Maine Enacts Income Tax Cut Formula and Creates Board of Tax Appeals

By Kris Eimicke

As the Legislative session comes to a close, two major pieces of tax legislation have been signed by Governor LePage.  First, if certain conditions are met, Maine’s individual income tax rates may over time be reduced to 4 percent.  Second, the Board of Tax Appeals has been established, replacing the Independent Appeals Office, and once again substantially amending the tax appeals process in Maine. 

Possible Reduction in Individual Income Tax Rates

The “Act to Provide Tax Relief for Maine’s Citizens by Reducing Income Taxes” provides for the gradual reduction in Maine’s individual income tax rates to a floor of 4 percent (the rates are currently 8.5 percent for 2012 and 7.95 percent for 2013) if the State has sufficient surplus to support the reduction.  Twenty percent of the State's revenue exceeding the “General Fund appropriation limitation” and “unappropriated surplus” will now be placed in a newly-created Tax Relief Fund.  Once the amount in the Fund is sufficient to support a reduction in individual income tax rates, the State Tax Assessor will announce (by November 1 of each calendar year) what the tax rates will be in the following calendar year.  The rates will only be reduced if the amount in the Fund is sufficient.  The initial reduction must be at least 0.2 percent.  Further reductions must be at least 0.1 percent. 

The Maine Board of Tax Appeals

The “Act to Create the Maine Board of Tax Appeals” makes substantial changes to the procedures for appealing decisions of the State Tax Assessor.  The Act creates the Maine Board of Tax Appeals and eliminates the Independent Appeals Office, which was created just last year.  If a taxpayer disagrees with an assessment by the State Tax Assessor, the taxpayer must timely petition the Assessor for reconsideration.  Under the new regime, if the taxpayer continues to disagree after the Assessor’s reconsideration, the taxpayer now has the option of petitioning either the Board of Tax Appeals or the Superior Court directly.  However, decisions of the Board may then be appealed to the Superior Court.

The Board is an independent panel, not subject to the supervision of the Bureau of Revenue Services.  The Board consists of 3 members to be appointed by the Governor, no more than two of whom can be lawyers.  Appeals to the Board will be heard by an independent appeals officer.  The decision of the appeals officer will be adopted, modified, or rejected by the full Board.  If either the taxpayer or the Assessor disagrees with the decision of the Board, either party may petition the Superior Court for review.  At the Superior Court, the parties may raise any argument or issue regardless of whether it was raised during the underlying proceeding. 

Please contact any member of Pierce Atwood’s State and Local Tax Group if you have any questions about the reduction in tax rates, appeals of decisions of the State Tax Assessor, or other state and local tax issues.