Maine State Tax Law Developments Presented by Jonathan A. Block - PowerPoint PPT Presentation

Maine State Tax Law Developments Presented by Jonathan A. Block Partner PIERCE ATWOOD, LLP 18th Annual Maine Tax Forum -Nov2014 1

INCOME TAX • Top Marginal Rate Reduced from 7.95% to 7.15% • But not as good as it sounds… 10/5/2015 18th Annual Maine Tax Forum -Nov2014 2

PHASE-OUT OF DEDUCTIONS • Itemized and Standard Deductions Phase-Out beginning in 2016 – For single filers, phase out begins at $70,000 of income; phases out completely at $145,000 of income. (Amts indexed for inflation beginning in 2018). – For married filing jointly: , phase out begins at $140,000 and phases out completely at $290,000. • Itemized deduction phase out applies to charitable contributions (protection for charitable contributions repealed) 18th Annual Maine Tax Forum -Nov2014 3

STANDARD DEDUCTION AMOUNTS • 2016: Fixed at $11,600 for single filers – $17,400 for head of household – $23,200 for married filing jointly • After 2016, above amounts will be inflation adjusted 18th Annual Maine Tax Forum -Nov2014 4

Other Repealed Deductions 2016: • Deduction for Contributions to 529 plans repealed • Deduction for Long term care premiums repealed 18th Annual Maine Tax Forum -Nov2014 5

2016 INCOME TAX BRACKETS • New Brackets beginning with 2016 Tax Year. • For Single and Married Filing Separately: – 5.8% applies to MTI < $21,050. (O% bracket gone) – 6.75%. Applies to MTI 21,050 to 37,500. (6.5% bracket gone) – 7.15% Applies to MTI > $37,500 (7.95% gone) 18th Annual Maine Tax Forum -Nov2014 6

2017 INCOME TAX BRACKETS • New Brackets beginning with 2017 Tax Year. • For Single and Married Filing Separately: – 5.8% applies to MTI < $21,050. (no change from 2016) – 6.75%. Applies to MTI 21,050 to 50,000. (was $37,500 for 2016) – 7.15% Applies to MTI > $50,000 (was $37,500 for 2016) 18th Annual Maine Tax Forum -Nov2014 7

Elimination of Income Tax Credits • High Tech Credit (2016) • Jobs & Investment Credit (2016) • Super Credit for R&D (2014) • Family Development Account Credit (2016) • Employer-Assisted Day Care (2016) • Employer-Provided Long-Term Care (2016) • Quality Child Care (2016) • Biofuel Production (2016) 10/5/2015 18th Annual Maine Tax Forum -Nov2014 8

ELIMINATION OF INCOME TAX CREDITS • Elderly/Disabled retirement and disablity credit repealed (2016) • Forest management planning credit (2016) 18th Annual Maine Tax Forum -Nov2014 9

EIC Refundable • Earned income credit becomes refundable beginning in 2016 18th Annual Maine Tax Forum -Nov2014 10

Education Opp’y Credit Expanded • Educational opportunity credit. Beginning in 2016, credit expanded to include qualified individuals who obtain associate’s or bachelor’s degree after 2015 from a non-Maine college or university • Also extended to graduate degree obtained from a Maine college or university after 2015 • Eliminates requirement that individual maintain Maine residency while attending school • Removes restrictions on refinanced and consolidated loans • Credit now refundable for all associate degrees 18th Annual Maine Tax Forum -Nov2014 11

Military Pension Income • Beginning 2016, benefits received under a military retirement plan, including survivor benefits, are fully-exempt from Maine nicome tax 18th Annual Maine Tax Forum -Nov2014 12

NEW Sales Tax Fairness Credit 2016 • Refundable Credit for Low and middle income residents • Credit base depends on number of exemptions claimed on return; e.g. $125 for individual income tax return one personal exemption; $175 for ind. Income tax return claiming 2 personal exemptions; $200 for individual income tax return claiming 3 personal exemptions, etc. • Credit does not apply to married filing separately; “safe - harbor residents”; incarcerated individuals with no family members in Maine 18th Annual Maine Tax Forum -Nov2014 13

NEW Sales Tax Fairness Credit • “Income” means FAGI increased by certain amounts. • Phase out begins for single filers at $20,000 (credit is reduced by $10 for every $500 that exceeds $20,000 of income). – Higher phase-outs for HH and MFJ 18th Annual Maine Tax Forum -Nov2014 14

CORPORATE INCOME TAX • Rates remain the same • Loss of 8 credits (see previous list) • Beginning in 2015, deduction kicks in for portion of gain realized on sale of eligible timberlands held for at least 10 years beginning on or after 1/1/2005. 18th Annual Maine Tax Forum -Nov2014 15

Maine Estate Tax • For deaths prior to 1/1/2016, Maine exclusion amount is $2 million • For those dying on or after 1/1/2016, the Maine exclusion amount is indexed to the federal exclusion amount (projected to be about $5.45 million) 18th Annual Maine Tax Forum -Nov2014 16

Sale and Use Tax • General 5.5% rate remains in place • 8% rate on meals and liquor remains in place • Lodging tax will increase from 8% to 9% on 1/1/2016. Includes casual rentals of lodging. • 10% rate on short term rentals remains in place. • Service provider tax rate increased to 6% effective 1/1/2016. 18th Annual Maine Tax Forum -Nov2014 17

Sales and Use Tax • Definition of “grocery staples” changed so that more food products are subject to sales tax. A few examples: – Marshmallow Fluff and Crème; Chocolate spreads – Corn chips, potato chips, crisped vegetable or fruit chips, potato sticks, pork rinds, pretzels, crackers, popped popcorn, cheese sticks, cheese puffs and dips – Nuts and seeds processed or treated by salting, spicing, smoking, roasting or other means, but NOT INCLUDING PEANUT BUTTER! – Meat sticks, meat jerky, meat bars 18th Annual Maine Tax Forum -Nov2014 18

Service Provider Tax Expanded • Basic cable and satellite TV • Sale of satellite radio services, including the installation of associated equipment • Interstate and international telecommunications services (unless sold to a business) • Changes take effect 1/1/2016 18th Annual Maine Tax Forum -Nov2014 19

New Sales Tax Exemptions • Organizations providing support services to veterans and their families living with service- related PTSD or traumatic brain injury • Nonprofit collaboratives of academic, public, school and special libraries that provide support for library resource sharing, quality library information services and support the cultural, educational and economic development of the State 18th Annual Maine Tax Forum -Nov2014 20

Property Tax • Homestead exemption increases from $10,000 to $15,000 in 2016 – State will reimburse municipalities 50% of lost revenue • Homestead exemption increases to $20,000 in 2017. – State will reimburse municipalities 50% of first $10,000 and 75% on the second $10,000 18th Annual Maine Tax Forum -Nov2014 21

“Tax Expenditures” • Review to be conducted by OPEGA • Clean Elections ballot initiative, if passed, would require elimination of $6 million per biennium of tax expenditures 18th Annual Maine Tax Forum -Nov2014 22

Judicial Developments • Nothing significant to report this year 18th Annual Maine Tax Forum -Nov2014 23