A.
Generally. Income received by a nonresident is attributable to and
taxable by Maine when the income is derived from or connected with sources in
Maine ("Maine-source income"). The itemized and standard deductions, credits,
income modifications, and personal exemptions applicable to residents also
apply to nonresidents. A loss realized by a nonresident is attributable to
Maine when the loss is derived from or connected with sources in Maine
("Maine-source loss"). Each nonresident partner of a partnership, member of a
limited liability company ("LLC") categorized as a partnership, and shareholder
of an S Corporation is subject to Maine income taxation on Maine-source income
allocable to the nonresident from the partnership, LLC or S Corporation.
Estates of nonresident decedents and nonresident trusts are also subject to tax
if Maine-source income has been received.
B.
Compensation for personal
services. Except as provided by federal law, compensation received for
personal services performed in Maine, regardless of where paid, is Maine-source
income. Personal service compensation includes, but is not limited to, wages,
salaries, taxable benefits such as annual and sick leave, commissions, fees, or
payment in kind. Personal services performed in Maine include sick time and
vacation time earned while working in Maine. In the case of compensation for
personal services, unless excluded from the definition of "income" under the
Code, the taxpayer must report all Maine-source income even though the taxpayer
does not receive the entire amount of such income. For example, amounts
withheld by an employer for federal income taxes, FICA contributions, medical
insurance plans, or other similar withholding deductions must be included in
Maine-source income; on the other hand, compensation contributed to a 401(k)
plan is not subject to Maine taxation. Unemployment compensation received by a
nonresident that is derived from employment in Maine is Maine-source income.
With respect to incentive stock options, nonstatutory stock
options, and employee stock purchase plans, compensation for personal services
performed in Maine generally includes, for nonresident employees working in
Maine at the time the employee is granted the right to a stock option plan, the
amount that represents the fair market value of the stock on the date exercised
(i.e. when the employee has purchased the stock) that exceeds
the option price of the stock at the time the option is granted. When the
period between the grant of a stock option and the time the option is exercised
straddles employment within and without the state of Maine, an adjustment must
be made in accordance with section .05, subsection A below; the compensation
sourced to Maine must be included in Maine adjusted gross income during the
same tax year the income is included in federal adjusted gross income. For
purposes of stock option plans described in this paragraph, income derived from
personal services is compensation even if the amount is reported as a capital
gain on the federal income tax return.
C.
Income from a trade or
business. All income derived from or connected with the carrying on of a
trade or business within Maine is Maine-source income. Generally, a nonresident
has a trade or business in Maine if:
1. The
nonresident, directly or through agents or employees or through a pass-through
entity in which the nonresident is a shareholder, member, or partner, maintains
or operates or shares in maintaining or operating a desk, room, office, shop,
store, warehouse, factory, or any other place in Maine where business affairs
are systematically and regularly conducted; or
2. The nonresident, directly or through
agents or employees or through a pass-through entity in which the nonresident
is a shareholder, member, or partner, is present for business in Maine on other
than a systematic or regular basis and earns or derives gross income during the
taxable year from contractual or sales-related activities.
D.
Income from ownership of real or
tangible personal property. All income derived from the ownership of
real or tangible personal property located in Maine is Maine-source income;
however, unless the property was employed in a business, trade, profession, or
occupation carried on in this State, interest income earned from the sale of
such property will not be subject to Maine income tax. Maine-source income
includes rents derived from and gains from a federally taxable sale or exchange
of:
1. Real property located in
Maine;
2. Tangible personal
property having a situs in Maine; or
3. Any interest in a Maine time-share or
similar arrangement.
E.
Income from the sale of a partnership interest. The income from
the sale of a partnership interest on or after July 1, 2005, by a nonresident
is sourced to Maine to the extent of the ratio of the partnership's tangible
property located in Maine to the partnership's tangible property located
everywhere in the United States, determined based on original cost. "Original
cost" for purposes of this subsection and
36 M.R.S. §5142(3-A) is defined
in Rule 801.09(D). Tangible property includes real estate, inventory, and
equipment that is owned or rented by the partnership. If more than 50% of the
partnership's assets consist of intangible property, the gain or loss is
allocated to Maine based on the sales factor of the partnership for the prior
tax year. "Sales" for purposes of computing the sales factor are defined in
Maine Rule 801. "Property" for purposes of computing the ratio of property
located in Maine to property located everywhere is defined in Maine Rule 801.
Maine-source income does not include income from the sale of a limited
partnership's interest in an investment partnership where more than 80% of the
value of the partnership's total assets consists of intangible personal
property held for investment, except that such property cannot include an
interest in a partnership unless that partnership is itself an investment
partnership.
If the apportionment provisions set forth in this subsection
do not fairly represent the extent of the partnership's business activity in
this State, the taxpayer may petition for, or the State Tax Assessor
("Assessor") may require, in respect to all or any part of the partnership's
business activity, the employment of any other method to effectuate an
equitable apportionment to this State of the partner's income from the sale of
the partnership interest. See 36 M.R.S. §5142(3-A). The provisions of
this subsection also apply to an LLC, unless it elects at the federal level to
be taxed as an entity other than a partnership. See 36 M.R.S. §
5180(1).
F.
Gambling
activity/lottery winnings. Winnings received by a nonresident from the
Maine Lottery or the Tri-State Lotto (Maine, New Hampshire, Vermont) are
Maine-source income if the winning ticket was purchased in Maine on or after
July 13, 1993. Maine-source income also includes proceeds from any gambling
activity conducted in Maine, lottery tickets purchased in Maine (except as
provided in the previous sentence), and payments received from third parties as
consideration for the transfer of rights to future proceeds related to gambling
activity in Maine or lottery tickets purchased in Maine.
G.
Minimum taxability
thresholds. Notwithstanding the provisions of subsections B and C above
and to the extent the income is not excluded from Maine income tax by section
.03 below, a nonresident individual with compensation earned in Maine or income
from a temporary business presence in Maine is subject to income taxation on
that income as provided by this subsection.
1. A nonresident individual is subject to
Maine income tax on compensation that is Maine-source income earned through the
performance of personal services in Maine as an employee only if the individual
was present in Maine performing the personal services for more than 12 days
during the taxable year and directly earned or derived more than $3,000 of
gross income during the taxable year in Maine from all sources.
2. A nonresident individual is subject to
Maine income tax on Maine-source income that is derived from a temporary
business presence in Maine only if the individual had a temporary business
presence in Maine for more than 12 days during the taxable year and earned or
derived more than $3,000 of gross income during the taxable year from
contractual or sales-related activities.
The days worked in Maine that count toward the taxability
threshold need not be consecutive. Any portion of a day spent performing
personal services in Maine is counted as a full day. For taxable years of less
than 12 months, day references must be prorated based on the number of months
of the taxable year over 12 multiplied by the day threshold.
H.
Up to 24 days performing
certain personal services not counted towards the 12-day minimum taxability
threshold. Up to 24 days spent by a nonresident individual in the State
performing the following services as an employee will not count towards the
12-day threshold in .02(G)(1).
1.
Any
personal service performed in connection with presenting or receiving
employment-related training or education. These services include
providing instruction at or attending seminars, hands-on training, on-the-job
training, or other types of educational opportunities required by or related to
the nonresident's employment.
2.
Any personal service performed in connection with a site inspection,
review, analysis of management, or any other supervision:
(a) At a company-owned facility on behalf of
a company not headquartered in Maine; or
(b) At a Maine-based affiliated or subsidiary
company on behalf of its parent.
3.
Any personal service performed in
connection with research and development at a facility based in Maine or in
connection with the installation of new or upgraded equipment or systems at
that facility, including:
(a)
Conducting research and development at that facility; or
(b) Installing or repairing any equipment or
systems used for purposes of research and development at that
facility.
4.
Any
personal service performed as part of a project team working on the attraction
or implementation of new investment in a facility based in Maine. These
services include financial or business planning, engineering, construction,
testing, permitting, inspection, or any other service provided by members of a
project team whose purpose is to bring in or implement new investment of money
or resources in an existing or new Maine-based facility or in the expansion,
renovation, development, or construction of the Maine-based facility
itself.
