Maine Revenue Services (MRS) issued guidance late last week responding to the state’s recently-enacted tax conformity legislation. Of note, MRS explained that some taxpayers may be required to amend their 2017 Maine income tax return to comply with Maine’s new tax laws because some federal tax changes—to which Maine conformed in the recent legislation—apply to tax years beginning in 2017. MRS still expects to issue additional guidance for taxpayers who are required to file a 2017 Maine income tax return to reflect the effects of federal mandatory repatriation of deferred foreign income (also referred to as “deemed repatriated income” or “IRC Section 965 income”).

Maine generally requires that taxpayers file an amended Maine return within 180 days from the date of a change or correction affecting the taxpayer’s income tax liability. MRS will abate interest and penalties that would otherwise apply to 2017 amended Maine income tax returns to the extent that the interest and penalties are associated with the federal tax law changes addressed by the recently-enacted Maine tax conformity legislation, and if the amended return is filed no later than March 11, 2019. In addition, MRS will abate interest and penalties that would otherwise apply to 2017 original Maine income tax returns to the extent that the interest and penalties are associated with federal tax law changes addressed by the recently-enacted Maine tax conformity legislation, and if the return is filed no later than October 15, 2018. To qualify for abatement, affected taxpayers should write “TAX CONFORMITY” across the top of their return.

MRS followed-up this week with additional guidance urging taxpayers to review their Maine income tax withholding and estimated tax liability for 2018 in light of Maine’s recent conformity legislation. The most significant Maine tax law changes that taxpayers should be aware of as they review their expected 2018 tax liability include:

• Increased Maine standard deduction (the Maine standard deduction is now equal to the federal standard deduction)
• Elimination of the Maine personal exemption for dependent taxpayers
• New Maine dependent exemption tax credit
• Nonconformity with the $10,000 federal limitation on real and personal property taxes included in itemized deductions
• New Maine employer credit for family and medical leave
• Not allowing the federal business expense deduction under IRC § 199A