Skip Maine state header navigation
18 DEPARTMENT OF ADMINISTRATIVE
AND FINANCIAL SERVICES
125 BUREAU OF REVENUE SERVICES
Chapter 601: ESTATE TAX
SUMMARY: This rule explains in further detail the estate tax
laws of the State of Maine.
Outline of Contents:
.01 Definitions
.02 Federal Law
.03 Filing Requirements
.04
.05 Gifts
.06 Valuation
.07 Sourcing
of Estate Property
.08 Qualified
Terminable Interest and
.09 Qualified Domestic Trusts
.10 Liability
.11 Liens
The following
definitions apply with respect to this rule and 36 M.R.S.A., Chapter 575,
except as the context may otherwise require.
A. Adjusted taxable gifts. “Adjusted
taxable gifts” has the same meaning as in the Internal Revenue Code (“Code”).
B. Allowable deductions. “Allowable
deductions” means deductions from the federal gross estate as authorized under
the Code, in calculating the federal taxable estate, excluding the state
death tax deduction. “Allowable deductions” includes deductions taken by a Gap
estate or that would have been allowable if the estate had been required
to file a federal estate tax return.
C. Alternate valuation date. “Alternate
valuation date” means the date of valuation of an estate other than the date of
death, as determined under the Code. In the case of an estate that does not
incur a federal estate tax, but is taxable to Maine, the alternate valuation
must be determined under Code § 2032 as if the estate was taxable under federal
law.
D. Federal exclusion. “Federal
exclusion” means the applicable exclusion amount pursuant to the Code. The
exclusion amount is the dollar value for which the calculated estate tax is
exactly equal to the applicable unified credit.
E. Federal tentative taxable estate. “Federal
tentative taxable estate” means the federal gross estate less allowable
deductions.
F. Gap estate. “Gap estate”
means the estate of a decedent where the value of the gross estate as of the
decedent’s date of death or alternate valuation date is less than or equal to
the federal exclusion amount but more than the Maine exclusion amount.
G. Maine estate tax. “Maine estate
tax” means the amount of tax due in accordance with Title 36 M.R.S.A., Chapter 575
and this rule.
H. Maine exclusion. “Maine exclusion”
means the applicable federal exclusion amount for Maine estate tax purposes under
Title 36 M.R.S.A., Chapter 575. The exclusion amount is the dollar value for
which the calculated estate tax is exactly equal to the applicable unified
credit.
I. Maine gross estate. “Maine gross
estate” means the federal gross estate, whether or not a federal estate tax
return is required to be filed, modified by the value of Maine qualified
terminable interest property and Maine elective property, adjusted for property
located outside of Maine as follows. For resident decedents, the Maine gross
estate excludes all real and tangible personal property physically located
outside of Maine. For nonresident decedents, the Maine gross estate includes only
real and tangible personal property, including such property that is part of
Maine elective property, located in Maine.
J. Maine gross estate tax. “Maine
gross estate tax” means the maximum federal credit in accordance with 36
M.R.S.A., Chapter 575.
K.
Pro forma federal Form 706. “Pro
forma federal Form 706” means
federal Form 706 prepared as if it were required to be filed federally under
the Code.
L. Qualified domestic trust. “Qualified
domestic trust” has the same meaning as under the Code.
M. Surviving spouse. “Surviving spouse”
means an individual who outlived the decedent and who was married, according to
the laws of Maine, to the decedent at the time of the decedent’s death.
N. Unified credit. “Unified credit” has
the same meaning as in the Code, §2010.
.02 FEDERAL LAW
Generally, in
appropriate circumstances, Maine Revenue Services shall look to federal law, including
statutes, regulations, statements, policy and related case law for guidance
when interpreting Maine estate tax law.
.03 FILING REQUIREMENTS
A. Forms
1. Form 706ME. Where the sum of the federal gross estate, adjusted
taxable gifts and Maine elective property exceeds the Maine exclusion and where
the estate includes property sourced to Maine, a personal representative must
file a Maine Estate Tax return (Form 706ME) with required attachments within nine
months of the decedent’s date of death, unless an extension of time to file has
been granted. If the estate is required to file a federal Form 706, a copy of
that form, including all schedules and attachments (including Worksheet 706C) must be filed with the Form 706ME. If
the estate is not required to file federal Form 706, a pro forma federal Form
706 must be attached to Form 706ME and must include all of the information,
schedules and attachments that would be required if a federal return was
required to be filed.
2. Form 706ME-EZ. Where the sum of the federal gross estate, adjusted
taxable gifts and Maine elective property is equal to or less than the Maine
exclusion and where the estate includes property sourced to Maine, the personal
representative may file Form 706ME-EZ at any time after date of death. The
purpose of the form, along with a certificate of discharge of estate tax lien,
is to request the release of the automatic statutory estate tax lien on real or
tangible personal property for estates with no tax liability.
3. Certificates of Discharge of Estate Tax
Lien. A personal representative must
file a Certificate of Discharge of Estate Tax Lien to request release of the
automatic estate tax lien on Maine real property. A personal representative
must file a Certificate of Discharge of Estate Tax Lien on Tangible Personal
Property to request release of the automatic estate tax lien on personal
property sourced to Maine.
B. Attachments.
A personal representative must file attachments required by the State Tax
Assessor. Required attachments may include, but are not limited to, appraisals, wills and trust documents, any estate tax, gift
tax or fiduciary income tax return filed with the IRS or another state, proof of
payment to another state, any document stating a request for an extension of
time to file or pay, Life Insurance Statements (federal Forms 712), financial
statements, pension or annuity plan documents or statements, bank and brokerage
statements, and a detailed list of miscellaneous property and documentation of
its value.
C. Payment.
Payment of all estate tax shown to be
due on the return must be paid within 9 months of the decedent’s date of death,
unless a request for an extension of time to pay has been granted by the State
Tax Assessor. See section .03(F)(2) below.
D. Amended
Returns. If the estate receives or
becomes entitled to additional property that was not shown on the Maine estate
tax return, the personal representative must file an amended Maine estate tax
return within 90 days of the receipt of such property, even if the additional
property does not result in an increase in the estate’s liability shown on the
Maine estate tax return. If Form 706 has been audited by the IRS and the IRS
changed any item resulting in an increase in the estate’s liability shown on
the Maine estate tax return, the personal representative must file an amended Maine
estate tax return with a copy of the federal statement of changes packet within
90 days of the change.
E. Record
Retention. A personal representative
must, for Maine estate tax purposes, retain complete records for the same
period as required by the Code and regulations for estates that incur a federal
estate tax, even if the estate has not incurred a federal estate tax.
F. Extensions
1. Extension to File. The State Tax Assessor may allow a reasonable
extension up to eight months from the date that the Maine estate tax return
would have originally been due absent any extension as long as a payment
reasonably estimating the tax due has been submitted on or before the original
due date. A payment of at least 90% of
the tax due must be submitted to avoid late payment penalties. If a federal extension to file has been
granted, a Maine extension to file is automatically granted equal to the
federal extension period. If the federal extension that was granted is less
than eight months, the Assessor may allow an extension up to a total of eight
months upon the written request of the personal representative stating the
reason for the extension request. If a federal estate tax return is not
required, the State Tax Assessor may allow a reasonable extension up to eight
months from the date that the return would have originally been due absent any
extension upon written request of the personal representative.
2. Extension to Pay. In order to receive an extension to pay, the personal
representative must request an extension in writing and show that the estate has
an inability to pay by the original due date. The State Tax Assessor may
mandate a bond or other security. An extension of time to pay will not exceed
one year from the date that the tax was originally due, but the State Tax
Assessor may grant successive extensions pursuant to 36 M.R.S.A. § 4069. Interest
accrues on any amount of tax not paid by the original due date.
G. Escrow
Agreements. Where appropriate and
upon request of the personal representative, the State Tax Assessor may allow
an estate to establish an escrow account in favor of Maine Revenue Services in
lieu of the tax bond typically required by the probate court to secure the
estimated estate tax liability.
H. More
than one personal representative. If
an estate has more than one personal representative, a list containing the name,
address, telephone number, and social security number or tax identification
number for each personal representative must be attached to the return.
.04
A. Final
federal determination. When the
federal government issues a final determination as to the inclusion in the federal
gross estate of any item, the amount claimed as a deduction from the gross
estate, or the federal credit for estates of decedents dying prior to
after January 1, 2003 but before July 1, 2008, that issue is finally determined
for Maine estate tax purposes. For
estates of decedents dying on or after July 1, 2008 but before January 1, 2010,
the State Tax Assessor is not bound by a final federal determination on the
above issues and may determine the issue for Maine estate tax purposes within
two years of the date the return was filed or was due to be filed, whichever is
later.
B. Sourcing
of property. Property is sourced to the Maine gross estate in accordance
with section .07 below.
C. Administrative
expenses. If a gap estate has
administrative expenses included in the calculation of the pro forma federal Form
706 that are also included in the estate’s federal fiduciary return (Form 1041)
for calculating the income tax for the estate, the estate must make an addition
modification equal to the amount of the administrative expense deduction to the
Maine fiduciary income tax return on Form 1041ME.
.05 GIFTS
Generally, adjusted taxable gifts are added to the federal tentative
taxable estate and Maine elective property in order to determine whether the
estate has exceeded the Maine exclusion. As appropriate, the State Tax Assessor
will disregard the gift and treat the decedent as the owner of the property. For
instance, the State Tax Assessor will disregard gifts where a gift has not been
completed, incidents of ownership were retained by the decedent, or where the
gift otherwise would be disregarded under the Code, federal regulations, or
policy.
.06 VALUATION
A. Determination. The State Tax Assessor may, for Maine estate tax
purposes, independently determine the value of an estate in accordance with the
Code and federal regulations and policy even if there is a final federal
determination with respect to the valuation of the assets of the estate. Generally,
the value of the gross estate of the decedent is determined by the fair market
value of all the decedent’s assets at the time of death. The fair
market value means the price at which the property would change hands between a
willing buyer and a willing seller, neither being under any compulsion and both
having reasonable knowledge of the relevant facts.
B. Alternate
valuation date. The personal
representative of an estate may elect to value the estate using the alternate
valuation date as determined under the Code, § 2032. The State Tax Assessor
may, for Maine estate tax purposes, independently determine the value of an
estate on the alternate valuation date in accordance with the Code and federal
regulations and policy even if there is a final federal determination with
respect to the valuation of the assets of the estate.
.07 SOURCING OF ESTATE PROPERTY
A. Property
1. Real property. Real property is sourced to the taxing jurisdiction
in which it is physically located, regardless of whether the decedent was a
Maine resident or nonresident.
2. Tangible personal property. Tangible personal property is sourced to the taxing
jurisdiction in which it was situated at the date of death. If an item of
tangible personal property is temporarily situated in a taxing jurisdiction for
repair or other temporary purpose, that item will be sourced to the taxing
jurisdiction to which it is intended to be located after such repair or
purpose.
3. Intangible property. Intangible property is sourced to the taxing jurisdiction
of the decedent’s domicile. Intangible property includes, but is not limited
to, bank accounts, stocks, bonds and other cash accounts, except as provided by
.07(C) and (D).
B. Domicile. The taxing jurisdiction in which an individual is
domiciled is that individual’s permanent legal residence. See the Maine Revenue
Services publication Guidance to
Residency Status for additional information.
C. Residents. For a resident decedent’s estate, all real and
tangible personal property located in Maine plus all intangible property is
sourced to Maine. A credit may be
allowed against the estate tax of a resident decedent’s estate for
constitutionally valid estate, inheritance, legacy and succession taxes
actually paid to another jurisdiction upon the value of real or tangible
personal property owned by the decedent, subject to such tax and included in
the value of the decedent’s intangible personal property subject to taxation
under 36 MRSA 4063.
D. Nonresidents
1. Generally. For a nonresident decedent’s estate, all real and
tangible personal property situated in Maine is sourced to Maine. If real or tangible personal property situated
in Maine is sold by a decedent within six months prior to the date of death the
proceeds are sourced to Maine in a nonresident decedent's gross estate.
2. Real or tangible personal property
transferred to a trust or other pass-through entity. Where a nonresident decedent during life transferred
real or tangible personal property situated in Maine into a trust, limited liability
company or other pass-through entity, the State Tax Assessor will look beyond
the form of the transfer to the substance of the transaction to determine
whether the decedent had an interest in the real or tangible personal property situated
in Maine at the date of death. As appropriate, the State Tax Assessor will
disregard the transfer and treat the decedent as the owner of the real or
tangible personal property located in Maine.
If
the trust, limited liability company or other pass-through entity in which the
decedent has an interest does not actively carry on a business for the purpose
of profit and gain, the entity will be disregarded for the purpose of including
real and tangible personal property located in Maine in the Maine gross estate
of the decedent.
Where a decedent transferred real or tangible personal
property situated in
Where a trust, limited liability company or other
pass-through entity acquired real or tangible personal property situated in
Maine other than from a bona fide sale for full and adequate consideration and the
decedent retained a power or interest in the property which would bring the real
or tangible personal property located in Maine within the decedent’s federal
gross estate, the Assessor will disregard the entity and treat the property as
personally owned by the decedent for purposes of valuing the estate and
sourcing the real or tangible personal property located in Maine to Maine.
3. Allocation of debt. For nonresident decedents, the Maine estate tax is
applied to the total value of the real and tangible personal property situated in
Maine. If Maine real property is encumbered, only the direct debt against the
property (debt used for the purchase, repair, maintenance or improvement of
that property) is an allowable reduction of the value of that property.
.08 QUALIFIED TERMINABLE INTEREST AND
A. Qualified Terminable Interest Property.
Beginning with deaths in 2005, an estates of a decedent with a surviving spouse may elect an estate deduction for assets that are eligible to be
treated as qualified terminable interest property (“QTIP”) under the Code, § 2056(b)(7).
The maximum allowable Maine QTIP deduction is the difference between the
decedent’s federal exclusion amount or, if no federal return is required, the
pro forma federal exclusion amount and the Maine exclusion amount. The
Maine QTIP may not include property designated as federal QTIP property, nor
may it include property included in adjusted taxable gifts. Maine QTIP property
is tax-deferred for Maine estate tax purposes until the death of the surviving
spouse. At the death of the surviving spouse, the remaining Maine QTIP property
is revalued and is identified as Maine elective property which must be included
in the surviving spouse’s taxable estate.
B. Maine
Elective Property. If a decedent was
predeceased by a spouse whose estate elected a deduction for a Maine QTIP, the remaining
property in the Maine QTIP must be included in the value of the estate of the surviving
spouse as Maine elective property. The value of the Maine elective property is measured
at the death of the surviving spouse and is added to the federal tentative taxable
estate of the surviving spouse to calculate the Maine taxable estate. If the estate
of the surviving spouse is based on the alternate valuation date, then the same
alternate valuation date is to be used for valuation of the Maine elective
property.
.09 QUALFIED DOMESTIC TRUSTS “QDOT”
If a federal Form 706-QDT is required, the estate must
also file an amended Maine estate tax return, showing the taxable distribution
as an increase to the predeceased spouse’s estate.
.10 LIABILITY
A personal representative, trustee, grantee, donee or
other beneficial recipient of the assets of an estate remains personally liable
for the tax debt on the assets of an estate until that debt is paid.
.11 LIENS AND LIEN RELEASES
An automatic lien for estate taxes, interest and
penalties attaches to all Maine property owned by a decedent at death. The lien
continues indefinitely until it is released.
When a personal representative of an estate files a
completed Certificate of Discharge of Estate Tax Lien, the State Tax Assessor
will release the lien upon a showing by the estate that all taxes, interest,
and penalties have been paid or a determination by Maine Revenue Services that
no tax is due.
The lien is released by operation of law only when the
personal representative of the estate, a trustee, or surviving joint tenant of
the property transfers the property for value as defined pursuant to Chapter
575. However, the lien continues to attach to any property that is transferred
for less than its value or when transferred by any other party.
STATUTORY AUTHORITY: 36 M.R.S.A. §112.
EFFECTIVE DATE:
January
7, 2008 – filing 2008-3
October
27, 2008