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CCH® PAYROLL — 06/25/09

Maine Governor signs tax reform legislation

Maine Gov. John E. Baldacci has signed tax reform legislation which makes changes to the personal income tax structure.

For tax years beginning on or after January 1, 2010, the legislation replaces the current personal income tax brackets, personal exemptions, and itemized deductions with a 6.5% flat tax on all taxable income. In addition, an income tax surcharge equal to 0.35% is imposed on taxable income over $250,000.

A new "household credit" for low- and middle-income individuals is created (the credit amount is adjusted annually for inflation). New credits for charitable contributions exceeding $250,000 and persons who are 65 years of age or older are added as well. In addition, the legislation eliminates the low-income tax credit and makes the earned income tax credit refundable for tax years beginning after 2009 up to $150 for taxpayers filing joint returns and $125 for all other taxpayers. These credit changes are effective January 1, 2010.

The legislation also abolishes the alternative minimum tax on individuals, repeals the 15% tax on lump-sum retirement plan distributions and early distributions from qualified retirement plans, and replaces withholding exemptions with a requirement that the household credit be taken into account when determining personal income tax withholding rates. Again, these changes apply beginning in 2010. Finally, the State Tax Assessor is required to report to the Joint Standing Committee on Taxation by November 1, 2011, regarding the impact of the changes in the tax laws contained in the legislation.

(L.D. 1495 (H.P. 1051), Laws 2009, effective and applicable as noted; Press Release, Gov. John E. Baldacci, June 12, 2009.)

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