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An Act To Expand Incentives To Live and Work in Maine through a Tax Credit for Certain Student Loans
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §5217-E  is enacted to read:
§ 5217-E. Student loan credit
 
1.  Definitions.     As used in this section, unless the context otherwise indicates, the following terms have the following meanings.
 
A.  "Eligible individual" means a resident individual who has received an associate degree, a bachelor's degree or a graduate degree from an eligible institution of higher education and, for the first tax year for which the credit is claimed, was employed at a location in the State for at least 4 months during the first tax year.
 
B.  "Eligible institution of higher education" means an accredited Maine community college, college or university as defined in section 5217-D, subsection 1, paragraph A-2 or an accredited non-Maine community college, college or university as defined in section 5217-D, subsection 1, paragraph A-1 that participates in the federal Pell Grant Program under Title IV of the federal Higher Education Act of 1965.
 
C.  "Qualified education loan" has the same meaning as under Section 221 of the Code, but is limited to indebtedness incurred on behalf of the eligible individual.
 
2.  Credit allowed.     An eligible individual is allowed a credit for loan payments made by the individual during the tax year on qualified education loans that were obtained for attendance at an eligible institution of higher education. The credit is equal to the lesser of 50% of the amount paid by the eligible individual to repay the principal and interest on qualified education loans during the tax year and:
 
A.  For the first year that the eligible individual was employed at a location in the State for at least 4 months, 50% of the eligible individual's tax liability under this Part, after the application of all other credits, multiplied by the percentage of full months that the individual was employed at a location in the State during the tax year;
 
B.  For the year following the first year that the credit is claimed, if the individual was employed at a location in the State for 12 months, 40% of the eligible individual's tax liability under this Part, after the application of all other credits;
 
C.  For the 2nd year following the first year that the credit is claimed, if the individual was employed at a location in the State for 12 months, 30% of the eligible individual's tax liability under this Part, after the application of all other credits;
 
D.  For the 3rd year following the first year that the credit is claimed, if the individual was employed at a location in the State for 12 months, 20% of the eligible individual's tax liability under this Part, after the application of all other credits; or
 
E.  For the 4th year following the first year that the credit is claimed, if the individual was employed at a location in the State for 12 months, 10% of the eligible individual's tax liability under this Part, after the application of all other credits.
 
3.  Limitations.     The credit is subject to the following limitations:
 
A.  The credit may not exceed $1,000 per eligible individual;
 
B.  A credit may not exceed 50% of the eligible individual's outstanding student loan debt; and
 
C.  The credit may not be claimed by an eligible individual who claims the credit under section 5217-D.
Sec. 2. Application. This Act applies to tax years beginning on or after January 1, 2020.
 
SUMMARY
This bill provides an income tax credit of up to $1,000 for individuals for certain student loan payments made during the tax year if the individuals were first employed in Maine on or after January 1, 2020. The credit is equal to the lesser of 50% of the loan payments actually made and 50% of income tax liability in the first year in which the credit is claimed declining to 10% of income tax liability in the 5th and final year in which the credit is claimed. The credit may not exceed 50% of the individual's outstanding student loan debt and may not be claimed if the individual claims the credit for educational opportunity.