An Act To Reform and Lower Maine Taxes
PART A
Sec. A-1. 36 MRSA §5219-BB is enacted to read:
§ 5219-BB. Maine Residents Property Tax Program credit
A refundable credit is allowed against the taxes imposed by this Part in the amount of benefits allowed under chapter 907. This credit is not available if the taxpayer has filed a separate application for benefits under chapter 907.
Sec. A-2. 36 MRSA §6221 is enacted to read:
§ 6221. Income tax credit option
A person eligible for benefits under this chapter may elect to receive those benefits as a credit against income tax as provided in section 5219-BB if the credit is claimed on the claimant's annual income tax return.
Sec. A-3. Application. This Part applies to tax years beginning on or after January 1, 2007.
PART B
Sec. B-1. 30-A MRSA §5681, sub-§2, ¶E, as enacted by PL 1999, c. 731, Pt. U, §1, is amended to read:
(1) Before January 1, 2008, .01;
(2) From January 1, 2008 to December 31, 2008, .011;
(3) From January 1, 2009 to December 31, 2009, .012;
(4) From January 1, 2010 to December 31, 2010, .013;
(5) From January 1, 2011 to December 31, 2011, .014; and
(6) Beginning January 1, 2012 and thereafter, .015.
PART C
Sec. C-1. 36 MRSA §5111, sub-§1-B, as enacted by PL 1999, c. 731, Pt. T, §3, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $4,200 | 2% of the Maine taxable income |
| At least $4,200 but less than $8,350 | $84 plus 4.5% of the excess over $4,200 |
| At least $8,350 but less than $16,700 | $271 plus 7% of the excess over $8,350 |
| $16,700 or more | $856 plus 8.5% of the excess over $16,700 |
Sec. C-2. 36 MRSA §5111, sub-§1-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| Less than $4,750 | 2% of the Maine taxable income |
| At least $4,750 but less than $9,450 | $95 plus 4.5% of the excess over $4,750 |
| At least $9,450 but less than $18,950 | $307 plus 7% of the excess over $9,450 |
| $18,950 or more | $972 plus 7.5% of the excess over $18,950 |
Sec. C-3. 36 MRSA §5111, sub-§2-B, as enacted by PL 1999, c. 731, Pt. T, §5, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $6,300 | 2% of the Maine taxable income |
| At least $6,300 but less than $12,500 | $126 plus 4.5% of the excess over $6,300 |
| At least $12,500 but less than $25,050 | $405 plus 7% of the excess over $12,500 |
| $25,050 or more | $1,284 plus 8.5% of the excess over $25,050 |
Sec. C-4. 36 MRSA §5111, sub-§2-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| Less than $7,150 | 2% of the Maine taxable income |
| At least $7,150 but less than $14,200 | $143 plus 4.5% of the excess over $7,950 |
| At least $14,200 but less than $28,450 | $460 plus 7% of the excess over $28,450 |
| $28,450 or more | $1,458 plus 7.5% of the excess over $28,450 |
Sec. C-5. 36 MRSA §5111, sub-§3-B, as enacted by PL 1999, c. 731, Pt. T, §7, is amended to read:
| If Maine Taxable income is: | The tax is: |
| Less than $8,400 | 2% of the Maine taxable income |
| At least $8,400 but less than $16,700 | $168 plus 4.5% of the excess over $8,400 |
| At least $16,700 but less than $33,400 | $542 plus 7% of the excess over $16,700 |
| $33,400 or more | $1,711 plus 8.5% of the excess over $33,400 |
Sec. C-6. 36 MRSA §5111, sub-§3-C is enacted to read:
| If Maine Taxable income is: | The tax is: |
| Less than $9,500 | 2% of the Maine taxable income |
| At least $9,500 but less than $18,950 | $190 plus 4.5% of the excess over $9,500 |
| At least $18,950 but less than $37,950 | $615 plus 7% of the excess over $18,950 |
| $37,950 or more | $1,945 plus 7.5% of the excess over $37,950 |
Sec. C-7. 36 MRSA §5126, first ¶, as amended by PL 2001, c. 583, §16, is further amended to read:
For income tax years beginning on or after January 1, 1998 but before January 1, 1999, a resident individual is allowed $2,400 for each exemption that the individual properly claims for the taxable year for federal income tax purposes, unless the taxpayer is claimed as a dependent on another return. For income tax years beginning on or after January 1, 1999 but before January 1, 2000, a resident individual is allowed $2,750 for each exemption that the individual properly claims for the taxable year for federal income tax purposes, unless the taxpayer is claimed as a dependent on another return. For income tax years beginning on or after January 1, 2000 but before January 1, 2007, a resident individual is allowed $2,850 for each exemption that the individual properly claims for the taxable year for federal income tax purposes, unless the taxpayer is claimed as a dependent on another return. For tax years beginning on or after January 1, 2007, a resident individual is allowed the same amount allowed under Section 151 of the Code for each exemption that the individual properly claims for the taxable year for federal income tax purposes, unless the taxpayer is claimed as a dependent on another return.
Sec. C-8. 36 MRSA §5219-S, as amended by PL 2003, c. 20, Pt. GG, §1, is repealed and the following enacted in its place:
§ 5219-S. Earned income credit
A taxpayer is allowed a refundable credit against the taxes otherwise due under this Part equal to:
Sec. C-9. Application. This Part applies to tax years beginning on or after January 1, 2007.
PART D
Sec. D-1. 36 MRSA §652, sub-§1, ¶L, as enacted by PL 1977, c. 487, is amended to read:
(1) The owners of certain institutional and organizational real and personal property , which that is otherwise exempt from state or municipal taxation , may be under this section are subject to service charges when these charges that are calculated according to the actual cost of providing municipal services to that real property and to the persons who use that property. Service charges may also be applied to any improved property owned by the State that is exempt from taxation under section 651. These services shall include, without limitation:
(a) Fire protection;
(b) Police protection;
(c) Road maintenance and construction, traffic control , and snow and ice removal;
(d) Water and sewer service provided to the tax-exempt entity, the costs for which are not otherwise recovered through user fees or other charges;
(e) Sanitation services provided to the tax-exempt entity, the costs for which are not otherwise recovered through user fees or other charges; and
(f) Any services other than education and welfare provided to the tax-exempt entity, the costs for which are not otherwise recovered through user fees or other charges.
(2) The establishment of service charges is not mandatory, but rather is at the discretion of the municipality in which the exempt property is located. The municipal legislative body shall determine those institutions and organizations on which service charges are to be levied by charging for services on any or all of the following classifications of tax exempt real property:
(a) Residential properties currently totally exempt from property taxation, yet used to provide rental income. This classification shall not include student housing or parsonages.
If a municipality levies service charges in any of the classifications of this subparagraph, that municipality shall levy these service charges to all institutions and organizations owning property in that classification.
(3) With respect to the determination of service charges, appeals shall must be made in accordance with an appeals process to be provided for by municipal ordinance. Appeals concerning the assessed value of any property against which a service charge is levied must be undertaken in accordance with subchapter 8.
(4) The collection of unpaid service charges shall must be carried out in the same manner as provided in Title 38, section 1208.
(5) Municipalities shall use the revenues accrued from service charges to fund, as much as possible, the costs of those services reduce the municipality's tax commitment as provided in section 709-C.
(6) The total service charges levied by a municipality on any institution and organization under this section shall not exceed 2% of the gross annual revenues of the organization. To qualify for this limitation the institution or organization shall file with the municipality an audit of the revenues of the organization for the year immediately prior to the year which the service charge is levied. The municipal officers shall abate the service charge amount that is in excess of 2% of the gross annual revenues a tax-exempt entity under this section may not exceed the lesser of 1.5% of the tax-exempt entity's annual receipts and 50% of the amount that would have been assessed as taxes on the property concerned if it were not exempt from taxation. To qualify for this limitation, the tax-exempt entity must file with the municipality a report of the annual receipts of the entity for the year immediately prior to the year for which the service charge is levied. The municipal officers shall abate the service charge amount that is in excess of the applicable limitation. For the purposes of this subparagraph, "annual receipts" means any streams of income received in the most recent fiscal year by the tax-exempt entity from any source, including receipts of goods and services provided at the exempt property. "Annual receipts" does not include amounts received by a tax-exempt entity in the form of governmental or corporate grants, private charitable donations or trust or endowment earnings to the extent all receipts in those categories are actually spent to provide tangible and direct services to those people benefiting from the services provided by the organization.
(6-A) A municipality may establish a payment schedule that is annual, semiannual or quarterly.
(7) Municipalities shall adopt any necessary ordinances to carry out the provisions of this paragraph regarding service charges.
(8) Any service charges calculated under this paragraph must be phased in as follows:
(a) For the tax year commencing April 1, 2008, the municipality may charge 35% of the total service charge calculated;
(b) For the tax year commencing April 1, 2009, the municipality may charge 70% of the total service charge collected; and
(c) For the tax year commencing April 1, 2010, and for each tax year after that date, the municipality may charge 100% of the total service charge calculated.
Service charges levied pursuant to this paragraph may be applied only to improved tax-exempt property, which is any parcel of land containing a building or other principal-use structure that is exempt from taxation pursuant to this section.
Sec. D-2. 36 MRSA §652, last ¶, as enacted by PL 1993, c. 422, §5, is repealed.
Sec. D-3. 36 MRSA §652-A is enacted to read:
§ 652-A. Application schedules
An organization or institution that desires to secure exemption under section 652 must make written application and file written proof of entitlement for each parcel to be considered on or before April 1st in the year in which the exemption is first requested with the assessors of the municipality in which the property would otherwise be taxable and every 3 years thereafter. If granted, the exemption continues in effect unless the assessors determine that the organization or institution is no longer qualified. Proof of entitlement must indicate the specific basis upon which exemption is claimed.
Any organization or institution that is established as exempt pursuant to section 652 on or before January 1, 2008 must reapply for continuing exemption according to the following schedule.
Sec. D-4. 36 MRSA §709-C is enacted to read:
§ 709-C. Service charges
The assessors shall deduct from the total amount required to be assessed an amount equal to the amount of service charges to be levied under section 652 for the municipal fiscal year.
Sec. D-5. Commission established. The Commission on Municipal Services and Tax-exempt Property, referred to in this section as "the commission," is established.
1. Commission membership. The commission consists of the following 13 members.
2. Appointments. All appointments must be made no later than 30 days following the effective date of this Part. The President of the Senate and the Speaker of the House of Representatives jointly shall determine the chair and cochair of the commission. The appointing authorities shall notify the Executive Director of the Legislative Council upon making their appointments. The cochairs shall convene the first meeting of the commission no later than 15 days after the appointment of all members is complete.
3. Duties. The commission shall develop a formula or process for municipalities to use to determine a municipal cost component. The commission shall analyze the extent of entities exempt from property tax and the impact of those tax-exempt entities on the costs of municipal services. The commission may consider any other options it determines necessary to fulfill its responsibilities.
4. Staff assistance. Upon approval of the Legislative Council, the Office of Policy and Legal Analysis shall provide necessary staffing services to the commission.
5. Compensation. Compensation may not be paid to members of the commission. Members of the commission who are not otherwise compensated by their employers or other entities that they represent are entitled to receive reimbursement of necessary expenses incurred for their attendance at authorized meetings of the commission.
6. Report. The commission shall submit its report, together with any recommended implementing legislation, to the First Regular Session of the 124th Legislature no later than December 6, 2008. If the commission requires an extension of time to make its report, it may apply to the Legislative Council, which may grant the extension.
Sec. D-6. Application. Those sections of this Part that amend the Maine Revised Statutes, Title 36, section 652, subsection 1, paragraph L; repeal Title 36, section 652, last paragraph; and enact Title 36, sections 652-A and 709-C apply to property tax years beginning on or after April 1, 2008.
PART E
Sec. E-1. 5 MRSA §13090-K, sub-§2, as enacted by PL 2001, c. 439, Pt. UUUU, §1, is amended to read:
Sec. E-2. 36 MRSA §1752, sub-§1-H is enacted to read:
Sec. E-3. 36 MRSA §1752, sub-§1-I is enacted to read:
Sec. E-4. 36 MRSA §1752, sub-§1-J is enacted to read:
Sec. E-5. 36 MRSA §1752, sub-§8-C is enacted to read:
"Personal services" does not include construction services;
Sec. E-6. 36 MRSA §1752, sub-§11, ¶A, as amended by PL 2005, c. 218, §14, is further amended to read:
(1) Conditional sales, installment lease sales and any other transfer of tangible personal property when the title is retained as security for the payment of the purchase price and is intended to be transferred later; and
(2) Sale of products for internal human consumption to a person for resale through vending machines when sold to a person more than 50% of whose gross receipts from the retail sale of tangible personal property are derived from sales through vending machines. The tax must be paid by the retailer to the State . ; and
(3) Any taxable service defined under subsection 17-B to the extent the taxable service is provided in this State and only if the relationship between the provider and the recipient of the taxable service is not an employment relationship with respect to the provision of the service.
Sec. E-7. 36 MRSA §1752, sub-§14, as amended by PL 2005, c. 675, §1 and affected by §2, is further amended to read:
(1) Services which that are a part of a retail sale; and
(2) All receipts, cash, credits and property of any kind or nature and any amount for which credit is allowed by the seller to the purchaser, without any deduction on account of the cost of the property sold, the cost of the materials used, labor or service cost, interest paid, losses or any other expenses.
When a taxable service is provided for a fee that is contingent on an ultimate award, settlement or similar financial result and the fee is a certain percentage of that ultimate award or settlement, the fee is deemed to include both the sale price and the applicable tax.
(1) Discounts allowed and taken on sales;
(2) Allowances in cash or by credit made upon the return of merchandise pursuant to warranty;
(3) The price of property returned by customers, when the full price is refunded either in cash or by credit;
(4) The price received for labor or services used in installing or applying or repairing the property sold, if separately charged or stated;
(5) Any amount charged or collected, in lieu of a gratuity or tip, as a specifically stated service charge, when that amount is to be disbursed by a hotel, motel, restaurant or other eating establishment to its employees as wages;
(6) The amount of any tax imposed by the United States on or with respect to retail sales, whether imposed upon the retailer or the consumer, except any manufacturers', importers', alcohol or tobacco excise tax;
(7) The cost of transportation from the retailer's place of business or other point from which shipment is made directly to the purchaser, provided that as long as those charges are separately stated and the transportation occurs by means of common carrier, contract carrier or the United States mail;
(8) The fee imposed by Title 10, section 1169, subsection 11;
(9) The fee imposed by section 4832, subsection 1;
(10) The lead-acid battery deposit imposed by Title 38, section 1604, subsection 2-B; or
(11) Any amount charged or collected by a person engaged in the rental of living quarters as a forfeited room deposit or cancellation fee if the prospective occupant of the living quarters cancels the reservation on or before the scheduled date of arrival . ; or
(12) With respect to any fee for a taxable service, any portion of that fee representing direct reimbursement charged to the recipient of the taxable service for commodities or services previously paid by the person providing the service, as long as any tax on those commodities or services, if any tax applies, has been previously paid.
Sec. E-8. 36 MRSA §1752, sub-§17-B, as enacted by PL 2003, c. 673, Pt. V, §19 and affected by §29, is amended to read:
Sec. E-9. 36 MRSA §1752, sub-§20-B is enacted to read:
Sec. E-10. 36 MRSA §1760, sub-§14 is repealed.
Sec. E-11. 36 MRSA §1760, sub-§16, as repealed and replaced by PL 2005, c. 622, §6, is amended to read:
Sec. E-12. 36 MRSA §1760, sub-§17 is repealed.
Sec. E-13. 36 MRSA §1760, sub-§19, as amended by PL 2003, c. 588, §7, is further amended to read:
Sec. E-14. 36 MRSA §1760, sub-§34, as amended by PL 2005, c. 218, §23, is repealed.
Sec. E-15. 36 MRSA §1760, sub-§43, as amended by PL 1983, c. 828, §6, is repealed.
Sec. E-16. 36 MRSA §1760, sub-§49, as amended by PL 2005, c. 622, §7, is repealed.
Sec. E-17. 36 MRSA §1760, sub-§64, as amended by PL 2003, c. 588, §10, is repealed.
Sec. E-18. 36 MRSA §1760, sub-§65, as amended by PL 1993, c. 670, §6, is repealed.
Sec. E-19. 36 MRSA §1760, sub-§71, as enacted by PL 1989, c. 533, §8, is repealed.
Sec. E-20. 36 MRSA §1760, sub-§75, as enacted by PL 1989, c. 871, §15, is repealed.
Sec. E-21. 36 MRSA §1760, sub-§76, as amended by PL 2003, c. 588, §11, is repealed.
Sec. E-22. 36 MRSA §1811, first ¶, as amended by PL 2001, c. 439, Pt. TTTT, §2 and affected by §3, is further amended to read:
A tax is imposed on the value of all tangible personal property and taxable services sold at retail in this State. The rate of tax is 7% on the value of liquor sold in licensed establishments as defined in Title 28-A, section 2, subsection 15, in accordance with Title 28-A, chapter 43; 7% 10% on the value of rental of living quarters in any hotel, rooming house or tourist or trailer camp; 10% on the value of rental for a period of less than one year of an automobile; 7% 8% on the value of prepared food; and 5% on the value of all other tangible personal property and taxable services. Value is measured by the sale price, except as otherwise provided.
Sec. E-23. 36 MRSA §1811, 2nd ¶, as amended by PL 2003, c. 673, Pt. V, §23 and affected by §29, is further amended to read:
The tax imposed upon the sale and distribution of gas, water or electricity , or telecommunications services, by any public utility, the rates for which sale and distribution are established by the Public Utilities Commission, must be added to the rates so established. No tax may be imposed upon the sale or use of electrical energy, or water stored for the purpose of generating electricity, when the sale is to or by a wholly owned subsidiary by or to its parent corporation, except for electrical energy or water purchased for resale to or by such wholly owned subsidiary.
Sec. E-24. Effective date. This Part takes effect January 1, 2008.
summary
This bill implements tax reform in the following areas.
This Part allows persons eligible for benefits under the Maine Residents Property Tax Program, also known as the Circuitbreaker Program, to file for a refundable credit using the individual income tax form.
This Part affects municipal revenue sharing by increasing the reduction of the disproportionate tax burden threshold a municipality must meet in order to qualify for so-called "revenue sharing 2" funds from 10 mills to 15 mills over a 5-year period
This Part affects individual income taxes by decreasing the top rate from 8.5% to 7.5%, conforming the personal exemption to the federal personal exemption and increasing the earned income tax credit from 5% to 20% over a 5-year period and allowing the credit to exceed the amount of income taxes actually paid.
This Part affects the ability of a municipality to impose service charges on tax-exempt properties located in that municipality in the following ways:
1. It expands the existing service charges statute in the following ways: Service charges are applied to all improved exempt property except churches, federal property and municipal and quasi-municipal property; the service charge, as is the case with existing law, is the equivalent of the full mill rate minus any portion of the mill rate attributable to education or welfare costs, except that municipal costs for services that are financed by user fees are not attributable to the special mill rate; service charges are phased in over a 3-year period; and the service charge may not exceed the lesser of 1.5% of the organization's annual receipts and 50% of the amount that would have been assessed as taxes if the organization were not exempt;
2. It provides a schedule for all existing properties currently exempt under the law to reapply for eligibility under the new standards of eligibility in a phased-in manner over the next 3-year period;
3. It specifies that revenues derived from service charges must be used to reduce the municipal assessment in the same fashion as funds received under the municipal revenue sharing program; and
4. It establishes the Commission on Municipal Services and Tax-exempt Property, a commission consisting of appointees of the Governor, President of the Senate and Speaker of the House. The commission is required to develop a formula or process for municipalities to use to determine a municipal cost component. The commission shall analyze the extent of entities exempt from property tax and the impact of those tax-exempt entities on the costs of municipal services and any other options the commission determines are necessary to fulfill its responsibilities.
This Part affects the imposition of sales tax in the following ways:
1. It expands the definition of "taxable service" for purposes of the imposition of sales tax to include amusement, recreational and personal services and consumer purchases of transportation services and professional, club or fraternal memberships. Under this Part, the provision of those services is subject to the 5% sales tax. The term "construction services" is also defined for the purpose of distinguishing nontaxable construction services from taxable personal services;
2. It eliminates the sales tax exemption on: sales of short-term publications; sales to institutions conducting medical research or scientific study of biology or ecology; private schools, churches, monasteries and convents; camp rentals; vending machine sales; sales to day-care centers, nursery schools, community action agencies, child abuse councils and child advocacy organizations; sales by schools and school-sponsored organizations; sales to state-chartered credit unions; meals and lodging provided to employees; and certain aircraft parts; and
3. It increases the so-called "lodging tax" from 7% to 10% and the tax on prepared meals from 7% to 8%.