HP1057, LD 1537, item 1, An Act To Replace the Educational Opportunity Tax Credit with the Student Loan Repayment Credit for Maine Residents

An Act To Replace the Educational Opportunity Tax Credit with the Student Loan Repayment Credit for Maine Residents

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, 2017, "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, 2017, "qualified employee" has the same meaning as in Title 36, section 5217-E, subsection 1, paragraph H.

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, 2017, "qualified individual" has the same meaning as in Title 36, section 5217-E, subsection 1, paragraph I.

Sec. 4. 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, 2017.

Sec. 5. 36 MRSA §5217-E is enacted to read:

§ 5217-E. Credit for student loan repayment

For tax years beginning on or after January 1, 2017, a Maine resident individual is allowed a credit for student loan repayments 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 or non-Maine community college, college or university to obtain an associate, bachelor's or graduate degree after 2007. "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 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 the term "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 or non-Maine community college, college or university after 2007;

(2) Was a resident individual for the entire taxable year; and

(3) Either:

(a) 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; or

(b) 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.

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 an individual is on leave or vacation. It extends to the full year for individuals working for employers that customarily operate only during a regularly recurring period of 9 months or more during the taxable year. For individuals working for employers that customarily operate only during regularly recurring periods of less than 9 months during the taxable year, including seasonal employment, the 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 loan payments actually made to a relevant lender or lenders under this section only with respect to eligible education loan payment amounts paid by the taxpayer during that part of the taxable year that the qualified individual worked in this State. Payment of loan amounts in excess of the amounts due during the taxable year does not qualify for the credit. Forbearance or deferment of 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.

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 monthly payment amount made on eligible education loans multiplied by the number of months during the taxable year in which the taxpayer made payments on eligible education loans; and

B. The greatest of $1,000 if the qualified individual obtained an associate degree, $2,000 if the qualified individual obtained a bachelor's degree and $3,000 if the qualified individual obtained a graduate degree.

4. Calculation of the credit; employers. Subject to subsection 2, a taxpayer constituting an employer making payments on eligible education loans directly to a lender during the taxable year on behalf of a qualified employee may claim a credit equal to the actual monthly loan payment made by the employer on the loans, multiplied by the number of months during the taxable year the employer made the loan payments on behalf of the qualified employee during the term of employment. The credit under this subsection may not be claimed with respect to months of the taxable year during which the employee was not a qualified employee. 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.

summary

This bill makes the current tax credit for educational opportunity inapplicable to tax years beginning on or after January 1, 2017 and creates a new simplified tax credit for student loan repayment applicable to tax years beginning on or after January 1, 2017. The credit, available to qualified individuals, is equal to the amount of eligible education loan payments made during the tax year, up to the greatest of $1,000 for individuals having obtained an associate degree, $2,000 for individuals having obtained a bachelor's degree and $3,000 for individuals having obtained a graduate degree. 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 after 2007 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. Loans obtained from related persons, such as family members and certain businesses, trusts and exempt organizations, do not qualify for the credit. The credit may not reduce the tax due to less than zero. The credit for employers of qualified employees is equal to the amount of eligible education loan amounts paid during the taxable year, except that the credit attributable to part-time employees is limited to 50% of the credit otherwise determined.

HP1057 LD 1537	Session - 128th Maine Legislature		LR 726 Item 1
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