AUGUSTA — State lawmakers are in the midst of an election-year struggle over a bill that pits pro-business Republicans against pro-education Democrats.

The bill offers about $38 million over the state’s two-year budget cycle in tax credits and deductions to Maine residents and businesses, with the two sides fighting over a specific $11.5 million tax break for some Maine-based businesses in 2016.

The far-ranging bill is meant to conform state tax code to changes in the federal tax code — usually a routine matter for state lawmakers. Lawmakers agree on almost everything in the bill except that $11.5 million annual business credit, which Democrats say should be reviewed for effectiveness before it’s extended to 2016 and possibly beyond.

Republicans, meanwhile, say Democrats’ desire to use $23 million in 2016 from the state’s “rainy day” fund to boost state aid to local schools is mixing apples and oranges, and that the issues of taxes and school funding should be debated separately.

Negotiations between Democratic and Republican leaders remain ongoing and, most recently, a proposal that would separate the tax and education spending issues in exchange for a two-year tax conformity package has been placed on the table.

The Republican-controlled Senate has yet to act on the bill, last approved by the Democrat-controlled House earlier in February. That measure includes the additional $23 million for public school support.

Jamie Logan, a spokeswoman for Senate Republicans, said GOP leaders had no intention of bringing the House bill for a vote Tuesday when the Senate convenes at 10 a.m.

Five things in the legislation both sides have agreed to are:

1. State and federal law should fully conform for those people and businesses filing their 2015 taxes. Both sides favor full conformity, including for the controversial $11.5 million state bonus depreciation tax credit for businesses, which must file taxes by March 15. 

2. Teachers who spend more than $250 a year of their own money on classroom supplies should be able to deduct that expense from their state income taxes each year.

3. Those who have to pay private mortgage insurance, or PMI, should get a tax deduction.

4. A new deduction for higher education costs, including books and tuition for 2016.

5. A smaller bonus depreciation deduction that’s available to businesses making capital investments that total $500,000 or less in any tax year should be made permanent.

Two things the two sides disagree on are:

1. How long the $11.5 million bonus depreciation tax credit should be in effect. Democrats want it only for 2015, with the possibility of making it permanent in the future if there is evidence it creates or protects jobs. Republicans want to make the credit permanent.

2. Republicans don’t want to include additional funding for schools in the tax measure. While they aren’t ruling out additional funding for public schools, they’ve argued that businesses and taxpayers deserve conformity without attaching additional concessions for public schools. Additionally, Republicans and Democrats disagree over how to fund their respective proposals. 

sthistle@sunjournal.com