PORTLAND, Maine — The Internal Revenue Service announced Friday that Maine's $450 winter energy relief payments would be exempt from federal tax in an apparent reversal after the Mills administration sent a letter of appeal to the federal agency earlier this week.
The IRS reportedly informed Maine Department of Administrative and Financial Services during a scheduled phone call on Dec. 7 that the relief payments issued to more than 880,000 Mainers between January and March of this year would be subject to federal taxes, prompting the Mills administration to put pressure on the federal agency.
Department of Administrative and Financial Services Commissioner Kristen Figueroa wrote a pointed letter of appeal to the IRS dated Dec. 12, detailing the "concern and deep disappointment" of previously decided exemptions for pandemic relief efforts taken up by state and federal initiatives.
"On behalf of the taxpayers of the State of Maine, I am deeply disappointed by this apparent reversal -- which comes right on the eve of tax season and the cold winter months of Maine -- and I remain frustrated with the lack of clarity from the IRS," Figueroa said in part.
The IRS responded to the appeal and confirmed Friday that the payments would not be subject to federal taxation.
The move was celebrated by the Mills administration in a news release.
"The IRS understands the concerns of Maine residents and assures taxpayers that their state payments to lower the cost of winter energy bills are not taxable under federal law," a spokesperson with the IRS said Friday in a statement to NEWS CENTER Maine. "The IRS has communicated this to state officials in Maine to eliminate any confusion along with an explanation about the underlying legal provisions on this complex issue."
Gov. Janet Mills and Figueroa issued a joint statement Friday.
“We are thankful to the IRS for arriving at the right decision and for their prompt response as Maine taxpayers prepare for the upcoming tax season," they stated in the Friday press release. "These payments were intended to provide financial relief to Maine people dealing with high energy prices, and we’re glad that money will stay in their pockets where it belongs.”