An Act To Support Maine Businesses By Establishing A Pass-Through Entity Tax And Tax Credit

132nd Legislature (2025-2026) Introduced by Jack Ducharme and 2 co-sponsors

Maine creates an optional pass-through entity tax with a credit for owners to offset personal income tax on pass-through income, aiming to support local businesses.

Died in Possession of the Senate when the Legislature adjourned Sine Die and was PLACED IN THE LEGISLATIVE FILES. (DEAD)

#credits #incometax #pass-throughentities

Overview

LD 191 is a bill introduced to establish a state-level Pass-Through Entity Tax (PTET) and an accompanying tax credit. The bill is framed as a measure to support Maine businesses by providing an entity-level tax option for pass-through entities (such as partnerships and S-corporations) and a corresponding credit for owners. The bill falls under the subject areas of credits, income tax, and pass-through entities.

Purpose and Intent

Create an optional PTET mechanism to be administered by Maine’s tax authority.

Provide a tax credit to owners of pass-through entities, intended to offset taxes paid or otherwise align with tax policy objectives for Maine businesses.

Improve the tax treatment of pass-through income for entities operating in Maine, with the goal of supporting business activity and potential economic development.

Note: Specific policy design elements (eligibility, tax rates, calculation methodology, election mechanics, carryover rules, nexus, and how credits are applied) would be defined in the bill’s text.

Key Provisions (Summary by typical PTET structure)

Establishment of an optional PTET for eligible pass-through entities.

Creation of a credit mechanism for owners of eligible pass-through entities, intended to offset personal income tax related to pass-through income.

Administrative framework for election, assessment, and collection of the PTET.

Rules governing how the entity tax interacts with the owners’ individual tax liabilities, and how credits are claimed and applied.

Provisions for conformity with or adaptation to federal tax rules affecting pass-through income (e.g., SALT considerations).

Revenue and fiscal provisions detailing how the PTET and credit affect state revenue.

Note: The precise provisions (rates, thresholds, eligible entities, reporting, and sunset provisions) would be specified in the bill’s text.

Affected Parties

Pass-through businesses operating in Maine (e.g., partnerships, LLCs taxed as partnerships, S-corporations).

Owners of pass-through entities, who would receive credits against their Maine individual income tax.

Maine Revenue Services and state tax administration.

Potential indirect impacts on other taxpayers due to shifts in revenue or compliance costs.

Procedural and Timeline Highlights

Introduced: January 14, 2025.

Referred to: Committee on Taxation (January 14, 2025).

2025-01-14: Sent for concurrence; ordered printed.

2025-03-21: Carried over to the next session, under Joint Order SP 519.

2025-05-07 and 2025-05-22: Work sessions held; bill tabled.

2025-05-23: Carry over requested.

2025-06-25: Carry over approved; bill to be carried over in the same posture to any special or regular session of the 132nd Legislature per Joint Order SP 800.

Next Steps and Considerations

The bill remains in carry-over status, with potential movement in a future session of the 132nd Legislature.

Key questions for analysis: fiscal impact, administrative complexity, interaction with federal tax changes, and how broadly the credit would benefit owners.

Stakeholders may seek amendments to clarify eligibility, rates, and timing of credits and payments.

This summary covers the bill’s stated purpose and procedural status based on available legislative actions. Detailed provisions will be defined in the bill’s full text.

Bill