Sec. 1. 36 MRSA §5122, sub-§2, śL, as amended by PL 1999, c. 708, §35 and c. 731, Pt. S, §2 and affected by §4 and amended by c. 790, Pt. A, §49, is repealed and the following enacted in its place:

L.__For income tax years beginning on or after January 1, 2000, an amount equal to the total premiums spent for qualified long-term care insurance contracts as defined in the Code, Section 7702B(b), as long as the amount subtracted is reduced by the long-term care premiums claimed as an itemized deduction pursuant to section 5125;

Sec. 2. 36 MRSA §5122, sub-§2, śM, as enacted by PL 1999, c. 708, §36 and c. 731, Pt. S, §3 and affected by §4, is repealed and the following enacted in its place:

M.__An amount equal to the aggregate of benefits under employee retirement plans and included in federal adjusted gross income.__For purposes of this paragraph, "employee retirement plan" means a state, federal or military retirement plan, a retirement benefit plan established and maintained by an employer for the benefit of its employees under Section 401(a), Section 403 or Section 457(b) of the Code or any other retirement plan recognized by the Code; and

Sec. 3. 36 MRSA §5122, sub-§2, śN is enacted to read:

N.__Interest or dividends on obligations or securities of this State and its political subdivisions and authorities to the extent included in federal adjusted gross income.

Sec. 4. Application. That section of this Act that repeals and replaces the Maine Revised Statutes, Title 36, section 5122, subsection 2, paragraph M applies to tax years beginning on or after January 1, 2002.

SUMMARY

Current law exempts from the state income tax the first $6,000 of income received from certain public, private and military pensions.

This bill removes the cap on the amount of the deduction and makes the deduction applicable to all pension plans as long as the pension plan is recognized by the United States Internal Revenue Code.