State balks at IRS plan to tax Mainers on $450 energy relief checks

File photo State officials are objecting to an apparent reversal by the Internal Revenue Service on the Federal Taxability of Maine’s $450 Winter Energy Relief Payments.

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By Alexis Wells

State officials are objecting to an apparent reversal by the Internal Revenue Service on the federal taxation of Maine’s $450 winter energy-relief payments.

The state contends that the IRS initially indicated that the payments would not be taxed at the federal level. On Dec. 7, the IRS verbally told Maine Revenue Services that the checks, issued to some 880,000 Mainers early in 2023, would be subject to federal taxes.

State officials say this is an apparent reversal from the IRS’ published guidance from August, indicating that Maine’s Winter Energy Relief Payments would not be subject to federal income tax. The IRS guidance cited an “Energy Relief Payment Program” on pages 14 and 15 of that guidance, a program that mirrored Maine’s, as an example of a program that would be exempt from federal tax.

The winter energy relief payment is still exempt from state tax.

Kirsten Figueroa, commissioner of the Department of Administrative and Financial Services, sent a letter on Tuesday to the IRS’ office of the chief counsel. She asked the IRS to stand by its original guidance and not federally tax the $450 relief payments.

“We are concerned that Maine taxpayers and practitioners may not get this update in a timely manner and that the IRS will hold taxpayers responsible for a decision the IRS is not even willing to put in writing or publicly announce,” said Figueroa.

“This verbal guidance by the IRS is not supported by the written guidance published by the IRS and results in arbitrary and unnecessary confusion for the taxpayers of our state," she continued.

"We are concerned that Maine taxpayers and practitioners may not get this update in a timely manner and that the IRS will hold taxpayers responsible for a decision the IRS is not even willing to put in writing or publicly announce."

Maine is not the only state that is dealing with the IRS’s reversal. Minnesota also recently objected to the IRS’ decision to apply federal tax to its relief program.

On Jan.31, eligible Maine taxpayers started receiving the $450 energy relief checks. The payments mailed by Maine Revenue Services, aimed to help Mainers stay warm, safe and secure during the winter amid soaring energy costs.