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. Formally called the Financial Institutions Franchise Tax, this levy is imposed in lieu of the corporate income tax for qualifying institutions. 

Unlike Maine's corporate income tax, this regime requires you to compute the tax using two calculation methods and pay the greater amount. You must pay either 1% of Maine net income plus 0.008% of Maine assets, or 0.039% of Maine assets, whichever is higher.

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." Financial institutions 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
• Any entity whose business substantially consists of activities permitted for financial institutions under federal or state law

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 unitary financial institution. 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 products
• Property taxes: Local assessment on business, real, and personal property

Discern manages your Maine compliance and beyond

While Discern can't help you with these complex tax filings, we can automate 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.