Maine Governor Janet Mills (D) has indicated that she will not enact some of the changes made by federal lawmakers in the One Big Beautiful Bill Act (OBBBA) earlier this year without action from the State Legislature.
Because Maine’s biennial budget was already passed by state lawmakers in March, Gov. Mills has indicated that the changes required under OBBBA could result in a $400 million deficit, due to the unexpected drop in revenue.
Although the state is expected to implement some portions of this legislation, reduced taxes on tips and overtime, as well as an increased standard deduction, will temporarily be delayed until lawmakers in Augusta decide how to incorporate the federal changes into Maine’s tax code.
In other words, the governor is looking to have Mainers file their 2025 state tax returns next year without taking advantage of the cuts included in the OBBBA.
The governor has indicated, however, that this is “not the end of the discussion of conformity” with the new federal income tax code, as further guidance will follow “in due course.”
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WMTW has shared the contents of a letter sent by Gov. Mills to State Tax Assessor Jerome Gerard in which the governor outlines her reasoning for making this recommendation, noting that the state budget would likely lose revenue as a result of the OBBBA changes, particularly in FY26 and FY27.
“I wish to stress that this is not the end of the discussion of conformity to the new federal law,” Mills wrote in her letter, according to WMTW.
“Further guidance on whether and to what extent to conform with these adjustments as well as the federal law changes for 2026 and future years — and even, potentially, whether to retroactively conform to some less urgent but more costly items in 2025 — will follow in due course, when we have more revenue and economic data to work with and when the Legislature is in a position to address Maine’s overall response,” explained Mills.
“This determination relates only to provisions of the federal act that affect taxpayers as they file their 2025 tax returns,” she said, “and is necessitated only by the urgent needs of tax administration for the 2025 tax year.”
Legislative Republicans have responded to this, criticizing the Mills Administration for “limiting the relief” Mainers will receive this year.
“It’s never enough for Maine Democrats,” Senate Republican Leader Trey Stewart (R-Aroostook) wrote in a statement last week. “Instead of taking this opportunity to provide much-needed relief to Maine citizens, our Governor has chosen to continue with her unsustainable tax-and-spend mentality.”
“Democrats’ angry obsession with opposing anything President Trump touches is going to continue to hurt Maine people,” Sen. Stewart said. “They continue to choose benefits for people who don’t work over tax relief for people that do.”
“Legislative Republicans will not support any budget bill that doesn’t provide broad-based tax relief,” wrote Stewart.
“Hard-working Mainers deserve no tax on tips and no tax on overtime — relief that was promised in President Trump’s Big Beautiful Bill. But Janet Mills refuses to deliver,” said House Republican Leader Billy Bob Faulkingham (R-Winter Harbor), accusing “[Mills] and the Democrats” of “cutting off” millions in “direct tax relief” to Mainers.
“That money belongs to Mainers, plain and simple,” wrote Rep. Faulkingham. “The folks hauling traps, waiting tables and swinging a hammer see it plain as day: Republicans have their backs while Augusta Democrats continue to show they’re out of touch with everyday Mainers trying to make ends meet.”
Under a new law approved without challenge earlier this year, the governor has the authority to delay implementation of some or all changes to federal tax law until the State Legislature has the opportunity to act on them, as has previously been pointed out by the Portland Press Herald.
LD 221, signed by Mills on June 17, lays out a process for dealing with changes to federal income tax law when the Legislature has not yet had the chance to conform or adjust Maine’s laws in response.
The governor’s decisions under this law, however, do not represent a final policy determination for the state, but rather are “contingent” upon future legislation enacted by lawmakers in response to the federal government’s amendments.
The governor’s determinations are to be based on the results of a report from the Commissioner of Administrative and Financial Services detailing the changes made by the federal government and their projected impact on Maine’s income tax laws and the state budget.
It is then explained in the law that Mainers’ state tax returns are to be processed in accordance with the governor’s directives, with the Commissioner issuing public guidance or filing instructions outlining the situation at hand and how Maine taxpayers are expected to adapt.
According to the law, the Commissioner is to make it publicly known that the “filing instructions and processing” of Mainers returns are “contingent” on the enactment of state laws incorporating the federal government’s changes to income tax law.
Under this legislation, Mainers are to be informed that they may wait for the Legislature to enact these laws before filing their that year’s tax returns by filing under extension.
If this Legislature ultimately addresses the changes to federal income tax law in a manner that is inconsistent with the governor’s preliminary guidance, taxpayers who already filed their returns will not be held responsible for any interests or penalties typically associated with underpayment or incorrect refunds.
These taxpayers will, however, need to file an amended return addressing the variance created by the differing guidance.
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