(1) Maine taxable income is not reduced below zero;

(2) The taxable year is either within 2 years prior to the year in which the loss arose or within the allowable federal period for carry-over of net operating losses; and

(3) The amount has not been previously used as a modification pursuant to this subsection; and

Sec. EE-4. 36 MRSA §5200-A, sub-§2, ¶M, as amended by PL 2001, c. 714, Pt. AA, §6, is repealed and the following enacted in its place:

M . __ A f r a c t i o n o f a n y a m o u n t p r e v i o u s l y a d d e d b a c k t o f e d e r a l a d j u s t e d g r o s s i n c o m e b y t h e t a x p a y e r p u r s u a n t t o s u b s e c t i o n 1 , p a r a g r a p h N . __ T h e f r a c t i o n i s e q u a l t o t h e a m o u n t a d d e d b a c k u n d e r s u b s e c t i o n 1 , p a r a g r a p h N f o r t h e p r o p e r t y , d i v i d e d b y t h e n u m b e r o f y e a r s i n t h e r e c o v e r y p e r i o d m i n u s 2 . __ T h e a d j u s t m e n t u n d e r t h i s p a r a g r a p h i s a v a i l a b l e f o r e a c h y e a r d u r i n g t h e r e c o v e r y p e r i o d , b e g i n n i n g 2 y e a r s a f t e r t h e b e g i n n i n g o f t h e t a x a b l e y e a r d u r i n g w h i c h t h e p r o p e r t y w a s f i r s t p l a c e d i n s e r v i c e .

Sec. EE-5. 36 MRSA §5200-A, sub-§2, ¶¶N and O, as enacted by PL 2001, c. 714, Pt. AA, §7, are repealed.

PART FF

Sec. FF-1. 36 MRSA §5218, sub-§§1 and 2, as repealed and replaced by PL 2001, c. 396, §38, are amended to read:

1. Resident taxpayer. A resident individual is allowed a credit against the tax otherwise due under this Part in the amount of 25% of the federal tax credit allowable for child and dependent care expenses in the same tax year, except that for tax years beginning in 2003, 2004 and 2005, the applicable percentage is 21.5% instead of 25%.

2. Nonresident or part-year resident taxpayer. A nonresident or part-year resident individual is allowed a credit against the tax otherwise due under this Part in the amount of 25% of the federal tax credit allowable for child and dependent care expenses multiplied by the ratio of the individual's Maine