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An Act To Provide Equitable Taxation for the Food and Beverage Industry
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 36 MRSA §5122, sub-§2, ¶B, as amended by PL 2005, c. 218, §52, is further amended to read:
 
B.  An amount equal to the reduction in salaries and wages expense for federal income tax purposes associated with the taxpayer's federal credit for employer social security tax on employee cash tips as determined under the Code, Section 45B, work opportunity credit as determined under the Code, Section 51 or empowerment zone employment credit as determined under the Code, Section 1396;
Sec. 2. 36 MRSA §5200-A, sub-§2, ¶C, as amended by PL 2005, c. 218, §55, is further amended to read:
 
C.  An amount equal to the reduction in salaries and wages expense for federal income tax purposes associated with the taxpayer's federal credit for employer social security tax on employee cash tips as determined under the Code, Section 45B, work opportunity credit as determined under the Code, Section 51 or empowerment zone employment credit as determined under the Code, Section 1396;
 
SUMMARY
This bill allows a deduction from Maine individual and corporate taxable income for the federal tax credit allowed to an employer for the employer's share of federal social security taxes paid on the portion of an employee's tips that cause the employee's wages to exceed $5.15 per hour. Under federal tax law, the credit amount must be subtracted from the taxpayer's otherwise deductible expenses, which increases federal taxable income. Under current Maine law, when an employer takes the credit available under the federal Internal Revenue Code, the employer receives neither a Maine credit nor a return of the federal disallowed deduction for Maine taxable income purposes; such a deduction is allowed from Maine taxable income for the work opportunity credit and empowerment zone employment credit. This bill makes Maine's treatment consistent across the 3 federal credits.