Form 1120b-Me - Maine Franchise Tax Instructions

GENERAL INSTRUCTIONS

1. FINANCIAL INSTITUTIONS SUBJECT TO FRANCHISE

receipt of a demand notice, the failure-to-file penalty increases to

TAX:

Every financial institution that had Maine net income or Maine

100% of the tax otherwise due.

assets during the taxable year must file Form 1120B-ME and pay

For failure to pay a tax liability, the penalty is 1% of the tax

liability for each month the payment is delinquent, up to a maximum

Maine franchise tax,

even if the institution is established as a part-

of 25%.

nership, S corporation or entity disregarded as separate from its

owner.

“Financial institution” means a bank, bank holding com-

c. Other penalties. The law also provides for penalties for

pany, thrift institution, savings association, insured institution, sav-

substantial understatement of tax, negligence, fraud, and for pay-

ings bank holding company, qualified savings bank, insured de-

ment of tax by check that is returned for insufficient funds.

pository institution, appropriate federal banking agency or quali-

7. ACCOUNTING PERIOD COVERED BY RETURN:

Form

fied family partnership (as defined in the Bank Holding Company

1120B-ME will cover the same period as the equivalent federal re-

Act of 1956, 12 U.S. Code § 1841), or any other financial institution

turn.

(except a credit union) authorized to do business in Maine as de-

fined in 9-B M.R.S.A. § 131(17-A). “Financial institution” includes

8. ACCOUNTING METHODS:

A taxpayer’s method of account-

any corporation of which more than 50% of the voting stock is

ing for Maine franchise tax purposes must be the same as that used

owned, directly or indirectly, by a financial institution or by a credit

for federal income tax purposes.

union as defined in 9-B M.R.S.A. § 131.

9. FEDERAL RETURN MUST ACCOMPANY STATE RETURN:

2. DATE FOR FILING RETURN:

Financial institutions reporting

Maine franchise tax return, Form 1120B-ME, must be accompanied

for calendar year 2002 are required to file with payment on or before

by a legible copy of pages 1 through 4 of the financial institution’s

March 17, 2003. Fiscal year taxpayers are required to file, with pay-

federal return for the same taxable period. You are not required to

ment, on or before the 15th day of the third month following the

provide Maine with copies of supporting schedules attached to the

close of the taxable year.

federal form filed with the Internal Revenue Service unless specifi-

cally requested.

3. EXTENSIONS FOR FILING: A State of Maine extension

request form is not required. If you are unable to file your return by

10. FEDERAL AUDIT CHANGES AND AMENDED RETURNS:

the original due date of the return, Maine allows an automatic seven-

Taxpayers must file Maine amended returns for any change or cor-

month extension of time to file.

CAUTION: AN EXTENSION TO

rection by the Internal Revenue Service in federal net income per

FILE YOUR MAINE RETURN IS NOT AN EXTENSION FOR PAY-

books or total end-of-year assets. The amended return must be filed

MENT OF TAX. If you owe money, you must pay at least 90% of

within 90 days after final determination of the federal change or

that amount by the original due date for filing your return and the

correction. Attach a copy of the Internal Revenue Agent’s report

remaining 10% must be paid when the return is filed by the extended

with all supporting schedules to your Maine amended return.

due date in order to avoid the failure-to-pay penalty. However,

Taxpayers filing amended federal income tax returns must, within

interest is charged on any tax paid after the original due date of your

90 days, file amended Maine income tax returns with copies of fed-

return.

eral Form 1120X. When filing returns that reflect federal net operat-

Remit your estimated tax payment with the payment voucher

ing losses, a copy of federal Form 1139 must be attached.

(Form 1120EXT-ME, available at or by call-

In addition, an amended Maine income tax return is required to

ing 207-624-7894) by the original due date for filing your Maine

correct errors on a previously filed return. The amended return must

return to: Maine Revenue Services, P.O. Box 9114, Augusta, ME

be filed within 90 days of the discovery.

04332-9114.

Maine Revenue Services does not provide a form for amended

franchise tax returns. Use Form 1120B-ME for the year(s) you are

4. PAYMENT OF FRANCHISE TAX:

All financial institutions

amending and check the box marked “check here if amended” in the

subject to franchise tax shall make payment of estimated tax unless

upper left corner of the form.

the liability for the taxable year reduced by allowable credits is less

than $1,000. See instructions for Form 1120ES-ME for details. Form

11. COMBINED REPORTS:

A financial institution that is a

1120ES-ME vouchers and instructions are available at

member of an affiliated group and operates in a unitary fashion must

or by calling 207-624-7894.

file a combined report (Form CRB).

Maine law defines affiliated group to mean a group of two or

5. INTEREST:

Beginning January 1, 2003, interest at 7% per an-

more financial institutions in which more than 50% of the voting

num, compounded monthly, will be added to the balance of any tax

interest of each member financial institution is directly or indirectly

due from the original due date to the date of payment and should be

owned by a common owner or owners, either corporate or

included with any payment.

noncorporate, or by one or more of the member financial institu-

6. PENALTIES:

a. Underpayment of estimated tax penalty. Be-

tions. Unitary is defined as a business activity that is characterized

ginning January 1, 2003, the penalty is 7% per annum, compounded

by unity of ownership, functional integration, centralization of man-

monthly. The penalty rate for 2002 is 8%, compounded monthly.

agement or economies of scale.

The penalty will be assessed if the sum of quarterly estimated tax

The State of Maine apportionment formula is used to apportion

net income of multi-state institutions. This formula adopts many

payments is not at least equal to the lesser of the previous year’s

features of the financial institution apportionment formula recom-

Maine income tax liability or ninety percent (90%) of the tax liability

for the current year. Exception: certain large corporations cannot

mended by the Multistate Tax Commission and is designed to re-

use the previous year’s liability in determining the required amount

flect how financial institutions earn income more accurately than

of estimated tax payments.

the corporate income tax apportionment formula.

b. Late filing and late payment penalties. If a past due return is

The law provides that the apportionment formula is also used

filed before the receipt, or within 30 days of the receipt, of a demand

to compute Maine assets from the total end-of-year assets of the

notice, the penalty for failure to file is the greater of $25 or 10% of the

financial institution.

amount of tax due. If the return is filed more than 30 days after the

Form 1120b-Me - Maine Franchise Tax Instructions - 2002 Page 3

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