Code of Maine Rules › 18 - DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES › 125 - BUREAU OF REVENUE SERVICES › Chapter 806 - NONRESIDENT INDIVIDUAL INCOME TAX › Section 125-806-02 - Income subject to Maine income tax

Current through 2024-29, July 17, 2024
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 Maine-source loss is determined in the same manner that a
				Maine-source gain is determined. 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
				Internal Revenue 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.
Business income.
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
				taxpayer 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 taxpayer 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.