(2) The taxable year is within the allowable federal period for carry-over; and

(3) The amount has not been previously used as a modification pursuant to this subsection; and

Sec. 5. 36 MRSA §5200-A, sub-§2, ¶I, as enacted by PL 1997, c. 746, §12 and affected by §24, is amended to read:

I. For income tax years beginning on or after January 1, 1997, all items of income, gain, interest, dividends, royalties and other income of a financial institution subject to the tax imposed by section 5206, to the extent that those items are passed through to the taxpayer for federal income tax purposes, including, if the financial institution is an S corporation, the taxpayer's pro rata share and, if the financial institution is a partnership or limited liability company, the taxpayer's distributive share. A subtraction may not be made under this paragraph for:

(1) Income of the taxpayer earned on interest-bearing or similar accounts of the taxpayer at a financial institution as a customer of that financial institution;

(2) Any dividends or other distributions with respect to a taxpayer's ownership interest in a financial institution; and

(3) Any gain recognized on the disposition by the taxpayer of an ownership interest in a financial institution.; and

Sec. 6. 36 MRSA §5200-A, sub-§2, ¶J is enacted to read:

J.__An amount equal to any income derived from a capital gain.

Sec. 7. Application. This Act applies to any tax year beginning on or after January 1, 2000.

SUMMARY

This bill exempts from state taxation all income derived from capital gains for individuals and corporations.