18-125 C.M.R. ch. 825 — Rule 825. Tribal Member Income from Sources on Tribal Land

18
DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES
125
BUREAU OF REVENUE SERVICES
INCOME/ESTATE TAX DIVISION
Chapter 825: TRIBAL MEMBER INCOME FROM SOURCES ON TRIBAL LAND
SUMMARY: This rule provides income tax guidance for tribal members and certain estates of
tribal members for purposes of calculating the income modifications under 36 M.R.S. §§
5122(1)(PP) and 5122(2)(ZZ) and regarding the application of Maine withholding requirements
on payments made to tribal members. The guidance includes:
• Determination of when an individual qualifies as a tribal member residing on tribal land;
and
• Determination of when income is derived from or connected with sources on tribal land.
Outline of Contents:
.01 Definitions
.02 Tribal member residing on tribal land
.03 Maine adjusted gross income from sources on tribal land
.04 Income sourced to tribal land
.05 Special sourcing rules
.06 Estate of tribal member decedent
.07 Maine income tax withholding requirements on payments to tribal members
.08 Application date
.01
Definitions
A. Enrolled member. "Enrolled member" means an individual who is enrolled with, and
appears on the tribal membership roll of, the Houlton Band of Maliseet Indians, the
Passamaquoddy Tribe, or the Penobscot Nation. Membership rolls of enrolled members
are in the possession of, and maintained by, the Houlton Band of Maliseet Indians, the
Passamaquoddy Tribe, and the Penobscot Nation.
B. Houlton Band of Maliseet Indians. "Houlton Band of Maliseet Indians" has the same
meaning as in 30 M.R.S. § 6203(2).
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C. Houlton Band Trust Land. "Houlton Band Trust Land" has the same meaning as in the
federal Houlton Band of Maliseet Indians Supplementary Claims Settlement Act of 1986,
Public Law 99-566, Section 2(2).
D. Intangible property. "Intangible property" means a right or possession of a nonphysical
or abstract nature that has value, or a financial asset that has no intrinsic value but that
represents value. Intangible property includes but is not limited to copyrights, patents,
licenses, bills of exchange, trademarks, business books and records, business goodwill,
covenants not to compete, securities, bonds, notes, insurance policies, and accounts
receivable.
E. Original Cost. "Original cost" means the basis of the property for federal income tax
purposes prior to any federal adjustments at the time of acquisition by the taxpayer and
adjusted by subsequent capital additions or improvements thereto and partial disposition
thereof by reason of sale, exchange, abandonment, or other disposition.
F. Passamaquoddy Indian territory. "Passamaquoddy Indian territory" has the same
meaning as in 36 M.R.S. § 111(2-A). The term as defined by 30 M.R.S. § 6203(6) means
the territory as defined by 30 M.R.S. § 6205(1).
G. Passamaquoddy Tribe. "Passamaquoddy Tribe" has the same meaning as in 30 M.R.S.
§ 6203(7).
H. Pass-through entity. "Pass-through entity" means a corporation that for the applicable
tax year is treated as an S corporation under the Internal Revenue Code, or a general
partnership, limited partnership, limited liability partnership, limited liability company,
trust, or similar entity that for the applicable tax year is not taxed at the entity level for
federal income tax purposes. "Pass-through entity" does not, for Maine income tax
purposes, include a financial institution subject to tax under 36 M.R.S., chapter 819.
I. Payroll factor. "Payroll factor" means the ratio of compensation paid by the taxpayer to
employees during the taxable year whose base of operations is on tribal land to
compensation paid by the taxpayer to employees during the taxable year everywhere.
The following apply only for purposes of determining the payroll factor:
1. Effect of accounting method. If a taxpayer has adopted the accrual method of
accounting, all compensation properly accrued will be deemed to have been paid.
However, compensation may be included in the payroll factor by use of the cash
method if the taxpayer is required to report such compensation under that method for
unemployment compensation purposes.
2. Base of operations. "Base of operations" means the taxpayer's place of business
from which an employee customarily begins work or to which the employee
customarily returns at some other time to receive instructions, direction and
supervision from the taxpayer or communications from customers or other persons, to
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replenish stock or other materials, to repair equipment, or to perform any other
function necessary to the exercise of the employee's trade or profession.
3. Compensation. "Compensation" means wages, salaries, commissions and any other
form of remuneration paid to employees for personal services. Payments made
pursuant to a contract to an employee-leasing company for leased employees are
included at 85% as compensation or to a temporary service company for temporary
employees are included at 100% as compensation. Payments made to an independent
contractor, or any other person not properly classifiable as an employee, are excluded.
Only amounts paid directly to employees are included in the payroll factor. Amounts
considered paid directly include the value of board, rent, housing, lodging and other
benefits or services furnished to an employee by the taxpayer in return for personal
services provided that such amounts constitute income to the recipient under the
Internal Revenue Code. In the case of employees not subject to the Internal Revenue
Code (e.g., those employed in foreign countries), the determination of whether such
benefits or services would constitute income to the employees is made as though such
employees were subject to the Internal Revenue Code. Employer contributions under
a retirement plan, qualified cash or deferred arrangement as defined in Internal
Revenue Code § 401(k), and employer contributions to nonqualified deferred
compensation plans are generally included in the payroll factor.
4. Employee. "Employee" means any officer of a corporation or any individual who
would be considered an employee under the common law rules governing the
employer-employee relationship. Generally, an individual is considered to be an
employee if the individual is included by the taxpayer as an employee for purposes of
the payroll taxes imposed by the Federal Insurance Contributions Act ("FICA"). This
presumption may be overcome by evidence provided by a taxpayer that an individual
who is included as an employee for purposes of FICA would not be an employee of
the taxpayer under the usual common law rules. Generally, an independent contractor
is not considered an employee.
5. Independent contractor. "Independent contractor" means any individual who
performs services for a taxpayer, but who is not an employee of the taxpayer, and
who is not otherwise subject to the supervision or control of the taxpayer in the
performance of the services.
6. Payroll in states in which taxpayer is not taxable. Compensation paid to employees
whose services are performed entirely in a state where the taxpayer is immune from
taxation, for example, by 15 U.S.C. § 381 et seq. (P.L. 86-272), is included in the
denominator of the payroll factor.
J. Penobscot Indian territory. "Penobscot Indian territory" has the same meaning as in 36
M.R.S. § 111(2-C). The term as defined by 30 M.R.S. § 6203(9) means the territory as
defined by 30 M.R.S. § 6205(2).
K. Penobscot Nation. "Penobscot Nation" has the same meaning as in 30 M.R.S. §
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6203(10).
L. Permanent place of abode. "Permanent place of abode" means a house, apartment,
residential care facility, dwelling place, or other residence that an individual maintains as
a household for the entire tax year, whether or not that individual owns it. The term does
not include a seasonal camp or cottage that is used only for vacations or a dormitory
room used by a student during the school year. A place of abode is not considered
"permanent" if it is maintained only during a temporary stay on tribal land for the
accomplishment of a particular purpose.
M. Property factor. "Property factor" means the ratio of the average value of the taxpayer's
real and tangible personal property owned or rented and used on tribal land during the
taxable year to the average value of all of the taxpayer's real and tangible personal
property owned or rented and used during the taxable year. The following apply only for
purposes of determining the property factor:
1. Real and tangible personal property. The term "real and tangible personal
property" includes land, buildings, machinery, stocks of goods, equipment, and other
real and tangible personal property but does not include coin or currency.
2. Property used during the taxable year. Property is included in the property factor if
it is actually used or is available for use or capable of being used during the tax period
by the taxpayer. Property held in reserve or standby facilities or property held as a
reserve source of materials must be included in the factor. For example, a plant
temporarily idle or raw material reserves not currently being processed are includable
in the factor. Property or equipment under construction during the tax period (except
inventoriable goods in process) must be excluded from the factor until such property
is actually used by the taxpayer. If the property is partially used by the taxpayer while
under construction, the value of the property to the extent used must be included in
the property factor. Property used by the taxpayer must remain in the property factor
until its permanent withdrawal is established by an identifiable event such as its sale
or the lapse of an extended period of time (normally, five years) during which the
property is held for sale.
3. Property in transit; mobile property. Property in transit between locations of the
taxpayer to which it belongs is considered to be located at the destination for purposes
of the property factor. Property in transit between a buyer and seller that is included
by a taxpayer in the denominator of its property factor in accordance with its regular
accounting practices must be included in the numerator according to the destination.
The value of mobile or movable property, such as construction equipment, trucks or
leased electronic equipment, that is located both within and without of tribal land
during the taxable year, is determined for purposes of the numerator of the property
factor on the basis of total time within tribal land during the taxable year.
Automobiles assigned to traveling employees are included in the numerator of the
factor to the location to which the employee's compensation is assigned under the
payroll factor.
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4. Valuation of owned property. Property owned by the taxpayer is valued at its
original cost. Capitalized intangible drilling and development costs are included in
the factor whether or not they have been expensed for either federal or state tax
purposes. If the original cost cannot be determined, the property must be included in
the factor at its fair market value as of the date acquired by the taxpayer.
Generally, the average value of all property owned by the taxpayer is determined by
averaging the values at the beginning and ending of the tax period. However, the
assessor may require or allow averaging of monthly values if substantial fluctuations
in the values of the property exist during the taxable year or if property is acquired
after the beginning of the taxable year or disposed of before the end of the taxable
year.
5. Valuation of rented property. Property rented by the taxpayer is valued at 8 times
the net annual rental rate. Subrentals are not deducted.
If property is used at no charge or rented for a rate other than a reasonable market
rate, the property must be included in the property factor on the basis of a reasonable
market rental rate.
The "annual rental rate" is the amount paid as rent for the property for a twelve-
month period. When property is rented for less than a twelve-month period, the net
rent paid for the actual period of rental constitutes the "annual rental rate" for the tax
period. However, when a taxpayer has rented property for a term of 12 or more
months and the current tax period covers a period of less than 12 months, the net rent
paid for the short tax period must be annualized. If the rental term is for less than 12
months, the rent must not be annualized beyond its term. Rent will not be annualized
because of the uncertain duration when the rental term is on a month-to-month basis.
"Rent" is the actual sum of money or other consideration payable, directly or
indirectly, by the taxpayer or for its benefit for the use of the property and includes:
a. Any amount payable for the use of real or tangible personal property, or any
part thereof, whether designated as a fixed sum of money or as a percentage of
sales, profits or otherwise;
b. Any amount payable as additional rent or in lieu of rents, such as interest,
taxes, insurance, repairs or any other items required to be paid by the terms of
the lease or other arrangement but does not include amounts paid as service
charges, such as utilities, janitor services, etc. If a payment includes rent and
other charges unsegregated, the amount of rent must be determined by
consideration of the relative values of the rent and the other items.
"Rent" does not include incidental day-to-day expenses such as hotel or motel
accommodations, daily rental of automobiles, etc. "Rent" does not include
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royalties based on extraction of natural resources, whether represented by delivery
or purchase. For this purpose, a royalty includes any consideration conveyed or
credited to a holder of an interest in property that constitutes a sharing of current
or future production of natural resources from such property, irrespective of the
method of payment or how such consideration may be characterized, whether as a
royalty, advance royalty, rental or otherwise.
Leasehold improvements are treated as property owned by the taxpayer regardless
of whether the taxpayer is entitled to remove the improvements or of whether the
improvements revert to the lessor upon expiration of the lease.
N. Tangible personal property. "Tangible personal property" means personal property that
has physical existence. It can be seen, weighed, measured, felt, touched or in any other
manner perceived by the senses, but does not include anything that constitutes intangible
property as defined in section .01(D) above.
O. Tribal land. "Tribal land" means land within the Houlton Band Trust Land, the
Passamaquoddy Indian territory, or the Penobscot Indian territory.
P. Tribal member. "Tribal member" means an enrolled member of the Houlton Band of
Maliseet Indians, the Passamaquoddy Tribe, or the Penobscot Nation.
Q. Tribal member residing on tribal land. "Tribal member residing on tribal land" means
an individual who is a tribal member and:
1. Who is domiciled on tribal land, unless:
a. The tribal member does not maintain a permanent place of abode on tribal land,
maintains a permanent place of abode off of tribal land and spends in the
aggregate not more than 30 days of the taxable year on tribal land; or
b. Within any period of 548 consecutive days, the tribal member:
i.
Is present in a foreign country or countries for at least 450 days;
ii.
Is not present on tribal land for more than 90 days;
iii.
Does not maintain a permanent place of abode on tribal land at which a
minor child of the tribal member or the tribal member's spouse is present
for more than 90 days, unless the tribal member and the tribal member's
spouse are legally separated; and
iv.
During the nonresident portion of the taxable year with which, or within
which, such period of 548 consecutive days begins and the nonresident
portion of the taxable year with which, or within which, such period ends,
is present on tribal land for a number of days that does not exceed an
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amount that bears the same ratio to 90 as the number of days contained in
such portion of the taxable year bears to 548; or
2. Who is not domiciled on tribal land, but maintains a permanent place of abode on
tribal land and spends in the aggregate more than 183 days of the taxable year on
tribal land, unless the tribal member is in the Armed Forces of the United States
("U.S.").
The geographic location of a political organization or political candidate that receives one
or more contributions from the tribal member is not in and of itself determinative on the
question of whether the tribal member is domiciled on tribal land. The geographic
location of a professional advisor retained by a tribal member or the geographic location
of a financial institution with an active account or loan of a tribal member may not be
used to determine whether or not a tribal member is domiciled on tribal land. For
purposes of this subsection, "professional advisor" includes, but is not limited to, a person
that renders medical, financial, legal, accounting, insurance, fiduciary or investment
services. Charitable contributions may not be used to determine whether or not a tribal
member is domiciled on tribal land.
.02
Tribal member residing on tribal land
For purposes of this rule, a tribal member residing on tribal land is a Maine resident
individual, as that term is defined by 36 M.R.S. § 5102(5). This section provides
guidance to assist in making a determination as to whether an individual is, for the
taxable year, a tribal member residing on tribal land.
A. Domicile on tribal land. An individual is considered to be a tribal member residing on
tribal land if the member is domiciled on tribal land.
1. Generally. The word "domicile" is a common-law term that has been defined by
Maine courts. Under Maine common-law, "domicile" means the place (A) where a
person resides, and (B) where that person intends to remain and, whenever absent,
intends to return. Thus, under Maine law, domicile has two components: residence
and the intent to remain or return, if absent. Once an individual's domicile is
established, it continues until domicile is established elsewhere. An individual
alleging a change in domicile has the burden to prove that domicile has been
established elsewhere. The intent to move in the future is not sufficient to establish a
change in domicile.
Maine Revenue Services considers all of an individual's relevant facts and
circumstances allowed by Maine law to determine the domicile of an individual.
Although an individual's intent to remain or return is a critical factor in determining
domicile, an individual's statement as to intent is not necessarily determinative.
Evidence of an individual's intent may be found in many decisions made by the
individual. An individual may retain the right to make decisions that determine his or
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her domicile, even though that individual is considered incapable of making, or
chooses not to make, other decisions, such as health care choices or financial
decisions. Actions by a person responsible for an incapacitated individual's affairs
may be considered when determining the incapacitated individual's intent to remain.
When a guardian has been appointed and chooses the incapacitated individual's place
of abode pursuant to authority as a guardian, the intent of the guardian for the
individual to remain or return to a particular location becomes a factor in the
determination of the incapacitated person's domicile. Evidence of the guardian's
intent may be found in relevant statements and actions.
2. Factors used in determining an individual's domicile. All relevant facts and
circumstances allowed by Maine law are considered in determining where an
individual is domiciled. The following factors, while not exclusive or of equal
weight, may be used as evidence of domicile.
a. Where the individual is enrolled as a tribal member.
b. Property ownership and residence.
i. Location of the individual's principal residence under the Internal
Revenue Code;
ii. Location of the individual's mailing address;
iii. Where the individual spent the most amount of time; and
iv. Whether the individual applied for a residential property tax
exemption or related benefit for property in Maine on tribal land or a
comparable benefit for property located elsewhere.
c. Family and dependents.
i. Whether the individual can be claimed as a dependent on another
person's federal income tax return and where that other person is
domiciled;
ii. Where the individual's spouse or dependents reside; and
iii. Where the individual's dependents attend elementary or secondary
school.
d. Licenses and registrations.
i. Where the individual is registered to vote;
ii. The address listed on the individual's driver's license;
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iii. Where the individual's vehicles are registered; and
iv. Where the individual maintains professional licenses.
e. Financial data.
i. Where the individual earns wages;
ii. The address recorded for the individual's insurance policies, deeds,
mortgages, or other legal documents; and
iii. Where the individual's safety deposit boxes are maintained.
f. Affiliations.
i. Where the individual's fraternal, social or athletic memberships are
located;
ii. Where the individual's union memberships are maintained; and
iii. The location of a church or other house of worship of which the
individual is a member.
g. Other factors.
i. Where the individual's personal property is located;
ii. Where the individual conducts business;
iii. The address listed for the individual in a telephone directory; and
iv. Where the individual's pets are located.
h. Exceptions. Maine Revenue Services does not consider whether a donation
was made to an organization located in or outside of tribal land when making
domicile determinations. Also, the geographic location of an individual's
professional advisors (such as doctors, lawyers, accountants, financial
advisors, and investment advisors) or the geographic location of a financial
institution with an active account or loan of an individual is not considered.
The geographic location of a political organization or candidate that an
individual supports financially is not determinative of the individual's
domicile.
3. Presumption. If an individual is married, both that individual and the individual's
spouse are presumed to have the same domicile, even though they may live apart for a
portion of the year. This presumption can be overcome if the facts clearly
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demonstrate that the spouses are domiciled in different locations.
4. Exceptions to domicile on tribal land.
a. Generally. Certain individuals domiciled on tribal land are treated as not
residing on tribal land as described in sub-paragraphs b and c below:
b. General exception: A tribal member domiciled on tribal land will be treated
as not residing on tribal land if, during the taxable year, the tribal member:
i. Did not maintain a permanent place of abode on tribal land;
ii. Maintained a permanent place of abode outside of tribal land; and
iii. Spent no more than 30 days in the aggregate on tribal land (with any
portion of a day counted as a full day).
c. Foreign exception. A tribal member domiciled on tribal land will be treated
as not residing on tribal land if:
i. Within any period of 548 consecutive days (the "548-day period"), the
tribal member is present in a foreign country (or countries) for at least
450 days;
ii. During the 548-day period, the tribal member is not present on tribal
land for more than 90 days and does not maintain a permanent place of
abode on tribal land at which the tribal member's spouse (unless the
tribal member and their spouse are legally separated) or a minor child
is present for more than 90 days; and
iii. During that period of the taxable year the tribal member did not reside
on tribal land with which or within which the 548-day period begins
and during that period of the taxable year the tribal member did not
reside on tribal land with which or within which the 548-day period
ends, the tribal member is present on tribal land for a number of days
that does not exceed an amount that bears the same ratio to 90 as the
number of days contained in the period not residing on tribal land
during the relevant taxable year bears to 548.
B. Statutory residency on tribal land. Even if a tribal member is not domiciled on tribal
land, he or she will be considered to be residing on tribal land if the tribal member
maintained a permanent place of abode on tribal land and was present on tribal land for
more than 183 days during the taxable year, unless the tribal member is in the Armed
Forces of the United States.
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.03
Maine adjusted gross income from sources on tribal land
A. General. For purposes of determining the income modifications under 36 M.R.S. §§
5122(1)(PP) and 5122(2)(ZZ), the Maine adjusted gross income of a tribal member
derived from or connected with sources on tribal land is the sum of the following
amounts:
1. The net amount of items of income, gain, loss and deduction entering into the tribal
member's federal adjusted gross income that are derived from or connected with
sources on tribal land including:
a. The tribal member's distributive share of partnership or limited liability
company income and deductions derived from or connected with sources on
tribal land determined following the methods for sourcing income to this State
under 36 M.R.S. § 5192, except that 36 M.R.S. § 5132(2) - (6) and not 36
M.R.S. § 5142 apply under 36 M.R.S. § 5192(1);
b. The tribal member's share of estate or trust income and deductions derived
from or connected with sources on tribal land determined following the
methods for sourcing income to this State under 36 M.R.S. § 5176, except that
36 M.R.S. § 5132(2) - (6) and not 36 M.R.S. § 5142 apply under 36 M.R.S. §
5176(1); and
c. The tribal member's pro rata share of the income of an S corporation derived
from or connected with sources on tribal land; and
2. The portion of the modifications described in 36 M.R.S. §§ 5122(1) and (2) that
relates to income derived from or connected with sources on tribal land, including any
modifications attributable to the tribal member as a partner of a partnership,
shareholder of an S corporation, member of a limited liability company, or
beneficiary of an estate or trust.
B. Attribution. Items of income, gain, loss, and deduction derived from or connected with
sources within tribal land are those items attributable to:
1. The ownership or disposition of any interest in real or tangible personal property on
tribal land;
2. A business, trade, profession, or occupation carried on within tribal land; and
3. Proceeds from any gambling activity conducted on tribal land or lottery tickets
purchased on tribal land, including payments received from a 3rd party for the
transfer of the rights to future proceeds related to any such gambling activity or
lottery tickets, except that proceeds from Maine State Lottery tickets, including
payments received from a 3rd party for the transfer of the rights to future proceeds
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related to the lottery tickets, are not derived from or connected with sources on tribal
land.
C. Intangibles. Income from intangible personal property including annuities, dividends,
interest and gains from the disposition of intangible personal property constitutes income
derived from sources within tribal land only to the extent that such income is from
property employed in a business, trade, profession or occupation carried on within tribal
land.
D. Gain or loss on sale of partnership interest. Notwithstanding section .03(C) above,
the gain or loss on the sale of partnership interest is sourced to tribal land in an amount
equal to the gain or loss multiplied by the ratio obtained by dividing the original cost of
partnership tangible property located on tribal land by the original cost of partnership
tangible property everywhere, determined at the time of the sale. Tangible property
includes property owned or rented and is valued in accordance with 36 M.R.S. §
5211(10). If more than 50% of the value of the partnership's assets consists of intangible
property, gain or loss from the sale of the partnership interest is sourced to tribal land in
accordance with the property and payroll factors of the partnership for its first full tax
period immediately preceding the tax period of the partnership during which the
partnership interest was sold. For purposes of this subsection, the property and payroll
factors of a partnership are determined in accordance with 36 M.R.S., chapter 821. This
subsection does not apply to the sale of a limited partner's interest in an investment
partnership where more than 80% of the value of the partnership's total assets consists of
intangible personal property held for investment, except that such property cannot include
an interest in a partnership unless that partnership is itself an investment partnership.
If the apportionment provisions of this subsection do not fairly represent the extent of the
partnership's business activity on tribal land, the taxpayer may petition for, or the State
Tax Assessor may require, in respect to all or any part of the partnership's business
activity the employment of any other method to effectuate an equitable apportionment to
tribal land of the partner's income from the sale of the partnership interest.
E. Deduction for losses. Deductions with respect to capital losses, net long-term capital
gains and net operating losses must be based solely on income, gains, losses, and
deductions derived from or connected with sources on tribal land, under regulations to be
prescribed by the assessor, but otherwise must be determined in the same manner as the
corresponding federal deductions.
F. Apportionment. If a business, trade, profession, or occupation is carried on partly
within and partly without tribal land, the items of income and deduction derived from or
connected with sources within tribal land must be determined as apportioned to tribal
land according to the following methods:
1. Except as provided in paragraph 2 below of this subsection, according to the methods
for apportioning income to this State under 36 M.R.S., chapter 821, except that
instead of apportioning income to tribal land using the sales factor pursuant to 36
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M.R.S. § 5211(8), income is apportioned to tribal land by multiplying the income by
a fraction, the numerator of which is the property factor plus the payroll factor and the
denominator of which is 2; or
2. In the case of the rendering of purely personal services by a tribal member, according
to the methods established in regulations to be prescribed by the assessor.
.04
Income attributable to tribal land. For purposes of subsection .03(B) above the
following apply:
A. Generally. Income received by a tribal member is attributable to tribal land when the
income is derived from or connected with sources on tribal land. The itemized and
standard deductions, credits, income modifications, and personal exemptions apply to
tribal members in accordance with Maine law. A loss is sourced to tribal land in the
same manner that a gain is sourced to tribal land.
B. Compensation for personal services derived from or connected with sources on
tribal land. Personal services compensation derived from or connected with sources on
tribal land is the income derived from personal services performed on tribal land.
Compensation includes, but is not limited to, wages, salaries, taxable benefits such as
annual and sick leave, commissions, fees, and payment in kind. Personal services
compensation attributable to tribal land includes sick time and vacation time earned while
working on tribal land. Compensation for personal services is includable for purposes of
this subsection unless it is excluded from "gross income" under the Internal Revenue
Code. For example, amounts withheld by an employer for federal and state income taxes,
FICA contributions, medical insurance plans, or other similar payroll deductions are
considered compensation for personal services.
Unemployment compensation received by a tribal member that is derived from
employment on tribal land is attributable to tribal land.
Generally, incentive stock options, nonstatutory stock options, and employee stock
purchase plans are compensation for personal services in the amount that represents the
fair market value of the stock on the date exercised (i.e., when the employee has
purchased the stock) that exceeds the option price of the stock at the time the option is
granted. Income from stock option plans reported as capital gains on the federal income
tax return is, for purposes of this paragraph, compensation from personal services. If the
period between the grant of a stock option and the exercise of the option straddles
employment on and off tribal land, the amount attributable to employment on tribal land
must be determined in accordance with section .05(B) below and the amount so
determined is compensation derived from or connected with sources on tribal land for the
same taxable year that the income is included in federal adjusted gross income.
C. Income from a trade or business. All income derived from or connected with the
carrying on of a trade or business on tribal land is income sourced to tribal land.
Generally, a tribal member has a trade or business if:
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1. The tribal member, directly or through agents or employees or through a pass-through
entity in which the tribal member is a shareholder, member, or partner, maintains or
operates or shares in maintaining or operating a desk, room, office, shop, store,
warehouse, factory, or any other place on tribal land where business affairs are
systematically and regularly conducted; or
2. The tribal member, directly or through agents or employees or through a pass-through
entity in which the tribal member is a shareholder, member, or partner, is present for
business on tribal land on other than a systematic or regular basis and earns or derives
gross income during the taxable year from contractual or sales-related activities.
D. Income from ownership of real or tangible personal property. All income derived
from the ownership of real or tangible personal property located on tribal land is income
sourced to tribal land; however, unless the property was employed in a business, trade,
profession, or occupation carried on within tribal land, interest income earned from the
sale of such property is not subject to sourcing to tribal land. Income sourced to tribal
land includes rents derived from and gains from a federally taxable sale or exchange of:
1. Real property located on tribal land;
2. Tangible personal property having a situs on tribal land; or
3. Any interest in a time-share or similar arrangement on tribal land.
.05
Special sourcing rules
A. Allocation or apportionment required. When a tribal member earns or derives income,
including income from pass-through entities or sole proprietorships, from sources both on
tribal land and elsewhere, an allocation or apportionment of the income must be made to
determine the amount of income sourced to tribal land. The following provisions set forth
the rules for the determination of a tribal member's income sourced to tribal land. For
the purpose of this section, the term "income" includes, in the alternative, the term "loss."
A tribal member may, with the return for the taxable year, request an alternative method
of allocation or apportionment of income with a full explanation of the method. The
proposed method is subject to review and modification by the Assessor. Allocation or
apportionment of income from the rendering of purely personal services by employees,
salespersons, athletes, and entertainers is addressed below.
B. Employees generally. When a tribal member employee establishes the exact amount of
compensation received for services performed on tribal land, that amount is the amount
of income sourced to tribal land. When a tribal member is unable to establish such exact
determination of amounts earned on, or derived from, tribal land, the compensation must
be apportioned to tribal land. The apportionment is calculated by multiplying the gross
compensation wherever earned by a fraction, the numerator of which is the number of
days spent working on tribal land and the denominator of which is the total working days.
18-125 Chapter 825 Page 15
The result is the amount of the tribal member's compensation sourced to tribal land.
Holidays, sick days, vacations, and paid or unpaid leave are included in both the
numerator and the denominator. When a working day is spent working partly on tribal
land and partly elsewhere, it is treated as one-half of a day spent working on tribal land.
For purposes of this subsection, salaries and wages earned while teleworking or working
remotely on tribal land, whether for the convenience of the tribal member employee or
the employer, are items of income derived from sources on tribal land. Conversely,
salaries and wages earned while teleworking or working remotely off tribal land, whether
for the convenience of the tribal member employee or the employer, are not items of
income derived from sources on tribal land.
C. Salespersons. Tribal land income of a tribal member who is a salesperson or whose
compensation is based in whole or in part upon commissions is computed as follows: The
gross income earned by the tribal member from sales everywhere is multiplied by a
fraction, the numerator of which is the amount of sales made by the tribal member on
tribal land and the denominator of which is the amount of sales made by the tribal
member everywhere. For the purposes of this calculation, the "amount of sales" is
determined under the same method by which the amount of sales is determined for
purposes of calculating the tribal member's commissions. Sales are sourced to the
location where the tribal member performs the activities in obtaining the order, not to the
location of the formal acceptance of the contract.
D. Professional Athletes.
1. Exhibition and regular season games. A tribal member who is a professional
athlete must include in the income sourced to tribal land the entire amount of
compensation received for games played on tribal land. In the case of a tribal member
athlete not paid specifically for the game played on tribal land, the following
apportionment formula must be used: The income earned on tribal land is the total
compensation earned during the taxable year, including incentive payments, bonuses,
and extras, but excluding signing bonuses and league playoff money. Total
compensation is multiplied by a fraction, the numerator of which is the number of
exhibition and regular season games the tribal member played (or was available to
play for the tribal member's team, as, for example, with substitutes) on tribal land
during the taxable year, and the denominator of which is the total number of
exhibition and regular season games that the tribal member was obligated to play
under contract or otherwise during the taxable year, including games in which the
tribal member was excused from playing because of injury or illness.
2. Playoff games. For playoff games played on tribal land, the amount of league playoff
money earned by the tribal member for playing or being available to play in such
games is determined by the following formula: League playoff money earned on
tribal land is the total league playoff compensation earned during the taxable year
multiplied by a fraction, the numerator of which is the number of playoff games the
tribal member played or was available to play on tribal land during the taxable year,
18-125 Chapter 825 Page 16
and the denominator of which is the total number of playoff games which the tribal
member's team played during the taxable year, including playoff games in which the
tribal member was excused from playing because of injury or illness.
3. Signing bonuses. Any amount received by a tribal member as a signing bonus is
excluded from the income subject to apportionment.
E. Entertainers. Tribal land income of a tribal member who is an entertainer is the entire
amount received by the tribal member for performances, engagements, or events that
occurred on tribal land. In the case of a tribal member who is not paid specifically for a
performance on tribal land, the following apportionment formula must be used: The
income earned on tribal land is the tribal member's total annual compensation multiplied
by a fraction, the numerator of which is the number of performances the tribal member
performed (or was available to perform, as, for example, with understudies) on tribal
land, and the denominator of which is the total number of performances which the tribal
member was obligated to perform under contract or otherwise during the taxable year.
.06
Estate of tribal member decedent
An estate of a decedent who at the time of death was a tribal member residing on tribal
land must apply the provisions of this Rule to determine the income modifications under
36 M.R.S. §§ 5122(1)(PP) and 5122(2)(ZZ) to calculate the income of the estate subject
to Maine income tax under 36 M.R.S., Part 8.
.07
Maine income tax withholding requirements on payments to tribal members
See MRS Rule 803 (18-125 C.M.R., ch. 803) for the Maine withholding requirements on
wage and non-wage payments to a tribal member.
.08
Application date
Except where otherwise stated, this Rule applies to taxable years beginning on or after
January 1, 2023.
STATUTORY AUTHORITY: P.L. 2021, c. 681, Part H; 36 M.R.S. § 112(1)
EFFECTIVE DATE: September 30, 2023 - filing 2023-179