The High Technology Investment Tax Credit is a credit against Maine income tax for the cost (or, if depreciation has been claimed in a different jurisdiction, the remaining basis) of eligible equipment that is placed into service in Maine and used in a “High-technology activity.” ”High Technology Activities” are defined as the design, creation, and production of computer software, computer equipment, supporting communications components and other accessories that are directly associated with computer software and computer equipment or the provision of internet access services and advanced telecommunications services.
High Technology Equipment
Computer equipment, electronics components and accessories, communications equipment and computer software all qualify for the credit if more than 50% of their use is for a “high technology activity.” Leased equipment can also qualify. Normally, the lessee or sublessee (the end-user of the equipment) claims the credit, but they also have the ability to waive the credit and allow the lessor to claim it instead.
If the credit is claimed by a lessee who deduct the lease payments as they make them, then the credit is available for the amount of the lease payments made each year. If the taxpayer accounts for the property as a capital lease for tax purposes, then the credit is figured as though they had purchased the equipment. If the lessor claims the credit, lease payments received in the year that the equipment is placed in service reduce the cost eligible for the credit. If a sublessor claims the credit, the lease payments they pay are reduced by the lease payments they receive to determine the amount eligible for the credit.
How to Claim
To claim the tax credit, the taxpayer must complete the High-Technology Investment Tax Credit Worksheet to calculate the amount of the credit. This worksheet will help the taxpayer to determine the total tax credit available, and how much of that credit is currently available for use. The total credit available becomes a modification to increase Maine taxable income and the amount available for the current year becomes a dollar-for-dollar reduction in Maine income tax.
There is no time frame specified in Maine’s tax code for when to claim the credit. Therefore, a taxpayer who failed to claim the credit on his or her original Maine income tax return has up to three years from the date that they timely-filed their original return to amend it and claim a refund, or up to two years from the date that they paid their tax, which ever is later. The time frame for claiming a refund on an amended return is discussed in a different blog post, and Maine follows the federal law for those time frames.
Limitations on the Credit
The Maine High Technology Investment Tax Credit is subject to certain limitations. First, it cannot reduce Maine tax liability below zero. Second, it cannot reduce a taxpayer’s liability to less than the taxpayer’s liability in the preceding year, after accounting for all other tax credits. Finally, the Maine High Technology Tax Credit cannot reduce Maine tax liability by more than $100,000 in any one year.
Any amount of the tax credit that is available but cannot be claimed due to these limitations can be carried forward for up to five years.