Code of Maine Rules
18 - DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES
125 - BUREAU OF REVENUE SERVICES
Chapter 805 - COMPOSITE RETURN FILING
Section 125-805-.02 - FILING OF COMPOSITE RETURNS

Universal Citation: 18 ME Code Rules ยง 125-805-.02

Current through 2024-38, September 18, 2024

A. Generally. An entity may file a composite return on behalf of its partners, beneficiaries, or shareholders who are eligible persons and who elect to participate in the composite return by completing the required Nonresident Member Affidavit and Agreement to Participate in a Composite Filing of Maine Income Tax (Form 941CF-ME). Form 941CF-ME must be retained by the pass-through entity for at least six years after the filing of the composite return for the taxable year. A new affidavit must be submitted each year by each eligible person electing to participate in the composite return for the taxable year.

An entity otherwise not qualified to file a composite return may nonetheless file a composite return if approved by the State Tax Assessor ("Assessor").

Eligible persons who are included in the composite return will be deemed to have filed a Maine income tax return for the period covered by the composite return. Eligible persons who participate in the composite return are personally liable for the tax amount reported on their behalf in the composite return and any tax, interest, or penalty that may be assessed for that period in the same way as if a composite return had not been filed. The Assessor reserves the right to require the filing of a Maine nonresident income tax return by any of the eligible persons included in the composite return. Eligible persons are not jointly and severally liable for the tax, interest, or penalty imposed on any other unrelated eligible person or the entity solely because of that eligible person's membership interest in the entity.

B. Information required. The composite return's supporting information must include, at a minimum, the name and taxpayer identification number of each eligible person included in the return, the amount of each eligible person's distributive share of taxable entity income and the tax thereon, the amount of each eligible person's share of any business tax credit claimed under 36 M.R.S. § 5219-G, the amount of any payments previously made and applied to each eligible person's tax liability, and the amount of payment included with the return and applied to each eligible person's tax liability. The composite return (Form 1040C-ME for taxable years beginning on or after January 1, 2023; Form 1040ME and Schedule 1040C-ME for taxable years beginning prior to January 1, 2023) must be complete.

C. ESBTs and QSSTs. To be an eligible person, an ESBT must be a nonresident trust for Maine income tax purposes, in accordance with 36 M.R.S., Chapter 813. A beneficiary of a QSST must be a nonresident for Maine income tax purposes for the QSST to qualify as an eligible person. If an ESBT holds stock in more than one S corporation, each stock holding must be considered separately for determining eligibility and must be treated as a separate eligible person for the purposes of this rule.

D. Composite returns for tiered entity structure. An upper tier entity may file a single composite return on behalf of the non-resident members (including members, partners, shareholders, or beneficiaries) in a tiered entity structure, where the nonresident members are eligible persons. The following additional requirements must be met:

1. Each of the lower tier entities (including any related pass-through entity) with individual members that elect to participate must agree to have its electing members included in the composite return and each lower tier entity must not file a separate return;

2. A schedule must be attached to the composite return indicating each member's distributive share of Maine-source income from each tiered entity, and the total amount of Maine-source income received by each member from all tiered entities in the tiered entity structure; and

3. A statement must be attached to the composite return, including an organizational chart, disclosing the structure and identity, including the names, addresses and federal identification numbers, of all the related entities from which participating nonresident members directly or indirectly derived Maine-source income.

E. Pass-through entity withholding return. An entity that files a composite return must also file an annual pass-through entity withholding return (Form 941P-ME) for the year pursuant to 36 M.R.S. §5250-B and MRS Rule 803 (18-125 C.M.R., ch. 803). Form 941P-ME must include information required regarding eligible persons participating in the composite return by attaching a completed Schedule 3P.

F. Partnership audits; federal adjustment report. An original composite return cannot be filed as the result of an administrative adjustment request ("AAR") or final federal adjustment ("FFA") report issued by the Internal Revenue Service ("IRS") after audit. If an original composite return was filed prior to the AAR or FFA, see Section .07(B) below for the process to amend the composite return.

Disclaimer: These regulations may not be the most recent version. Maine may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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