Maine Revenue Services Rulemaking Activity

Amendments to Rule 801 , " Apportionment of Income ." This rule last amended in February 2009, explains the basis for the apportionment of net income of corporations, pass-through entities, sole proprietorships and other business types as required by law. The proposed amendments to Rule 801 reflect legislative changes made in 2009 and correct other portions of the Rule. Specifically, in section .06, language has been changed to reflect the adoption of the “throw out” rule and in .06(C) and (E) to delete wording that is no longer accurate due to that adoption. The application date and the summary at the beginning of the Rule have been updated.

Proposed amended Rule 801 can be found on the MRS web site at www.maine.gov/revenue (select Laws & Rules). Comments are due by April 14, 2010, and should be directed to Edward Charbonneau, Esq., Deputy Executive Director Legal, (207) 624-9626, Edward.Charbonneau@maine.gov.

Maine Income Tax Withholding Military Spouses Residency Relief Act

Federal Public Law No. 111-97, the Military Spouses Residency Relief Act (MSRRA), was signed into law on November 8, 2009. The new law amends section 571 of the Servicemembers Civil Relief Act (SCRA) and affects the state income taxation of the spouse of a military servicemember (military spouse) who meets certain qualifications.

Domicile or Residence of a Military Spouse for Tax Purposes

MSRRA provides that a military spouse cannot lose or acquire residence or domicile in a state when the military spouse is absent from, or located in, a state solely to be with the servicemember who is complying with military orders. Consequently, for Maine income tax purposes, a military spouse will not be treated as a resident of Maine if the following conditions are met:

• The military spouse is located in Maine solely to be with the servicemember;
• The servicemember is located in Maine in compliance with military orders;
• The servicemember and the spouse were resident or domiciled in a state other than Maine immediately prior to being located in Maine; and
• The servicemember and the spouse have the same state of residency or domicile.

Certain Income Not Sourced to Maine

Maine law imposes income tax on the Maine-source income of a nonresident individual. Under provisions of SCRA, income of a military spouse for the performance of services in Maine will not be treated as Maine-source income subject to Maine income taxation if:

• The military spouse is a not a resident or domiciliary of Maine;
• The military spouse is located in Maine solely to be with the servicemember;
• The servicemember is located in Maine in compliance with military orders; and
• The servicemember and the spouse have the same state of residency or domicile.

For purposes of the new law, income from the performance of services includes:

• Wages, salaries and other compensation for services performed by a military spouse as an employee, and
• Any other income received, to the extent it is for services performed directly by the military spouse (e.g. personal services provided by a sole proprietor).

The exclusion from state taxation applies only with respect to the military spouse. Non-military income earned in Maine by a servicemember is Maine-source income and remains subject to Maine income tax.

Exemption from Withholding

For tax years beginning on or after January 1, 2010, a military spouse may claim exemption from Maine income tax withholding with respect to wages, salaries and other compensation received for services performed in Maine as an employee if such compensation is excluded from Maine-source income under MSRRA. To claim the exemption, the military spouse must complete Form W-4ME, line 6e (see revised Form W-4ME at www.maine.gov/revenue/forms/with/Form%20W-4ME_Mar2010.pdf).

To qualify for the exemption, the military spouse must attach a copy of the servicemember’s latest Leave and Earning Statement (LES) to Form W-4ME. From information on the LES, the employer must ensure that the assignment is at a location in Maine. The military spouse must also present a valid military ID as proof that the employee is a spouse of a servicemember. The employer may NOT accept a military ID dated more than four years before the date on which it is given to the employer.

The employer may not accept an exemption certificate if the employer has actual knowledge, or reason to know, that the military spouse does not meet the requirements to be exempt. In this case, the employer must continue to withhold.

The military spouse exemption claimed on Form W-4ME, line 6e automatically expires at the end of the calendar year in which it is submitted, at which time the military spouse must submit a new Form W-4ME or become subject to Maine withholding using a filing status of single with one exemption.

Income Earned in 2009

MSRRA applies to tax years beginning on or after January 1, 2009. Therefore, military spouses whose compensation was subject to Maine income tax withholding or estimated tax payments in 2009 may claim the withholding and estimated tax payments on their 2009 income tax return and, if applicable, receive a refund of any overpayment. Military spouse compensation not subject to Maine income tax under MSRRA is claimed as an income modification deduction on 2009 Maine Form 1040ME, Schedule 1, line 2k and on related lines on Maine Schedule NR or Schedule NRH.

Maine Revenue Service News & Updates

Property Tax Division

• The Secretary of State certified the 2010 State Valuation on January 20. The 2010 state valuation of $170,336,350,000 is 1.35% greater than the 2009 State Valuation.

Income/Estate Tax Division

• By the end of January, MRS had processed over 50,000 individual income tax returns for tax year 2009. No major issues have been identified to hold up processing returns. Beginning February 1, MRS will issue 1040 refunds twice a week.

• 190,312 Forms 1099G were mailed to taxpayers receiving income and property tax refunds during 2009. Taxpayers who itemize deductions need this information to file their 2009 federal income tax forms.

Tax Processing Center

• January payments received via the Electronic Funds Transfer (EFT) options increased compared to last year in January. MRS received 54,166 payments totaling $216,124,490 in revenue this month. This represents an increase of 19.7% in the number of payments with an increase of 18.5% in revenue received via EFT over this same month last year. During January, the EFT unit set up 26 ACH Debit and 72 ACH Credit applications.

• Maine EZ-Pay: 9,601 payments totaling $32,498,980 were received through the Maine EZ-Pay on-line payment system during January. This represents an increase of 33% in the number of payments and 53% in the total revenue collected using this payment option. Fiscal year to date there has been a 48% increase in the number of payments and a 34% increase in the amount of revenue processed using EZ-Pay.

Tax Policy and Legal Division

• TheDivision prepared and submitted the following reports to various Joint Standing Committees of the Legislature:

• A report to the Business, Research and Economic Development Committee regarding the 2009 compliance rate of initiators of deposit to pay over abandoned deposits to the State, including any enforcement and/or auditing issues.

• The Working Waterfront Property Report to the Taxation Committee which includes relevant data on the sales of waterfront land to assist municipal assessors in calculating current use assessments of enrolled properties that support commercial fishing activities.

• A report to the Taxation Committee regarding the status of electronic filing requirements and the number of waivers requested and granted.

• MRS reviewed the recommendations of Department of Agriculture for revisions to rules and bulletins regarding sales tax exemptions for products purchased for agricultural use. MRS reported its findings and recommendations, including an improved protocol to respond to requests for interpretations, to the Joint Standing Committees of Taxation and Agriculture, Conservation and Forestry.

• A report to the Taxation Committee of the findings of the study group convened by the Department of Economic and Community Development and the State Tax Assessor regarding economic development incentives, including tax increment financing, in the Unorganized Territory.

• A report to the Joint Standing Committees of Taxation and Agriculture, Conservation and Forestry prepared by the State Tax Assessor and the Department of Agriculture regarding changes in the federal estate tax provisions as they impact the preservation of farmland in the State.

Sales, Fuel and Special Tax Division

• As of January 2010, there were 63,148 active sales and use tax accounts. The number of sales tax internet filers during the month of January 2010 was 28,283. A comparison of paper filed returns to internet filed returns reflects the following:

	CY	Paper	%	Internet	%	Total Returns
	2005	230,998	81.65%	51,904	18.35%	282,902
	2006	212,617	73.24%	77,700	26.76%	290,317
	2007	198,916	68.52%	91,385	31.48%	290,301
	2008	178,705	58.69%	125,769	41.31%	304,474
	2009	87,690	30.05%	204,116	69.95%	291,806
	2010	20,888	42.48%	28,283	57.52%	49,171

Department	Telephone Numbers	FAX Numbers	E-mail Addresses
Taxpayer Service Center	(207) 626-8475	(207) 287-5855
Audit	(207) 822-0450	(207) 822-0453
Central Registration	(207) 621-5129	(207) 287-3733	division.uctax@maine.gov
Collections & Compliance	(207) 624-9595	(207) 287-6627	compliance.tax@maine.gov
Corporate Tax	(207) 624-9670	(207) 624-9694	corporate.tax@maine.gov
E-file Help Desk (1040 ONLY)	(207) 624-9730	(207) 287-6628	efile.helpdesk@maine.gov
Electronic Funds Transfer	(207) 624-5625	(207) 287-6975	efunds.transfer@maine.gov
Estate & Fiduciary Income Tax	(207) 626-8480	(207) 624-9694	estatetax@maine.gov
Fuel Tax	(207) 624-9609	(207) 287-6628	fuel.tax@maine.gov
Forms Request Line	(207) 624-7894
Individual Income Tax Assistance	(207) 626-8475	(207) 624-9694	income.tax@maine.gov
Insurance Premium Tax	(207) 624-9753	(207) 624-9694
Payment Plan/Income Tax	(207) 621-4300	(207) 621-4328	compliance.tax@maine.gov
Payment Plan/Other	(207) 624-9595	(207) 287-6627	compliance.tax@maine.gov
Practitioners’ Hotline	(207) 626-8458	(207) 624-9694
Property Tax	(207) 624-5600	(207) 287-6396	prop.tax@maine.gov
Public Communications	(207) 626-8478	(207) 624-9694
Sales Tax	(207) 624-9693	(207) 287-6628	sales.tax@maine.gov
Tax Clearance Letters	(207) 624-9628	(207) 287-6627
Office of Tax Policy	(207) 624-9789	(207) 287-3618
Taxpayer Advocate	(207) 624-9649	(207) 287-3618	taxpayer.advocate@maine.gov
NexTalk	1-888-577-6690
Withholding Tax	(207) 626-8475	(207) 624-9694	withholding.tax@maine.gov
Tax Violations Hot Line	(207) 624-9600

This publication is designed to keep taxpayers, tax practitioners and the general public informed of developments, problems, questions and matters of general interest concerning Maine tax law, policy and procedure. The articles in this newsletter are not designed to address complex issues in detail, and they are not a substitute for Maine tax laws and/or regulations
Suggestions for the Tax Alert? Please contact: Public Communications (207) 626-8478 Maine Revenue Services 24 State House Station Augusta, Maine 04333-0024