Break: Maine’s newly adopted supplementary budget is in line with PPP loans
In the wee hours of the morning, the Maine Legislature passed a compromise Supplementary Budget for fiscal 2021. It is important to note that the budget fully conforms to Maine’s tax treatment of Paycheck Protection Program loans. (PPP) to the federal treatment of tax-exempt loans.
As a result, Maine businesses will not face an increase in Maine income tax due to the cancellation of the PPP loan or the federal deduction for business expenses paid with the proceeds of the canceled loan. . This compromise budget differs from the governor’s proposal, which would have been in accordance with federal treatment up to the first million dollars of the proceeds of the canceled P3 loan. This is an important victory for Maine businesses.
As adopted, the Supplementary Budget also includes the following new tax provisions:
- FDII Addition Study. As part of the governor’s original proposal, the Supplementary Budget expanded a Maine addition to apply to both the 50% block deduction of low tax intangible income and the 37.5% deduction of intangible income. of foreign origin under IRC § 250 (a) (1). Additionally, the budget passed last night will force Maine Revenue Services to study the FDII addition change to determine its impact on Maine-based businesses.
- Limits of unemployment benefit. The Supplementary Budget complies with the US federal bailout law of 2021 by exempting up to $ 10,200 in unemployment benefits received in 2020 from Maine income tax, for people with gross income Federal adjusted is less than $ 150,000.
The supplementary estimates also adopt the tax provisions proposed by the governor and dissociate themselves from the federal treatment of business surplus losses, interest charges and charitable deductions, while conforming to the federal treatment of net operating losses. Additional analysis on these and other tax changes in the budget is available in our recent alert, Supplementary Budget Proposed by the Governor of Maine – Summary of Federal (Non) Compliance.