Many tax filers use online programs such as TurboTax to file their state and federal tax returns. These programs are simple to use and result in significant savings for filers as professional tax preparation can be expensive. Now imagine that next year Maine filers go to use TurboTax only to find out it isn’t available for state returns.
If we fail to act on tax conformity this session, this is exactly what will happen.
In order for these companies to offer Maine tax returns as a product next tax season, they must receive guidance from the Maine Revenue Service on 2018 state tax law by June to allow their programmers time to develop the software in time for the next tax season, which begins Jan. 1, 2018.
If we punt tax conformity to next session, as Democrats and this publication have suggested, the next legislature won’t vote on tax conformity until well into the next tax season, which will have far reaching effects on everyone’s tax returns, regardless of income level.
As chair of the Legislature’s Taxation Committee, I can attest to the fact that tax policy is always highly controversial, meaning it would likely be one of the last things the next legislature votes on, and the vote would likely occur well after the 2018 tax season has ended.
That’s a lot of unnecessary uncertainty for Maine households and businesses.
What we do know for certain is that if we refuse to do our homework and fail to vote on some form of conformity within the next month, many Maine filers — businesses and individuals alike — will have to pay to file amended tax returns after the changes go into effect, causing a needless burden and exposing Maine filers to an increased risk of audits.
There’s been a lot of news lately about investors looking to invest in Maine’s economy. Belfast and Bucksport are poised to become major producers of farm-raised salmon. The once shuddered mill in Millinocket is going to become the first Maine-based manufacturer of cross-laminated timber. The mill in Rumford is investing in a $56 million expansion. The Verso mill in Jay is looking to upgrade its No. 3 paper machine, creating approximately 120 full-time jobs.
These are only a few examples of companies investing in Maine, creating good-paying jobs.
But failure to take action toward conformity now will put this investment at risk as businesses are forced to keep two sets of books for multiple tax years, file their taxes multiple times and operate under a cloud of uncertainty when it comes to the return on their investments.
Should we fail to conform this year, businesses won’t know if they are operating under two depreciation tables (federal and state are now different) or just the new federal depreciation table, which is far more generous in rewarding job-creating investment.
The simplest way to break this down is with an example. As the owner of Dow Furniture, I am constantly looking at upgrades to my store. If I decide to resurface the parking lot this year, I could be faced with two different sets of rules for recouping the cost. Right now under state law, I may need to write off a fifth of the cost of the project over the next five years, while under the new federal depreciation table, I can write off the full amount, which will be paid in full this year, on this year’s tax returns. If I can do this, I would also consider doing another project on my investment list at the same time instead of waiting another year.
As you can see, this is very confusing. As things stand right now, it would make the most sense for me to hold off on this project, along with any other, until conformity has been ironed out by the Legislature.
Given all of this, I find it troublesome that this paper’s March 10 editorial said conformity this session is unnecessary and that “there is no reason for Maine to conform with the federal tax changes.” That is utterly incorrect and irresponsible.
Tax conformity is the most important issue before the 128th Legislature this session. Either we conform to some degree without increasing the tax burden, saving Maine taxpayers and businesses a world of unnecessary heartburn and burden, or we put it off and throw a bucket of cold water on our growing economy for an entire year.
Dana Dow, R-Lincoln, represents Maine Senate District 13 and serves on the Legislature’s Taxation and Insurance and Financial Affairs Committees.
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