Maine taxpayers penalized unjustly, CPA says

ROCKPORT — The state Bureau of Taxation is penalizing Maine taxpayers unjustly, according to accountant Richard Simoneau, who said the Legislature and the governor should work together to rectify inequities in the state tax laws.

Simoneau, formerly of the Internal Revenue Service and now a certified public accountant with a thriving practice in Rockland, got a standing ovation from some of his clients, Rotarians, who greeted his remarks Friday at the Samoset Resort with apparent appreciation.

The problematic bottom line for Maine businesses trying to get a fair shake from the Bureau of Taxation, Simoneau said, is the agency’s unwillingness to bring its policies into compliance with the federal tax code.

Although the rank and file of state tax experts are cooperative and open to discussion, “that can’t be said of the people setting policy and interpreting the tax laws,” he said. “They ignore the law.”

The Bureau of Taxation is able annually to appropriate an undetermined, but significant, quantity of tax dollars that rightfully belong to taxpayers because the cost of an appeal of a tax penalty is usually higher than the sum in dispute, he said.

The discrepancies between the state and federal tax codes are exacerbated because federal tax payments are based on a tax table, while Maine state tax returns are calculated using a tax schedule. Additionally, the state tax code penalizes business by prohibiting sales-tax exemptions.

Under the federal tax code, “the presumption never runs against the taxpayer” as it does under the state’s tax laws, he said.

The Cianbro Corp. recently won a court decision against the Bureau of Taxation, which had prohibited tax “carry-backs” of corporate operating losses. Cianbro triumphed in court because its lawyers proved that the Maine prohibition was not in compliance with the federal tax code.

The Bureau of Taxation, Simoneau said, continues its attempts to get rid of the loss deductions, “probably because they can’t figure it out.”

The Bureau of Taxation shortchanges corporate taxpayers, especially those corporations recognized as partnerships under the federal tax code, by denying them tax credits and by assessing 50 percent penalties on all voluntarily amended tax returns.

“That flies in the face of the federal tax code,” he said.

The state imposes a 5 percent penalty on late tax filings; the federal government imposes only a half-percent charge. Additionally, the IRS pays interest on late tax refunds; the state does not.

Simoneau proposed three solutions to the tax problems faced by Maine businesses. The first solution, he said, should come from the Legislature, which should require state tax policy “to comply 100 percent with the federal code.”

The second solution would be for the Legislature to take steps to reduce or eliminate late-payment penalties, and the third would be for the Legislature to enact provisions that would allow taxpayers to recover filing and legal fees assessed because the state tax bureau has adopted “an arbitrary position not in compliance with the federal code,” he said.