February 6, 2023

Volume XIII, Number 37


February 06, 2023

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Maine Revenue Issues Additional COVID-19 Income and Sales Tax Guidance

On February 12, 2021, Maine Revenue Services (MRS) issued a tax alert with additional tax guidance for taxpayers impacted by the COVID-19 pandemic.

Maine Income Tax on COVID-19 Relief

Unemployment compensation, federal and state grants, and loan forgiveness are taxable in Maine to the extent that they are included in federal adjusted gross income and not otherwise exempt under Maine law. Maine intends to tax additional unemployment benefits provided under the CARES Act, loan and grant programs authorized by the CARES Act, and grants received through the Maine Department of Economic & Community Development. Our recent client alert, Update: Maine Governor Proposes Conformity to Federal Treatment for First $1 Million of PPP Loans, discusses the governor’s most recent proposal to exempt 99% of PPP loan recipients from tax.

No Relief from Statutory Residency for COVID-19

MRS will not provide relief from Maine’s statutory residency law to individuals who have a permanent place of residence in Maine and unexpectedly spent more than 183 days in Maine due to the pandemic. MRS takes the position that a place of abode is considered to be not permanent only if it is maintained during a temporary stay in Maine to accomplish a particular purpose. A second home in Maine does not meet this exception, even during the pandemic, according to MRS. Statutory residents will therefore be required to file Maine resident returns for 2020, even if the pandemic was their sole reason for overstaying the 183 days.

In an October tax alert, Maine Revenue announced that in 2020, employers with Maine resident employees working from Maine due to a state COVID-19 state of emergency were allowed to treat these employees as if they were still working out-of-state for Maine withholding purposes. MRS has not yet extended this relief to 2021.

Sales Tax Nexus Relief Extended

Previously, MRS announced that a business without Maine nexus will not establish nexus for sales and use tax purposes due solely to an employee working from Maine during the state of emergency and due to the pandemic. The guidance applied to sales occurring in 2020 has now been extended to apply to 2021 sales as well. MRS has not yet issued a corresponding extension for corporate income tax nexus.

Educational Opportunity Credit

MRS has finalized revisions to Rule 812, which allow student loan payments made in forbearance or deferment to qualify for the Educational Opportunity Credit.

©2023 Pierce Atwood LLP. All rights reserved.National Law Review, Volume XI, Number 46

About this Author

Jonathan Block tax lawyer Pierce Atwood Law Firm

Jon Block represents and advises clients with Maine, New Hampshire, and Massachusetts tax problems. Jon litigates tax cases at the administrative level and through all levels of the court system, advises clients on transactional and multistate tax issues, obtains advance rulings for clients, and does a substantial amount of legislative and government relations work in the tax area. Jon's substantive expertise in state and local tax encompasses corporate and individual income tax, business profits tax, sales and use tax, property tax, excise tax, transfer tax, and other state and local...

(207) 791-1173
Olga J. Goldberg, Pierce Atwood, tax lawyer

Olga J. Goldberg advises clients in complex state and local tax matters, including transaction planning and tax compliance. She represents clients on tax controversy matters from the administrative level through litigation and appeal or settlement. Olga’s practice covers all types of state and local taxes, including corporate income, business profits, franchise, sales and use, and property tax, with a focus on New England and Texas taxes.

Olga regularly speaks and writes on a wide range of state and local tax matters, and is actively involved in IPT and COST.

(207) 791-1180
Robert Ravenelle, Pierce Atwood Law Firm, Portland, Tax Law Attorney

As head of Pierce Atwood's Federal Income Tax practice, Rob Ravenelle has extensive experience in the planning, negotiation and tax structuring for mergers and acquisitions. He works closely with members of our Business Practice Group to ensure that clients obtain the most economic and tax efficient transaction results possible. Rob's prior experience practicing as a Certified Public Accountant brings unique skills that enhance the value of our services in deal transactions, from mergers to renewable energy tax equity financing to succession planning of closely held...

Kris J. Eimicke, tax lawyer, Pierce Atwood

Kris Eimicke concentrates his practice on tax issues and economic development programs, with a special emphasis on state and federal new markets tax credit (NMTC) programs, renewable energy tax credits, historic rehabilitation tax credits, and the newly created opportunity zone program. Kris also regularly advises businesses, tax-exempt organizations, and individuals on tax issues related to a variety of business transactions, as well as representation before the Internal Revenue Service, state revenue agencies, and the courts on tax matters. 

(207) 791-1248