September 27, 2021

Volume XI, Number 270


September 27, 2021

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Maine Tax Changes Following End of COVID-19 State of Emergency

On June 30, 2021, Maine Revenue Services (MRS) published a Tax Alert describing changes to COVID-19 tax relief programs following the end of Maine’s state of civil emergency, also on June 30. Below is a summary of the key changes affecting Maine taxpayers, which include the end of corporate income tax and sales tax nexus protection and the end of employer withholding relief.

Property Tax Current Use and Exemption Application Deadlines

During the state of emergency, the deadline for filing applications for certain property tax exemptions and current land use programs was extended from April 1, 2021 to the earlier of the municipality’s commitment date or 30 days after the end of the declared emergency. With the end of the state of emergency, the filing deadline is now the earlier of July 30, 2021 (30 days after June 30, 2021) or the relevant municipality’s commitment date. The extended deadline applies to the exemptions for nonprofit and educational institutions and organizations, veterans’ estates,  solar and wind energy equipment,  homesteads, and for business equipment (BETE). The extended deadline also applies to the farm and open space, tree growth, and working waterfront programs.

The MRS Tax Alert notes that municipalities will still be able to set due dates, interest rates, and interest accrual dates for taxes committed in 2021, if the municipality cannot hold its annual budget meeting.

Corporate Income Tax Nexus

During the state of emergency, MRS guidance provided that a corporation would not establish Maine corporate income tax nexus for tax years beginning in 2020 solely due to the presence of one or more employees who began working remotely from Maine due to the pandemic. In the Tax Alert, MRS confirms that if the employee began working remotely during the state of emergency, that employee’s presence will not be considered in determining nexus for a tax year beginning in 2020.

With respect to tax years beginning in 2021, earlier MRS guidance similarly provided that a corporation would not establish Maine corporate income tax nexus solely due to the presence of one or more employees in Maine from January through June 2021, if the employee started working remotely from Maine during the state of emergency and due to the pandemic. With the end of the state of emergency, MRS will now consider the presence of an employee in Maine (including employees working remotely in Maine) as part of the nexus determination, regardless of when the employee started working from Maine.

Sales Tax Nexus

During the state of emergency, MRS announced that, for sales occurring in 2020 and 2021, it would not treat a seller as establishing substantial physical presence in Maine solely due to the presence of one or more employees who began working remotely from Maine due to the pandemic. With the end of the state of emergency, MRS will now consider the presence of an employee who begins working remotely from Maine after June 30, 2021 as part of the sales and use tax nexus determination.   This sales tax nexus policy appears to differ from the income tax nexus policy discussed above, in that the income tax policy will consider the presence of an employee in Maine as creating nexus regardless of when the employee started working in Maine.

Employer Withholding

Under earlier MRS guidance, employers were permitted to treat employees who had previously worked outside of Maine but who began working from Maine during the pandemic as still working outside the state for income tax withholding purposes. Beginning July 1, 2021, employers will be required to comply with Maine income tax withholding rules for employees performing services from Maine, including employees teleworking in Maine for an out-of-state employer.

Expanded Resident Income Tax Credit

A Maine resident individual is allowed a credit for income tax paid to another state if the individual began working remotely from Maine due to the pandemic, and if the individual worked outside of Maine immediately before the COVID-19 state of emergency was declared in Maine or in the state from which the employee previously worked.

The credit is available in both the 2020 and 2021 tax years to the extent that (1) services were performed in 2020 or 2021 during either jurisdiction’s state of emergency, (2) the other jurisdiction asserts that the individual’s income should be sourced to that jurisdiction, and (3) the employee does not qualify for an income tax credit for taxes paid to the other jurisdiction.

The expanded resident tax credit was enacted in response to a Massachusetts rule that sourced a nonresident’s income to Massachusetts during the pandemic to the same extent as before the pandemic, even if the nonresident no longer worked from Massachusetts. Maine’s rule does not appear to account for the fact that the Massachusetts rule is set to expire on September 13, 2021, 90 days after the commonwealth’s state of emergency ended on June 15, 2021. Unless Maine provides additional relief, it appears that Maine residents who return to work in Massachusetts may be taxed twice on income earned between June 30, 2021 (the end of Maine’s state of emergency) and September 13, 2021 (the expiration of the Massachusetts rule).

©2021 Pierce Atwood LLP. All rights reserved.National Law Review, Volume XI, Number 183

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