Tax Conformity & the Payroll Protection Program: We need your help!

This week, the Joint Standing Committees on Appropriations and Financial Affairs and Taxation held a series of public hearings on LD 42, An Act Making Certain Supplemental Appropriations and Allocations and Changing Certain Provisions of the Law Necessary to the Proper Operations of State Government (Emergency).

To assist you in discussing this issue with your legislators, we have compiled the following talking points:

The Maine State Chamber of Commerce is asking you to call your legislators and urge them to VOTE to fully align with the federal government on tax conformity with respect to the Payroll Protection Program (PPP) loans and other important provisions. The federal government has created several lifesaving financial programs during the pandemic to put more money in the hands of businesses, to keep people employed, to keep the economy afloat, and to prevent businesses from folding as they navigate this unprecedented time in our nation.

During the week of January 25, the Joint Standing Committee on Appropriations and Financial Affairs held a series of public hearings on LD 42, An Act Making Certain Supplemental Appropriations and Allocations and Changing Certain Provisions of the Law Necessary to the Proper Operations of State Government (Emergency).

Through LD 42 as amended, Maine has proposed to differ from the federal government in how the State handles the taxation of those critical benefits. This is a significant departure from the federal government and different from the way many other states are handling tax implications as a result of the PPP loans/grants.

• PPP Loans:  The federal government is providing an expense deduction for the PPP loans for businesses and is proposing to exempt the PPP loans from income tax. Maine will allow companies to deduct expenses associated with the PPP loans but will require that taxpayers add back those expenses to taxable income. Maine needs to follow the federal government and do the same. This inconsistently with the federal guidelines would represent a lost benefit to Maine businesses of up to $100 million. The impact on struggling small businesses could be devastating – the last straw for many of them. 
• LD 42 is also proposing to not conform with the federal government on the treatment of net operating losses, business interest expense deductions, and other business-related tax deductions that employers currently use to remain competitive.

      Below please find talking points on tax conformity and contact information for the legislators on the Joint Standing Committees on Appropriations and Financial Affairs and Taxation.

      The time to act is now! Please contact the Governor's Office, Senate and House Leadership, the AFA and Taxation committees, and your Representatives and Senators TODAY and urge them to have Maine fully conform to the federal government. If you have further questions, please contact Linda Caprara, senior government relations specialist for the Maine State Chamber of Commerce, by emailing her or calling (207) 623-4568, ext. 106. Thanks for your help!
 
Talking Points regarding Tax Conformity…

• As amended, LD 42 does not align with the federal government on various business provisions related to tax conformity. 
• The federal government created several lifesaving financial programs during the COVID-19 pandemic to put more money in the hands of businesses – keeping their doors open, their people employed, and the economy afloat – all to just get them through this unprecedented time. 
  
• Maine businesses had every expectation that the state would conform accordingly, especially since these programs were created specifically to keep people in business.
  

Payroll Protection Program (PPP) loans would be tax-free at federal level, but not at state level:

• The federal government is providing an expense deduction for the PPP loans for businesses and is proposing to exempt the PPP loans from income tax.
  
• Maine will allow only companies to deduct expenses associated with the PPP loans, but will require that taxpayers add back those expenses to taxable income. This means PPP loans will be taxed.
  
• This inconsistency with the federal guidelines represents a lost benefit to Maine businesses of up to $100 million. The impact on struggling small businesses could be devastating – the last straw for many of them. 
  

Federal Derived Intangible Income (FDII) elimination will increase taxes on Maine manufacturers:

• LD 42 is proposing to eliminate the FDII provision and will cost Maine-based manufacturers an estimated $10 million. This provision was placed in the Tax Cuts & Jobs Act by Congress to make it easier for U.S. manufacturers to compete internationally.
• Elimination of this provision will mostly impact small- to medium-sized manufacturers that export overseas and invest here in Maine. We need to grow Maine’s economy – not shrink it!
  
• LD 42 is also proposing to not conform with the federal government on the treatment of net operating losses, business interest expense deductions, and other business-related tax deductions that employers currently use to remain competitive.
  

 
Key Contact Information
 
Governor’s Office: (207) 287-3531
 
Senate Leadership:
President of the Senate: (207) 287-1500
Senate Majority Office: (207) 287-1515
Senate Minority Office: (207) 287-1505
 
House Leadership:
Speaker of the House: (207) 287-1300
House Majority Office: (207) 287-1430
House Minority Office: (207) 287-1440
 
Appropriations Committee:

• Sen. Catherine Breen: (207) 329-6142 | Cathy.Breen@legislature.maine.gov
• Sen. Donna Bailey: (207) 284-9962 | Donna.Bailey@legislature.maine.gov
• Sen. Paul Davis: (207) 876-4047 or (207) 343-0258 | Paul.Davis@legislature.maine.gov  
• Rep. Amy Arata: (207) 333-1817 | Amy.Arata@legislature.maine.gov
• Rep. Kristen Cloutier: (207) 807-1637 | Kristen.Cloutier@legislature.maine.gov
• Rep. Sawin Millett: (207) 592-5398 or (207) 583-4842 | Sawin.Millett@legislature.maine.gov
• Rep. John Martin: (207) 834-8353 | John.Martin@legislature.maine.gov
• Rep. Jessica Fay: (207) 415-4218 | Jessica.Fay@legislature.maine.gov
• Rep. Barbara Cardone: (207) 356-7981 | Barbara.Cardone@legislature.maine.gov
• Rep. Patricia Hymanson: (207) 363-8353 | Patricia.Hymanson@legislature.maine.gov
• Rep. Teresa Pierce: (207) 415-8631 | Teresa.Pierce@legislature.maine.gov
• Rep. Patrick Corey: (207) 749-1336 | Patrick.Corey@legislature.maine.gov
• Rep. Justin Fecteau: (207) 248-7183 | Justin.Fecteau@legislature.maine.gov

 
Taxation Committee:

• Sen. Ben Chipman: (207) 318-4961 | Ben.Chipman@legislature.maine.gov
• Sen. Matthea Daughtry: (207) 522-0913 | Mattie.Daughtry@legislature.maine.gov
• Sen. Matt Pouliot: (207) 441-9418 | Matt.Pouliot@legislature.maine.gov
• Rep. Maureen Terry: (207) 712-9735 | Maureen.Terry@legislature.maine.gov
• Rep. Theodore Kryzak: (207) 752-2775 | Theodore.Kryzak@legislature.maine.gov
• Rep. Bruce Bickford: (207) 740-0328 | Bruce.Bickford@legislature.maine.gov
• Rep. Lori Gramlich: (207) 232-1067 | Lori.Gramlich@legislature.maine.gov
• Rep. Ann Matlack: (207) 594-4831 | Ann.Matlack@legislature.maine.gov
• Rep. Joseph Perry: (207) 659-5295 | Joseph.Perry@legislature.maine.gov
• Rep. Jeffrey Hanley: (207) 458-9009 | Jeff.Hanley@legislature.maine.gov
• Rep. Meldon Carmichael: (207) 827-1000 | Meldon.Carmichael@legislature.maine.gov
• Rep. Benjamin Colling: (207) 405-7865 | Benjamin.Collings@legislature.maine.gov
• Rep. Melanie Sachs: (207) 299-6825 | Melanie.Sachs@legislature.maine.gov

 
The time to act is now! Please contact the Governor's Office, Senate and House Leadership, the AFA and Taxation committees, and your Representatives and Senators TODAY and urge them to have Maine fully conform to the federal government. If you have further questions, please contact Linda Caprara, senior government relations specialist for the Maine State Chamber of Commerce, by emailing her or calling (207) 623-4568, ext. 106. Thanks for your help!