Maine Capital Investment Credit for Financial Institutions – Too Good to Be True!

Nancy Hawes, Managing Director, Tax Practice
October 28, 2013

For the past two years, financial institutions in Maine have enjoyed the benefit of an unintended “glitch” in the way the statute was written that provided a credit for purchases of assets placed in service in Maine (Maine Capital Investment Credit). The credit was intended to provide targeted relief from the state’s add-back of federal bonus depreciation.  The relief was provided by reversing the federal “bonus” depreciation (the federal benefit that immediately wrote off much of an asset’s cost), but then replacing it with a state tax credit.  Generally, the combination of these steps resulted in no detriment, and often a small net benefit, to most taxpayers.  This credit applied to assets placed in service in Maine.  The rule produced an unintended consequence, though, for one group:  Nothing in the rules prevented financial institutions from obtaining the favorable part of the adjustment (the credit), but the unfavorable part of the adjustment did not exist for them because federal bonus depreciation is not part of a financial institution’s tax base (there simply was nothing to reverse!).  If left alone for the life of the assets, this rule-making oversight would have allowed financial institutions to obtain double the benefit that lawmakers intended.

This oversight has now been addressed.  For tax years beginning in 2013, financial institutions will not be eligible for the previously available Maine Capital Investment Credit.

If you have any questions, please contact Nancy Hawes or your BNN tax advisor at 1.800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS CIRCULAR 230 DISCLOSURE:
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.  Please contact us if you wish to have formal written advice on this matter.