Maine GOP lawmakers have for the second time avoided voting on convening a special session, leaving IRC conformity and tribal sovereignty legislation in limbo.
Since adjourning sine die on March 17, the Legislature has been polled twice on returning for a special session to address IRC conformity and resolve over 400 unfinished bills carried over to a potential special session. On August 5 all Democrats and two Republicans voted to return to a special session, while 64 Republicans did not respond to the second poll organized by Senate President Troy Jackson (D) and House Speaker Sara Gideon (D).
“Once again, a majority of my Republican colleagues failed to match months of rhetoric with meaningful action,” Jackson said in a release. “To be honest, I’m absolutely floored. At a time when so many Mainers are struggling, it’s unacceptable that elected officials would refuse the opportunity to provide some relief. In almost any other job, refusing to show up over and over again would be a fireable offense.”
While lawmakers have resisted calls to a special session, Gov. Janet Mills (D) retains the authority to call for one. State GOP leaders have said they want a narrowed special session to address pandemic-related legislation only, including restricting Mills's emergency powers and allowing gatherings of over 50 people.
“We have been advocating to go back in for quite some time. What the Senate President is not telling you, however, is that Republicans have made it perfectly clear to him and Speaker Gideon that the priority right now is COVID-related legislation,” Senate Republican Leader Dana Dow said in a release.
Without a special session, legislation to update the state's IRC conformity will be left on the table. On July 30 the Joint Standing Committee on Taxation met to discuss and workshop a Maine Revenue Services draft of L.D. 2010, which would conform the state to the IRC as of June 30, 2020.
The legislation would not conform to significant retroactive federal changes for tax years 2018 and 2019, except for the exclusion of canceled debt income from Paycheck Protection Program loans, the qualified improvement property bonus depreciation, the increase in the charitable contribution limit, and the provision preventing double benefit for federal and state tax credits on paid family and medical leave.
For tax years 2020 and beyond, L.D. 2010 would conform to all items except the limit on noncorporate business losses and interest deduction.
Rep. Ryan Tipping (D), House chair of the Taxation Committee, told Tax Notes that he hasn’t heard any opposition to the conformity legislation in his conversations with Republicans, but noted that he hasn’t heard vocal support for it either.
“We’re definitely frustrated [that] Republicans don’t want to come back and finish the work. Our hope is that they come to their senses or the governor calls us back in,” Tipping said. “Acting on conformity this month is the right thing to do. When we’re called back into special session — or if we’re called — we could pass this within a couple days.”
Another major piece of legislation that could be carried over into special session is L.D. 2094, which would implement recommendations of the Task Force on Changes to the Maine Indian Claims Settlement Implementing Act. The sweeping tribal sovereignty legislation would, among other things, exempt current and later-acquired tribal lands from state and local taxation, give tribes the authority to tax nonmembers on tribal land, exempt tribal members living on their respective tribal lands from income tax, and authorize tribes to operate casinos.
Other taxation bills that have been slated to be carried over to a potential special session would address tax havens, the estate tax, sales taxes on lodging and hotels, the “dark store loophole,” economic nexus standards for the corporate income tax, and expanding the 6 percent service provider tax to include digital or streaming services.
Maine is facing a $527.8 million revenue shortfall in fiscal 2021, and an additional $883.2 million shortfall in the fiscal biennium ending in 2023, according to a revised revenue forecast released August 1. The governor has directed state department heads to cut 10 percent from their budgets by August 19, according to reporting from the Bangor Daily News.
"We have never seen our economy crash so hard or so quickly. The magnitude of the crisis cannot and should not be resolved with cuts alone," the Maine Center for Economic Policy stated in an email to Tax Notes. "Research shows that slashing spending by 10 percent across state government during a time of deep recession will only make the recession worse, by increasing layoffs and pumping the brakes on services like education, healthcare, and transportation that would otherwise fuel Maine’s recovery. As we have said from the beginning, the best solution lies with Congress, which should act swiftly to pass a bipartisan package that includes state fiscal relief."