Republican lawmakers in Maine have announced plans to introduce legislation implementing one of the new tax credits created by the One Big Beautiful Bill Act (OBBBA) signed into law by President Donald Trump (R) over the summer.
This upcoming proposed legislation would implement in Maine an OBBBA provision establishing a new, nonrefundable tax credit worth up to $1,700 per taxpayer beginning in the 2027 tax year. For those filing jointly, both taxpayers on a given return would be eligible to claim the credit individually.
This exact value of this credit for any given taxpayer is determined by a dollar-for-dollar match with cash contributions made to federally recognized nonprofits that distribute educational scholarships to qualifying K-12 students, known as Scholarship Granting Organizations (SGOs).
In order for Maine taxpayers to have their contributions to Maine-based institutions count toward this credit, however, the state must actively opt into the new program.
Section 70411 of the OBBBA explains that states must voluntarily elect to participate in the new tax credit, choosing to provide the federal government with a list of qualified SGOs in their state.
For anyone claiming the new tax credit, contributions to SGOs may not also be counted as charitable dedications for tax purposes, and the value of the federal credit would be reduced in accordance with any state credits claimed for the same contributions.
To be eligible under Section 70411 of the OBBBA to receive contributions that may be counted toward this tax credit, SGOs must, among other things, provide scholarships to at least ten students attending different schools, spend at least 90 percent of their income on scholarships, and verify the household size and income of their recipients.
The OBBBA also specifies that students who are to be considered as eligible for scholarships through approved SGOs must come from families earning less than 300 percent of the area median income.
Students receiving these scholarships must also be eligible to attend public school, even if the funds are going to be put toward private or alternative education options.
Approved uses of scholarships awarded by SGOs include private school tuition, tutoring, special-needs services, education technology, curriculum materials, and transportation.
Under Section 139K of the OBBBA, scholarships issued by SGOs would no longer be considered as part of a recipient family’s gross income for federal tax purposes beginning in the 2027 tax year.
“The Governor has never turned down federal funds before, especially when it comes to education funding. I don’t see any reason why she or legislative Democrats should oppose taking advantage of this opportunity to support Maine students,” said Senate Minority Leader Trey Stewart (R-Aroostook) in a statement Wednesday.
“There is no downside to designating our own SGOs in Maine,” Sen. Stewart continued. “If we don’t, our residents will still be eligible for this tax credit.”
“Their money will just flow to neighboring states and Maine students won’t get to reap the benefits of this ambitious program,” Stewart said.
The upcoming legislation, sponsored by Stewart, would create a process for the registration and oversight of IRS-certified SGOs within Maine’s state government.
Although the Maine Senate Republicans note in their statement that taxpayers in the state would still be eligible to receive the new credit in tax year 2027 if Maine does not act, they explain that only contributions made to out-of-state SGOs would qualify, “provid[ing] no benefit to Maine students.”
The Legislative Council is set to meet on October 23 to vote on the acceptance of proposed bills for the Second Regular Session of the 132nd Legislature.
