On February 9, 2021, Maine Governor Janet Mills proposed revisions to the supplemental budget that conform to the federal tax treatment of Paycheck Protection Program (PPP) loans for the first $1 million of PPP loan proceeds. Under the proposal, Maine taxpayers will be able to both exclude the forgiven portion of a PPP loan from federal taxable income and deduct eligible business expenses paid with forgiven loan proceeds—up to $1 million—for Maine income tax purposes.
Taxpayers will be required to add back the forgiven portion of the loan that exceeds $1 million. According to the governor’s press release, this compromise will provide full state tax relief to 99.1% of Maine businesses that received PPP loans. The new proposal is still estimated to cost the state about $82 million, down from $100 million.