Small businesses would benefit from a proposal to conform Maine law – for the 2025 tax year only – with several provisions in the big federal tax and budget bill signed into law this summer (PL 119-21).  Included in a proposal from Governor Janet Mills are conformity to these federal tax provisions:

• 179 expensing
• Business interest deduction
• R&D expenses (small business only)

The estimated cumulative savings for affected taxpayers (state revenue loss) would be $13.5 million in tax year 2025, declining each year to $5.2 million in tax year 2029.

Several other business-related significant federal tax changes are not included in the Governor’s conformity proposal:

• R&D expenses (other than small business)
• Accelerated depreciation for qualified production property
• Bonus depreciation
• No tax on tips
• No tax on overtime

Full tax conformity for tax year 2025 on all provisions would have an estimated state revenue impact of $366.6 million in tax year 2025, declining to $159.6 million in tax year 2029.

Legislation to implement the Governor’s conformity proposal has not been printed yet.  A public hearing also is not yet scheduled.

Legislators will be grappling in the 2026 legislative session with budgetary effects of federal funding changes, tax conformity, economic conditions and other factors that impact revenues and expenditures.

A new economic forecast will be issued in November by the state’s Consensus Economic Forecasting Commission.  The state’s Revenue Forecasting Committee is expected to issue an updated report in December.

Legislators next year also will be debating whether to increase taxes on “wealthy individuals and corporations” and use the additional revenues to support affordable healthcare, housing, and other services geared toward lower-income families.