What is Maine's franchise tax?

Maine's franchise tax is a privilege tax that only applies to financial institutions doing business in the state. Unlike Maine's corporate income tax, this levy gives you two calculation options each year. You can pay 1% of Maine net income plus 0.008% of Maine assets, or go with a straight 0.039% of Maine assets, if that's cheaper. 

Non-financial corporations face bracketed income tax rates and file Form 1120-ME. However, financial institutions bypass those brackets entirely and deal with the specialized franchise regime instead.

The statutory authority sits in Title 36, §5206, which frames this as a charge for "the privilege of doing business in Maine." You'll file Form 1120B-ME, not the regular corporate return. 

Who must file the Maine franchise tax?

Maine casts a wide net when defining "financial institution." Under state law, you're caught if you operate as:

• Banks and bank holding companies
• Thrift institutions and savings associations
• Savings bank holding companies and qualified savings banks
• Insured depository institutions and any other financial institution authorized to do business in Maine

Your legal structure doesn't matter. Whether you're a partnership, S corporation, single-member LLC, or any other pass-through entity, Maine looks at what you do, not how you're organized. The 1120B-ME instructions make this crystal clear.

Ownership can also drag you in. If a financial institution owns more than 50 percent of an entity's voting stock, that subsidiary is treated as a financial institution as well. It must either join the filing group or file its own return. However, credit unions get a complete pass. 

Additional state taxes

If your business doesn't meet Maine's broad definition of a financial institution, you're off the hook for franchise tax entirely. You'll deal with Maine's standard corporate income tax instead, alongside some other tax obligations, including:

• Payroll taxes: Standard employee withholding and unemployment insurance requirements
• Sales tax: Collection and remittance required for taxable goods and digital services
• Property taxes: Local assessment on business, real, and personal property

Discern manages your Maine compliance and beyond

Maine's franchise tax calculations for financial institutions require specialized expertise, especially when choosing between the dual calculation methods and determining subsidiary filing requirements. 

While Discern can't help you with these complex tax filings, we can track your Maine annual report deadlines alongside your entire multi-state portfolio, ensuring you maintain good standing. Our platform manages registered agent services in all 51 jurisdictions and automates routine state filings, letting you focus on business operations. Ready to simplify your Maine compliance? Book a demo with Discern today.