjustments awarded under paragraph A in fiscal year 2024-
25 only, the increase applies to that portion of the retirement benefit up to $40.000.
Sec. 3. 36 MRSA §5122, sub-§2, ^M-2, as amended by PL 2023,c. 523, Pt. B,
§ 1, is further amended by amending subparagraph (1), division (b) to read:
(b) An amount equal to the aggregate of retirement benefits under militaiy
retirement plans included in the individual's federal adjusted gross income;
aad
COMMITTEE AMENDMENT
COMMITTEE AMENDMENT " /\ " to S.P. 211, L.D. 457 [,<V ^ 1^]
Sec. 4. 36 MRSA §5122, sub-§2, ^M-2, as amended by PL 2023, c. 523, Pt. B,
§ 1, is further amended by amending subparagraph (2), division (f) to read:
(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); and
Sec. 5. 36 MRSA §5122, sub-§2, ^]M-2, as amended by PL 2023, c. 523, Pt, B,
§ 1, is further amended by enacting a new subparagraph (3) to read:
f3) For tax years beginning on or afiter_Januai-y 1, 2024, the amount in
subparagraph (l\ division (a) must be reduced by an amount equal to the total
amount in subparagraph ( 1), division fa) multiplied by a fraction, the numerator of
which is the taxpayer's federal adjusted gross income less the applicable amount.
except that the numerator may not be less than zero, and the denommator of which
is $50.000 in the case ofamarried individual filine a seDarate return and $100,000
in all other filing cases. The fraction contained in this subparaeraph may not
produce a result that is more than one. The applicable amount must be adjusted for
inflation in accordance with section 5403, subsection 10.
For purposes of this subparagraph, "applicable amount" means:
fa) For individuals filing as single individuals, $100,000;
fb) For individuals filing as heads of households, $150.000;
fcl_J:;or individuals filing married joint returns _or^^^^^^
$200.000; or
Cd) _PQ^m^ filing separate retims. 1/2 of tjie_ appUcable
amount under division fc).
Sec. 6. 36 MRSA §5403, sub-§8, as amended by PL 2023, c. 412, Pt. ZZZ, §9, is
further amended to read:
8. Personal exemption phase-out. Beginning in 2018 and each year thereafter, by
the dollar amount of the applicable amounts specified in section 5126-A, subsection 2,
paragraphs A, B and C, except that for the purposes of this subsection, notwithstanding
section 5402, subsection 1-B, the "cost-of-living adjustment" is the Chained Consumer
Price Index for the 12-month period ending June 30th of the preceding calendar year
divided by the Chained Consumer Price Index for the 12-month period ending June 30,
2017;aad
Sec. 7. 36 MRSA §5403, sub-§9, as enacted by PL 2023, c. 412, Pt. ZZZ, §10, is
amended to read:
9. Dependent exemption tax credit amount. Beginning in 2024 and each year
thereafter, by the dollar amount of the dependent exemption tax credit under section
5219-SS, except that for the purposes of this subsection, notwithstanding section 5402,
subsection 1-B, the "cost-of-living adjustment" is the Chained Consumer Price Index for
COMMITTEE AMENDMENT
COMMITTEE AMENDMENT " l\ " to S.P. 211, L.D. 457
the 12-month period ending June 30th of the preceding calendar year divided by the
^ ^| 2 Chained Consumer Price Index for the 12-month period ending June 3 0,2023. If the credit
amount, adjusted by application of the cost-of-living adjustment, is not a multiple of $5,
any increase must be rounded to the next lowest multiple of $57; and
Sec. 8. 36 MRSA §5403, sub-§10 is enacted to read:
10. Income deduction for retirement plan benefits; applicable amount. Beeinning
in 2024 and each year thereafter, by the dollar amount of the applicable amounts specified
in section 5122, subsection 2, paragraph M-2. subparagraph (3), except that for the
purposes of this subsection, notwithstanding section 5402, subsection 1-B. the "cost-of-
living adjustment" is the Chained Consumer Price Index for the 12-month period ending
June 30th of the preceding calendar year divided by the Chained Consumer Price Index for
the 12-month period ending June 3 0. 2023,
Sec. 9. Appropriations and allocations. The following appropriations and
allocations are made.
RETIREMENT SYSTEM, MAWE PUBLIC EMPLOYEES
Retirement System - Retirement Allowance Fund 0085
Initiative: Provides one-time funds to pay the unfunded actuarial liability created by
providing that, for fiscal year 2024-25 only, the cost-of-living adjustment awarded to
retired state employees and teachers and their beneficiaries applies to the first $40,000 of
the retirement benefit.
GENERAL FUND 2023-24 2024-25
AllOther $0 $39,836,000
GENERAL FUND TOTAL $0 $39,836,000
Amend the bill by relettering or renumbering any nonconsecutive Part letter or section
number to read consecutively,
• SUMMARY
This amendment, which is the maj ority report of the committee, replaces the bill, which
is a concept draft, changes the title and establishes a phase-out of the pension deduction for
nonmilitary pensions under the income tax based on the income of the taxpayer. The phase-
out begins with income over $100,000 for mdividuals, $150,000 for heads of households
and $200,000 for married individuals filing jointly. The amendment adjusts these amounts
for inflation in future years, The amendment provides that, for the cost-of-living adjustment
awarded to retired state employees and teachers and their beneficiaries in fiscal year 2024-
25 only, which is paid in September 2024, the adjustment applies to the first $40,000 of the
retirement benefit. Effective July 1,2025, the increase applies to the portion that otherwise
8 would have been in effect absent this one-time charge.
FISCAL NOTE REQUIRED
(See attached)
COMMITTEE AMENDMENT
Approved: 03/21/24 ^^<=.
LD 457 LR 2184(02)
'• ...... :. •
An Act to Amend Maine's Tax Laws
Fiscal Note for Bill as Amended by Committee Amendment "/!"/C>-(e^3
Committee: Taxation 'J ^- j
Fiscal Note Required: Yes
'r '."•: •' . :, .'
Fiscal Note
Projections Projections
FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27
Net Cost (Savings)
General. Fund.,, . $0 $22,812,000 ($17,812,500) ($19,076,000)
Appropriations/AHocations
General Fund .
Revenue :
General Fund '
Other Special Revenue Funds
Fiscal Detail and Notes
The provisions included in this legislation will result in a net cost to the General Fund of $22,812,000 in fiscal year
2024-25 and net savings to the General Fund of $17,812,500 in fiscal year 2025-26 and $19,076,000 in fiscal year
2026-27.
First, this bill establishes a phaseout of the individual income tax pension deduction for non-military pensions based
on the taxpayer's adjusted gross income for tax years beginning on or after January 1, 2024. It will increase General
Fund revenue by $17,024,000 and increase Local Government Fund revenue by $896,000 in fiscal year 2024-25.
This bill also provides that, for fiscal year 2024-25 only, the cost-of-living adjustment (COLA) awarded to retired
state employees and teachers and their beneficiaries applies to the first $40,000 of the retirement benefit. According to
the Maine Public Employees Retirement System, this provision will create an unfunded actuarial liability (UAL)
totaling $39,836,000 that, pursuant to the Maine Constitution, will have to be funded immediately. This bill includes a
one-time General Fund appropriation in that amount to the Retirement Allowance Fund within the Maine Public
Employees Retirement System in fiscal year 2024-25 to pay for the cost of the COLA provision.
LR2184(02) - Fiscal Note - Page 1 of 1
$0
$0
$0
$39,836
$17,024
$896
,000
,000
,000
$17,812
$937
$0
,500
,500
$0
$19,076,000
$1,004,000