Maine elective pass-through entity tax first year updates

By Lori Paci November 13, 2026

Co-Authored by Merrill Barter

As discussed in our previous article, Budget Bill Brings Significant Changes to Maine’s Tax Laws, Maine has enacted a new elective Passthrough Entity Tax (PTET), joining the list of more than thirty states with such elections. This is one of the most significant additions to Maine tax laws in the recent budget. We previously gave an overview of the basic information regarding this election. Maine recently updated its guidance, providing more detail regarding not only the mechanics of the election, but also the calculation and payment of the tax.

For background, traditionally, passthrough entities (PTEs) such as partnerships and S-corps have passed through all items of income to their partners or shareholders to be taxed at the owner level on their personal or other returns. The elective PTET allows for the tax burden to remain at the entity level and passes a refundable credit for 90% of the tax paid by the entity to the qualified PTE members, allowing them in some cases to take full advantage of federal deductions for state taxes paid that would otherwise be limited by the $40,000 State and Local Tax (SALT) cap under the One Big Beautiful Bill Act.

How to make the election

Eligible PTEs must electronically file Form PTET-ME by the 15th day of the 3rd month following the end of the entity’s tax year to elect to be subject to Maine income tax at the entity level. This same form is used to report and pay the PTET for the tax year, including the annual 10% estimated tax due on behalf of nonresident qualified members. It also functions to provide certain information about the qualified members of the PTE. The return can be extended to the federal extended due date plus 30 days. Any tax due must be paid by the original due date; an extension of time to file the return is not an extension of time to pay any tax due. As a reminder, once made, the election for that year is irrevocable after the return due date, including any extension, for filing Form PTET-ME.

Non-resident issues

The guidance also addresses matters regarding non-resident qualified members of a PTE which elects into the tax as follows:

• Nonresident qualified members of an electing entity are exempt from Maine pass-through entity withholding for the tax year of the election.
  • To qualify for the exemption the PTE must list all nonresident qualified members on the applicable form as prescribed by Maine Revenue Services.
  • Failure to list the nonresident qualified members will result in a continued withholding obligation and possible interest and penalty charges.
  • The state has cautioned that PTEs may still be subject to the Maine PTE withholding requirement for nonresident members that are not qualified members.
• A nonresident qualified member of an electing PTE is not required to file a Maine personal income tax return for the year the PTET is elected if the individual’s entire Maine adjusted gross income, including the income of a spouse if filing a joint federal return, is from one or more electing PTEs.
  • The qualified member’s PTET credit, plus the estimated payment made on behalf of the member by the electing PTE, must completely satisfy the income tax liability of the member, and the member’s spouse if applicable, for the taxable year.
  • The same is true for a nonresident qualified member that is an estate or trust, however, the member additionally cannot distribute any of its Maine-sourced income for the taxable year.
  • If the conditions above are not met, the member must file the appropriate income tax return to report any liability and claim the credit.

PLEASE NOTE: For both residents and nonresidents, modifications, such as those related to federal bonus depreciation, must be taken into account on a qualified member’s tax return, which may impact the owner’s tax liability and filing requirement. Additionally, nonresidents with income that meets that 2% surcharge threshold should be mindful of that impact to their individual filing requirements. (Both of these scenarios may create the need for a nonresident to file a Maine return when they otherwise could have avoided it.)

• No composites are allowed for PTEs that elect into the PTET for the same tax year.

Calculation

The most recent guidance provides further detail on the calculation of the PTET. As we noted previously, the tax is equal to the PTE’s taxable income for the tax year multiplied by the highest marginal individual income tax rate, excluding the new 2% surcharge on high earners. For more detailed information on the calculation of the PTET, please see the Maine Revenue Services webpage.

Payments

The new guidance provides additional information regarding required estimated payments, transfers of payments, and payment methods.

First, the Department currently will allow transfers of full payments that were previously made for estimated payments of PTE withholding or composite tax on behalf of qualified members. All requests for such transfers must be submitted in writing by an authorized representative of the PTE to partner-scorp.tax@maine.gov. Transfers are not allowed to or from individual income tax accounts or of partial payments made by a PTE for PTE withholding or composite tax. Requests are required to include:

• the PTE name;
• payment date and amount of the full payment to be transferred;
• the applicable tax period; and
• the eight-digit account ID of the account for which the payment was made and to which it is being transferred.

While there is no specific due date stated for requests for transfer of payments, we suggest that taxpayers make such requests as soon as possible.

Second, a PTE with a liability in either the current or immediately preceding tax year that is more than $1,000 must make estimated tax payments. As 2026 is the first year of the PTET, the Department has indicated that quarterly payments of estimated PTET are required only for payment due dates occurring on or after July 29, 2026, and underpayment penalties for PTET payments will be waived specifically for tax years that begin in 2026.

In all other later years, the required annual payment is equal to the lesser of:

• 90% of the PTET shown on the return for the current taxable year; or
• 100% of the PTET shown on the return for the preceding year.

Payments are due in equal installments on or before the 15th day of the 4th, 6th, 9th, and 13th months following the beginning of the electing PTE’s taxable year. Penalties and interest may be applied if estimates are not properly remitted. Quarterly estimated PTET payments are not required for the nonresident annual 10% estimated tax payment discussed in the Nonresident issues section above.

Third, in addition to paying the annual PTET amount, a PTE must pay an annual estimated tax payment equal to 10% of a nonresident qualified member’s distributive share of the Maine PTET paid by the PTE on or before the original due date for filing Form PTET-ME before extension.

Fourth, all payments of PTET must be made electronically and must be fully paid on or before the due date for filing Form PTET-ME, without regard to any extension of time to file.

Reach out

The above is only a summary of the requirements for the Maine elective passthrough entity tax. How each section applies to an individual or a business may vary depending on numerous factors. For more information and to discuss the specifics of your situation, please contact your BNN tax advisor at 800.244.7444.