Sec. 1. 36 MRSA §5219-S, as enacted by PL 1999, c. 731, Pt. V, §1 and affected by §2, is amended to read:

§5219-S. Earned income credit

A taxpayer is allowed eligible for a refundable credit against the taxes otherwise due under this Part equal to 5% 15% of the federal earned income credit for the same taxable year beginning January 1, 2002 and equal to 25% of the federal earned income tax credit for tax years beginning on or after January 1, 2003. The credit may not reduce the state income tax to less than zero.

SUMMARY

The State does not currently offer a refundable earned income tax credit to lower-income families with earnings. A nonrefundable credit against taxes owed was enacted in the Second Regular Session of the 119th Legislature. The maximum amount of credit a family could receive is less than $200.

This proposal makes the credit refundable, similar to the federal, earned income tax credit, and increases the amount of refund a family can receive from 5% of the federal rate to 15% in 2002 and 25% in 2003 and thereafter.