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On June 11, 2021, Maine Governor Janet Mills signed into law LD 1216, which extends the ability of Maine residents to claim a credit for income tax paid to another state while teleworking within the Maine and establishes a penalty for failing to file or filing false information returns.

Credit against teleworker's resident income tax for income tax paid to other states

Effective January 1, 2021 through December 31, 2021, a credit against Maine's resident income tax is allowed on the wages of Maine residents for telework provided within the Maine that are subject to nonresident income tax in another state, provided all the following requirements are met:

• The employee was engaged in performing services from a location outside of Maine immediately prior to a state of emergency declared Maine's Governor due to COVID-19 or an emergency declared by the jurisdiction where the employee was engaged in performing those services.
• The employee commenced working remotely from Maine due to the COVID-19 pandemic and during either Maine's or the other jurisdiction's state of emergency related to the COVID19 pandemic.
• The services were performed prior to January 1, 2022 and during either Maine's or the other jurisdiction's state of emergency.
• The compensation is sourced by the other jurisdiction as derived from or connected with sources in that jurisdiction under the law of that jurisdiction.
• The employee does not qualify for an income tax credit in the other jurisdiction for Maine income taxes paid as a result of the compensation.

LD 1216 extends COVID-19 income tax relief that was available for tax year 2020 as explained in Maine Tax Alert, Vol. 31, #3. (See EY Tax Alert 2021-0372.)

Penalty for failure to file or filing false information returns to the Maine tax assessor

LD 1216 creates a penalty for persons who fail to provide "returns of information" to the Maine state tax assessor or who willfully furnish to the assessor a false or fraudulent return of information.

Generally, returns of information consist of Forms W-2, Forms 1099 and other similar forms containing tax information necessary for filing Maine tax returns. Similar to the penalty imposed for failure to provide information statements, or for willfully providing a false or fraudulent statement to payees, the penalty is $50 for each failure to provide a return of information to the Massachusetts state tax assessor.

The penalty applies to returns of information required to be filed on or after January 31, 2022. (Maine Revenue Services, Presentation Chart for LD 1216.)

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