Line 1. Enter the income from municipal and state bonds, other than Maine, that is not included in your federal adjusted gross income (i.e., enter bond interest from City of New York but not Portland, Maine). 36 M.R.S. § 5122(1)(A).
Line 2. Net operating loss recovery adjustment. Enter on this line any amount of federal net operating loss carry forward that has been previously used to offset Maine addition modifications. For more information, go to www.maine.gov/revenue/tax-return-forms (select Income Tax Guidance Documents). 36 M.R.S. § 5122(1)(H).
Line 3. Enter 2021 Maine Public Employees Retirement System contributions. See your Maine state or municipal W-2 form. 36 M.R.S. § 5122(1)(G). Lines 4 and 5. Bonus depreciation add-back. Lines 4 and 5 relate to Maine’s decoupling from the federal special depreciation deduction through IRC § 168(k), commonly known as bonus depreciation. To calculate the amount to enter on these lines, complete a pro forma federal Form 4562 as if no bonus depreciation was claimed on the property placed in service in tax year 2021. The total addition modification is the difference between the federal depreciation claimed on Form 4562 and the depreciation calculated on the pro forma Form 4562. If any of the property placed in service in tax year 2021 is located in Maine and the Maine capital investment credit is claimed, the total addition modification must be divided between lines 4 and 5. Otherwise, the entire addition must be entered on line 4. Enclose copies of the original and pro forma federal Forms 4562, along with the add-back calculation, with the return.
Line 4. Bonus depreciation add-back: Enter on this line the total bonus depreciation add-back calculated above less the amount of Maine capital investment credit add-back from line 5. Amounts entered on this line are eligible for the recapture subtraction modification on Schedule 1S, line 9 in future years. 36 M.R.S. § 5122(1)(KK)(2).
Line 5. Maine capital investment credit bonus depreciation addback: The Maine capital investment credit is available to businesses that place depreciable property in service in Maine during the taxable year. 36 M.R.S. § 5122(1)(KK)(1). Enter on this line the portion of the bonus depreciation add-back calculated above relating to property for which the Maine capital investment credit is claimed, based on original basis of property placed in service in tax year 2021. For example, if you purchased $400,000 of eligible property and $100,000 of that property is located in Maine and included in the credit base, the portion of the add-back to include on this line is $100,000/$400,000 or 25% of the total bonus depreciation add-back calculated above. Property that is transferred out of state or disposed of within 12 months after being placed in service in Maine is not eligible for the Maine capital investment credit. Amounts entered on this line are eligible for the recapture subtraction modification on Schedule 1S, line 9 in future years.
Line 6. Enter your share of a fiduciary adjustment (addition modifications) relating to income from an estate or trust (36 M.R.S. § 5122(3)). Attach a copy of your federal Schedule K-1.
Line 7. Election to recognize total gain from the sale of Maine real or tangible property – nonresidents only. Nonresident individuals may elect to recognize the entire gain from an installment sale during the taxable year of real or tangible property located in Maine. The election may only be made on a timely filed original return and, once made, is irrevocable. Enter on this line the total gain from the sale of the Maine property that would have been included in your federal adjusted gross income if you had not reported the gain on the installment sale basis, less the amount of the gain from the sale already included in your federal adjusted gross income reported on Form 1040ME, line 14. An entry on this line constitutes an election under this paragraph. 36 M.R.S. § 5147.
Line 8. Adjustment for loss, deductions and other expenses of a pass-through entity financial institution subject to Maine franchise tax. Under Maine law, financial institutions are subject to the Maine franchise tax, regardless of how the institution is organized. This includes a financial institution organized as a pass-through entity, such as a partnership or limited liability company. Maine law provides that the income from an ownership share in a pass-through entity financial institution is not taxable income on the owner’s Maine income tax return. In like manner, any loss, deduction or expense of a passthrough entity financial institution reflected in an owner’s federal income is not permitted in calculating the Maine taxable income of the owner. 36 M.R.S. § 5122(1)(K).
Line 9. Wellness programs tax credit adjustment. Maine taxpayers who claim the Maine credit for wellness programs under 36 M.R.S. § 5219-FF and deducted related expenses on their federal tax return must increase Maine taxable income by the amount federal income was reduced. 36 M.R.S. § 5122(1)(EE).
Line 10. Business meals deduction add-back. The federal Consolidated Appropriations Act, 2021 temporarily removed the 50% deduction limitation on certain business meals expenses incurred after December 31, 2020. For Maine income tax purposes, business meals expenses over the 50% limitation may not be used to reduce Maine taxable income. Enter on this line the difference between the business meals deduction with no limitation used in calculating business income on your federal return and the business meals deduction calculated using the 50% limitation. 36 M.R.S. § 5122(1)(OO).