AUGUSTA – Minority Republicans at Maine House late Thursday met their demands for full tax compliance with the federal government and maintained an agreement that offers income tax breaks to more than 28,000 businesses and 160,000 unemployed people.
Disagreement over a proposed additional state budget bill earlier in the day had left a tax exemption of $ 100 million on federal law loans pending on the Payroll Program.
The final votes on the bill were still pending at midnight on Thursday, but leaders of both parties said they were behind the compromise.
A Democratic concession to put an additional $ 8 million in the state’s Rainy Day fund got enough Republicans on board to get the budget bill on its way to Governor Janet Mills’ desk.
The PPP tax break is valued at approximately $ 100 million for the Maine business community. This now avoids paying income taxes on the federal forgivable loans granted to protect jobs and sustain businesses that were badly hit at the height of the COVID-19 pandemic.
Earlier that night, Mills, a Democrat, had punished the House minority caucus for addressing his demands for Maine to be fully compliant with federal tax laws, which would have cost the state government an additional $ 32 million in tax revenue while they have a number of obscure federal tax breaks over state law.
Under the agreement, the Department of Administration and Financial Services will be tasked with investigating the implications for Maine if it introduces federal tax breaks on overseas intangible income derived from the export of products tied to intangible assets, such as z. B. Patents. Trademarks and copyrights held in the United States. Republicans said this would cost some Maine businesses and some Maine-based businesses a total of $ 8.3 million in new taxes.
Ultimately, Republicans seemed unwilling to risk the broader tax break package, including a provision in the bill that exempts the first $ 10,200 from state income taxes on unemployment benefits.
The Senate, with the support of two of the Chamber’s 12 Republicans with 35 seats, achieved a two-thirds majority in an earlier version of the bill.
Mills pushed against minority Republicans in the House of Representatives, saying they were taking an “all or nothing” approach and encouraging them to “abandon their last-minute attempt to give state tax breaks to large multistate, multinational corporations …”
However, House Minority Leader Kathleen Dillingham, R-Oxford, said Republicans and Democrats have not heard each other fully about what they mean by “full compliance.” Democrats believed this only meant full PPP compliance, while Republicans expected full compliance with all federal tax codes.
Dillingham said the study would show whether or not the piece of conformance the Republicans wanted would be beneficial. “Is it good for businesses how many Maine businesses are using it?” Said Dillingham. “Or do we want to continue to decouple ourselves from federal tax legislation?”
She said lawmakers broke a deal simply by sticking to the negotiating table. She also credited House Speaker Ryan Fecteau, D-Biddeford, with a willingness to remain in talks despite the heated rhetoric between the two meetings.
Earlier that night, Dana Connors, president of the Maine State Chamber of Commerce, the state’s largest corporate organization, said choosing between full PPP compliance and no relief at all was not an option for its members.
“The fallback should always have consisted of protecting full PPP compliance, as had already been agreed in a non-partisan way,” said Connors.
The supplementary budget bill is expected to close a projected revenue loss of around $ 125 million in the state’s current fiscal year ending June 30, but also includes the tax breaks for businesses and the unemployed.
The Maine Constitution also requires the state government to maintain a balanced budget or be forced to close.
Legislators have also faced tight deadlines, including a federal tax deadline of April 15, while the state is due to file a corporate income tax return by Monday.
The entire legislature met in person for only the second time since holding ceremonies last December. They met at the Augusta Civic Center – a larger venue that allows lawmakers to socially distance themselves to prevent the spread of the COVID-19 virus. The venue and the pandemic are putting additional pressure on lawmakers, however, as the municipal civic center is set to reopen as a mass vaccination site for Maine General Health on Friday.
The facility costs lawmakers approximately $ 21,000 per day to use.
As approved by the Senate late Wednesday, the amendment bill expands an initial proposal by Mills that would have exempted the first $ 1 million PPP funding a company received from state corporation tax. Instead, the bill exempts all PPP funds from state income tax, similar to a provision in the federal tax law passed by Congress in December. This expansion will cost the state about $ 100 million in tax revenue, and unemployment benefit exemption, which will be paid in 2020, will cost an additional $ 47 million.
These two provisions of the bill received bipartisan support in the legislature’s budget and finance committee, but ultimately the committee’s five Republicans voted against the final partisan-splitting package on the bill.
Republican leaders have denied claims that they changed their demands in negotiations, claiming they had sought full compliance with federal tax law since the January legislative session began. But the Democrats said the Republicans are only pushing for full compliance of the PPP funds, and when the Democrats agreed to that concession, the Republicans expanded their demands.
Another piece of compliance the Republicans asked for was the amendment to federal law that would allow businesses to deduct 100 percent of the cost of business-related meal expenses.
The widening of the meal allowance has been ridiculed by Senate President Troy Jackson, D-Allagash, and other leading Democrats as a write-off of “three martini lunches”.
But Republicans have said that many Maine companies have incurred increased business lunches as they fed their employees to keep them in the workplace during the pandemic.
With their earlier polls Thursday, Republicans turned their backs on Maine businesses, Fecteau said.
“These are the companies that have received PPP loans in my community. These are the companies we know. These are people who gave blood, sweat and tears to help survive the pandemic, ”said Fecteau. “This was a vote on whether we would stand with them.”
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