Maine R&D Tax Credits

Maine offers an R&D Tax Credit and a Sales Tax Exemption for businesses engaged in certain specialized industries. In general, Maine's Research Expense Tax Credit closely follow the federal R&D qualification guidelines and are applied for as part of a taxpayer's Maine corporate tax return.

Research Expense Tax Credit:
The credit is based on a percentage of the federal R&D Tax Credit under IRC § 41. The Maine R&D credit is calculated as:

• 5% of the excess qualified research expenses (QREs) over the previous three-year's average QREs plus 7.5% of the basic research payments.
• Credit utilization is limited to 100% of the first $25,000 in corporate tax liability plus 75% of the tax liability in excess of $25,000.
• The credit cannot be carried back, but can be carried forward for up to 15 years.

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Sales Tax Exemptions
Maine sales tax exemptions are available for expenses related to manufacturing, research and development, custom computer programming, fuel & electricity, and biotechnology.
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• Manufacturing:  Sales of machinery and equipment used by the purchaser directly and primarily in the production of tangible personal property for later sale or use is eligible for a sales tax exemption. In addition, items consumed or destroyed directly or primarily in production, and repair and replacement parts for qualified production equipment, are exempt from Maine sales tax.
  

• Research and Development:  Expenses related to machinery and equipment used by the taxpayer directly and exclusively in research and development are eligible for a sales tax exemption.
  

• Custom Computer Programming:  Any customized computer software purchased by a business is exempt from sales tax. Specifically, if a standard program is purchased, then customized, the cost of the standard program would be taxable and the customizing, if separately stated, would be tax-exempt.
  

• Fuel & Electricity For Use In Manufacturing:  Manufacturers are exempt from paying 95% of the sales tax on fuel and/or electricity used in the manufacturing operation.
  

• Biotechnology:  Expenses for machinery, equipment, instruments, and supplies used by the purchaser directly and primarily in a biotechnology application are eligible for a sales tax exemption.

Learn more about Maine's R&D Tax Credit here or see Maine's R&D tax form here.

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Due with Maine Tax Return

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Data Required to Compute Credit:

Claim Period Qualified R&D Expenses (QREs)

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What Information is needed?

QREs for Prior 3 Years

Federal Form 6765

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Credit Carryforward:

15 years

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The R&D tax credit equals:

• 5% of the excess qualified research expenses over the previous three-year average; plus
• 7.5% of basic research payments (relating to research performed by qualified universities or scientific research organizations).

Specific Items to Note:

• The credit is limited to 100% of the first $25,000 in income tax determined before other credits, plus 75% of the tax amount in excess of $25,000.
• The credit cannot be carried back, but can be carried forward for up to 15 years.
• Taxpayers that file a Combined Return (i.e. a controlled group) have special rules to follow.