An Act To Offer Financial Institutions an Option for Payment of the Maine Franchise Tax
Maine Legislature, Session 122, LD 1761
Committee: Taxation
Sponsors: PERRY
Amends: 36 MRSA §5206, 36 MRSA §5206-E

Legislative Document 
No. 1761 
S.P.678 
In Senate, December 30, 2005 
An Act To Offer Financial Institutions an Option for Payment of the 
Maine Franchise Tax 
Submitted by the Department of Economic and Community Development pursuant to Joint 
Rule 204. 
Received by the Secretary of the Senate on December 28,2005. Referred to the Committee 
on Taxation pursuant to Joint Rule 308.2 and ordered printed pursuant to Joint Rule 401. 
Presented by Senator PERRY of Penobscot. 
Cosponsored by Representative: DUGA Y of Cherryfield. 
Printed on recycled paper 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 36 MRSA §5206, as amended by PL 1997, c. 746, §14 and 
affected by §24, is repealed and the following enacted in its 
place: 
§5206. 
Franchise taz on financial institutions 
A tax 
is-.i~d for 
e.Q-.c.h 
calendar year or fiscal ye.aJ: 
ending during that calendar year upon the franchise or priyilege 
of doing business in this State of every financia.l institution 
that has 
Maine 
net 
income 
or 
Maine 
assets 
and that has 
a 
substantial physical presence in this State sufficient to satisfy 
the requirements of the due process and commerce clauses of the 
United States Constitution. 
A financial institution is subject 
to tax under this section eyen if it is treated as a partnership, 
S corporation or entity disregarded as separate from its owner 
for federal income tax purposes under the Code. 
Each financial 
institution shall 
determine 
the 
tax 
due 
using 
one 
of 
the 
following methods: 
1. 
Franchise tax on Maine net income. 
The s urn 0 f : 
A. 
One percent of the financial institution's Maine net 
income: and 
B. 
Eight cents per $1, 000 of the financial institution's 
Maine assets: or 
2. 
Franchise tax on Maine assets only. 
Thirty-nine cents 
per $1,000 of the financial institution'S Maine assets. 
Each financial institution subject to the tax under this 
chapter shall elect to calculate and pay tax under the method in 
subsection 1 
or 2. 
The financial institution shall make the 
election on its annual state tax return and the election cannot 
be 
revoked with 
respect 
to 
that 
tax 
year. 
If 
a 
financial 
institution fails to make an election, the method established in 
subsection 1 must be used and is deemed an election for purposes 
of this section. 
In 
each 
taxable 
year 
in which 
a 
financial 
institution 
sustains a 
book net operating loss, 
a credit must be allowed 
against the franchise tax on assets under subsections 1 and 2. 
The credit must be computed by multiplying the book net operating 
loss by the applicable franchise tax rate imposed by subsection 
1, paragraph A. 
The total amount of any credit allowed may not 
exceed 
the 
franchise 
tax 
on 
assets 
due 
under 
subsection 1, 
paragraph B. 
In any tax year in which there is excess credit.... 
the excess credit must be carried forward for no more than the 
Page l-LR2956(1) 
next 5 tax years and may be applied against the tax computed 
under subsection 1. 
Sec. 2. 36 MRSA §5206-E, first " 
as enacted by PL 1997, c. 
404, §5 and affected by §10, is amended to read: 
Except 
as 
otherwise 
specifically 
provided, 
a 
financial 
institution that is taxable both in and outside this State shall 
apportion its net income and end-of-year assets as provided in 
this section. 
A financial institution is considered taxable in a 
state if in that state the financial institution is subject to a 
net 
income 
tax, 
a 
franchise 
tax 
measured 
by net 
income, 
a 
franchise tax for the privilege of doing business or a corporate 
stock tax or that state has jurisdiction to subject the financial 
insti tution to a net income tax regardless of whether, in fact, 
the state does or does not tax the financial institution. 
Sec. 3. 36 MRSA §5206-E, sub-§l, as amended by PL 1997, c. 
746, §18 and affected by §24, is further amended to read: 
1. 
Formula applicable. 
All of a financial institution's 
MaiRe net income is and end-of -year assets are apportioned to 
this 
State 
by 
multiplying 
the 
income 
and 
the 
assets 
by 
a 
fraction, the numerator of which is the property factor plus the 
payroll 
factor 
plus 
times 
the 
receipts 
factor 
and 
the 
denominator of which is 4. 
Sec. 4. 36 MRSA §5206-E. sub-§5. ,n. as enacted by PL 1997, c. 
404, §5 and affected by §10, is amended to read: 
D. 
The employment of any other method to effectuate an 
equitable apportionment of the taxpayer's income or assets. 
Sec. 5. Application. 
after December 31, 2005. 
This Act applies to tax years ending 
SUMMARY 
This 
bill 
provides 
an 
alternative 
tax 
calculation 
for 
purposes of the franchise tax for financial institutions based 
entirely on Maine assets. 
Current law determines the franchise 
tax on the basis of both Maine net income and Maine assets. 
The 
financial institution may choose either the current method or the 
alternative method for calculating the franchise tax. 
The method 
used is irrevocable for that tax year. 
The bill applies to tax 
years ending after December 31, 2005.