Introduction to the Maine S Corporate Return

Form 941P-ME is prepared for all Maine S corporations. Form 1120ME, Maine Corporate Income Tax Return, is prepared for calendar, fiscal, and short year S corporations when tax is due at the federal S corporation level (such as when built-in gains or net passive tax is computed). Using the entries from the federal tax return and the Maine interview forms, the following forms are prepared for Maine:

• Form 941P-ME, Maine Information Return
• Form 1120ME, Maine Corporate Income Tax Return
• Form 1040-ME, Maine Individual Income Tax Return
• Form 1040C-ME, Composite Filing of Maine Income Tax
• Form SCH 2P, Pass-through Entity withholding Listing
• Form SCH 3P, List of Exempt Members
• Form 1120EXT-ME, Maine Extension Payment Voucher
• Form 901-ES EXT, Pass-through Entity Extension Payment Voucher

A copy of the federal return is produced for filing with the Maine return. To force the Maine Form 1120ME to print in addition to Form 941P-ME when it is not required, use the Maine worksheets, Options section.

Composite Returns

The Maine composite return, Form 1040C-ME, is produced by making an entry on the Maine Composite Return worksheet. Additional entries for selected shareholders may be required on the federal Shareholder information input for state of residence on federal Shareholder information worksheet, State information section for shareholder number, state code, and composite or withholding code.

Generic S Corporation Consolidated Return

A state S Corporation consolidated tax return is processed for Maine S Corporations by submitting the state interview forms with the consolidating unit. The state consolidated tax return generated under this input scheme is also known as the state "generic" consolidated tax return because we process the return as if it is a regular S Corporation return except we use federal consolidated income, deductions and shareholder information as the starting point.

We produce detailed supporting statements from input on the state interview forms, depreciation, and gains and losses on the sale of assets. However, we do not produce all detailed supporting statements for trade or business income (loss), Schedule K income and deductions, the balance sheet, or Schedule M-1, M-2 items or M-3 items. Therefore, you may want to attach a copy of the federal S Corporation consolidated return as supporting documentation.

Maine Special Allocations

Maine uses federal Special Allocation Detail section on the Shareholder worksheet to specially allocate the shareholder's share of income apportioned to Maine. All federal special allocation features (i.e., single entry of ratios, tiered allocation, residual suppression) are available for Maine purposes.

The Maine codes to be used are:

21204	Interest from Maine Bonds
21206	Nontaxable Income under ME and U.S. Law
21207	Income from Passthrough Financial Institutions
21208	Fiduciary Adjustment
21209	Domestic Production Activities Deduction
21300	Other Additions
21400	Other Subtractions
21251	Federal Distributive Income (Loss)
21501	Bonus Depreciation/Section 179 Expense Ded Addback
21503	Interest from state and municipal bonds, other than Maine
21505	Interest from U.S. Obligations
21507	Pass-Through Entity Withholding
21509	Bonus Depreciation Section 179 Recapture
21510	Discharge of Indebtedness
21701	Federal Work Opportunity Credit

Multiple State Apportionment and Allocation

On the federal Common State category, Allocation and Apportionment worksheet, various sections, a detail code is entered at the head of each column, and the amount for each state is entered on the line for that state. The total everywhere amount will be computed as the sum of the entries for each state, plus entries on the lines for foreign and other. Detail codes are provided for each category of property, payroll and sales. The federal Common State category, Total Everywhere Overrides worksheet is available to override the total everywhere amounts for each factor.

Refer to the federal instruction guide section under Multi-State Processing for additional information.

Federal Interview Form Notes and Automatic Features

FS Codes

The Maine return starts with federal taxable income. FS codes are not required on the federal interview forms to prepare the Maine corporate return.

The Maine Information return, Form 941-ME, is prepared for all federal S corporation return if the State of Maine is active in the return. The Maine Corporation return, Form 1120-ME, is prepared for a Maine S corporation with federal taxable income from built-in gains and excess passive income.

Automatic Transfers

Generally, additions and reductions to federal taxable income are handled through entries on the Maine interview forms. An exception is interest on U.S. obligations, which carries from the federal return and requires a state input.

U.S. Obligations

Interest on U.S. government obligations (entered on federalIncome/Deduction > Interest) does not carry to Form 1120ME as a reduction to federal taxable income.

Municipal Bond Interest

Maine does not include municipal bond interest in Maine S corporation income.

State Footnotes

Use state code "ME" and codes on federal General > Notes to indicate on which return the footnote should appear.

Note: Blank - Form 941-ME; code 1 - Form 1120ME.

Tax Accrual

An option is available on the federal input forms to carry state taxes to the federal return. Maine taxes carry to Form 1120, page 1, if "Deduct on Federal, Adjust balance sheet"is selected in the "State and City Tax Accrual Option" box in the "Calculation Options" category of General > Return Options. This entry also accrues the taxes to the appropriate sections of the federal balance sheet.

If State Tax Accrual Option "Deduct on Federal, Adjust Schedule M-1" is selected, Maine tax expense carries to Form 941P-ME page 1, but does not accrue to the federal balance sheet. If required, a Schedule M-1 book/tax adjustment is made.

If State Tax Accrual Option "Tax to rental, Adjust balance sheet" is selected, Maine tax expense carries to the rental schedule instead of Form 941P-ME, page 1, and the taxes are accrued to the federal balance sheet.

If State Tax Accrual Option "Tax to rental, Adjust Schedule M-1" is selected, Maine tax expense carries to the rental schedule instead of Form 941P-ME, page 1, and the taxes are not accrued to the federal balance sheet.

If State Tax Accrual Option "Tax to Sch. K, Adjust balance sheet" is selected, Maine tax expense carries to Schedule K instead of Form 1120, page 1, and the taxes are accrued to the federal balance sheet.

If State Tax Accrual Option "Tax to Sch. K, Adjust Schedule M-1" is selected, Maine tax expense carries to Schedule K instead of Form 1120, page 1, and the taxes are not accrued to the federal balance sheet.

If a state tax accrual option is not selected, Maine taxes neither carry to the federal return nor accrue to the balance sheet.

State Income Taxes

State taxes do not add back on the Form 1120ME, page 1, for the S corporation.

Resident Shareholders

The number of resident shareholders is calculated based on the entries on federal Shareholders Information section Shareholders worksheet. Be sure to indicate a "State of Residence" for each shareholder. Shareholders whose "State of Residence" is anything but "ME" or blank will be treated as nonresidents for this calculation. This information is required for Form 941P-ME.

Shareholder Tax Withheld

Taxes withheld from/for nonresident shareholders are entered on federal Shareholders > Special Allocation Detailwith allocation code 21507, and a resident state code other than ME on federal Interview Form K-1. These amounts are included on the Maine Schedule K-1. Amounts of tax withheld.

Depreciation

For tax years beginning in 2002, Maine net income must be increased by the net effect of any 30%/ 50% bonus depreciation refleceted in federal taxable income. This addition modification is determined by first recalculating the depreciation deduction on federal Form 4562 exclusive of the 30%/ 50% bonus depreciation amount. The difference between this pro forma depreciation deduction amount and the original federal depreciation deduction is the modification to Maine net income. Entries of the first year differences are required on Income/ Deduction > Depreciation that can suppress or change the type of JCWA calculation. Also, you may override the automatic bonus depreciation adjustment on Income/Deductions > Additions > Bonus depreciation/section 179 addback .

For tax years after 2004 a recapture of all depreciation difference of asset placed in service in prior years is in effect throughout the remaining life of the asset. ProSystem will calculate the recapture if there is an entry of the prior years depreciation difference of each asset class on the related Income/Deductions > Depreciation section. Override for this amount is available on Maine > Income/Deduction > Subtractions > "Bonus depreciation / Section 179 expense recapture".

Payment Processing Expectations

Estimate payments and ACH payments are not allowed to be canceled once the return has been submitted.