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 filing 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.
Additionally, upon request and approval, the State Tax
Assessor ("Assessor") may allow an entity to file a composite return on behalf
of its partners, beneficiaries, or shareholders who elect to participate in the
composite filing but would not otherwise qualify to file such a return under
this rule.
Eligible persons who are included in the composite filing
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
filing 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
individual 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 filing must be complete and
include all information and schedules required by law including, without
limitation, Form 1040ME and Schedule 1040C-ME.
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 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.
