10 §1100-T. Tax credit certificates

Title 10: COMMERCE AND TRADE

Part 2: BUILDING AND DEVELOPMENT

Chapter 110: FINANCE AUTHORITY OF MAINE

Subchapter 9: MAINE SEED CAPITAL TAX CREDIT PROGRAM HEADING: PL 1987, C. 854, §2 (NEW)

§1100-T. Tax credit certificates

1. Legislative findings; authorization. The Legislature finds that the growth of new and existing small businesses in the State results in increased job opportunities for Maine residents, produces more spending in the State and increases municipal tax bases. Businesses that export their products or services out of the State bring capital into the State and help to develop export markets for Maine products. Small new and existing businesses can provide significant economic benefits to the State if they can obtain sufficient seed equity financing to carry them from start-up through the initial development phases of a business. In order to encourage the increased availability of risk equity capital to enterprises that bring capital into the State, the authority is authorized to issue certificates of eligibility for the seed capital investment tax credit permitted by Title 36, section 5216-B, subject to the requirements of this section. This program is known as the Maine Seed Capital Tax Credit Program.

[ 1991, c. 854, Pt. A, §7 (AMD) .]

2. Eligibility for tax credit certificate. The authority shall adopt rules in accordance with the Maine Administrative Procedure Act, Title 5, chapter 375, to implement the program. Without limitation, the requirements for eligibility for a tax credit certificate include the following.

A. A tax credit certificate may be issued in an amount not more than 40% of the amount of cash actually invested in an eligible Maine business in any calendar year or in an amount not more than 60% of the amount of cash actually invested in any one calendar year in an eligible Maine business located in a high-unemployment area, as determined by rule by the authority. Rules adopted pursuant to this section are routine technical rules as defined in Title 5, chapter 375, subchapter 2-A. [2003, c. 451, Pt. E, §1 (AMD).]

B. The Maine business must be a manufacturer; must provide a product or service that is sold or rendered, or is projected to be sold or rendered, predominantly outside of the State; must be engaged in the development or application of advanced technologies; must be certified as a visual media production company under Title 5, section 13090‐L; or must bring capital into the State, as determined by the authority. [2009, c. 470, §2 (AMD).]

C. Aggregate investment eligible for tax credits may not be more than $5,000,000 for any one business as of the date of issuance of a tax credit certificate. [2003, c. 451, Pt. E, §2 (AMD).]

D. The investment with respect to which any individual is applying for a tax credit certificate may not be more than an aggregate of $500,000 in any one business in any 3 consecutive calendar years, except that this paragraph does not limit other investment by any applicant for which that applicant is not applying for a tax credit certificate. [2003, c. 451, Pt. E, §3 (AMD).]

E. The business receiving the investment must have annual gross sales of $3,000,000 or less and the operation of the business must be the full-time professional activity of the principal owner, as determined by the authority. The principal owner and the principal owner's spouse are not eligible for a credit for investment in that business. A tax credit certificate may not be issued to a parent, brother, sister or child of a principal owner if the parent, brother, sister or child has any existing ownership interest in the business. [1997, c. 782, §3 (AMD).]

F. The investment must be expended on plant, equipment, research and development, or working capital for the business or such other business activity as may be approved by the authority. [1987, c. 854, §§2, 5 (NEW).]

G. The authority shall establish limits on repayment of the investment. The investment must be at risk in the business. [1991, c. 854, Pt. A, §10 (AMD).]

H. The investors qualifying for the credit must collectively own less than 1/2 of the business. [1987, c. 854, §§2, 5 (NEW).]

I. The business receiving the investment may not be in violation of the requirements of subsection 6. [2001, c. 642, §12 (AFF); 2001, c. 642, §7 (NEW).]

[ 2009, c. 470, §2 (AMD) .]

2-A. Eligibility of private venture capital funds for tax credit certificate. The authority shall adopt rules in accordance with the Maine Administrative Procedure Act to implement application of the program to investment in a private venture capital fund. Without limitation, the requirements for eligibility for a tax credit certificate for investment in a private venture capital fund include the following.

A. A tax credit certificate may be issued to an individual who invests in a private venture capital fund in an amount that:

(1) Is not more than 40% of the amount of cash actually invested in or unconditionally committed to a private venture capital fund in any calendar year by the individual or entity, except that with respect to fund investments that are made in eligible businesses that are located in a high unemployment area, as determined by rule of the authority under subsection 2, the tax credit certificate may not be more than 60% of the cash actually invested in or unconditionally committed to a private venture capital fund in any calendar year by the individual or entity; and

(2) Does not exceed 40% of the amount of cash invested by the fund in eligible businesses, except that with respect to fund investments that are made in eligible businesses that are located in a high unemployment area, as determined by rule of the authority under subsection 2, a tax credit certificate may not be more than 60% of the cash invested by the fund in any calendar year in such businesses; provided that the authority may issue tax credit certificates in an amount not to exceed 20% of the amount of cash actually invested in or unconditionally committed to a private venture capital fund in any calendar year if the authority determines that the private venture capital fund is located in this State, is owned and controlled primarily by residents of this State and has designated investing in eligible businesses of this State as a major investment objective. The credit may be revoked to the extent that the private venture capital fund does not make investments eligible for the tax credit in an amount sufficient to qualify for the credits within 3 years after the date of the tax credit certificates. Notwithstanding any revocation pursuant to this subparagraph, each investor remains eligible for tax credit certificates for eligible investments as and when made by the private venture capital fund.

The aggregate amount of credits issued to investors in a fund may not exceed 40% of the amount of cash invested by the fund in eligible businesses, except that with respect to fund investments in eligible businesses that are located in a high unemployment area, the aggregate amount of tax credits issued to investors in a fund may not exceed 60% of the cash invested by the fund in eligible businesses. [2003, c. 451, Pt. E, §4 (AMD).]

B. As used in this subsection, unless the context otherwise indicates, an "eligible business" means a business located in the State that:

(1) Is a manufacturer;

(2) Is engaged in the development or application of advanced technologies;

(3) Provides a service that is sold or rendered, or is projected to be sold or rendered, predominantly outside of the State;

(4) Brings capital into the State, as determined by the authority; or

(5) Is certified as a visual media production company under Title 5, section 13090‐L. [2009, c. 470, §3 (AMD).]

C. Aggregate investment eligible for tax credits may not be more than $5,000,000 for any one business for any one private venture capital fund as of the date of issuance of a tax credit certificate. [2003, c. 451, Pt. E, §4 (AMD).]

D. The investment with respect to which any individual or entity is applying for a tax credit certificate may not be more than an aggregate of $500,000 in any one eligible business invested in by a private venture capital fund in any 3 consecutive calendar years, except that this paragraph does not limit other investment by any applicant for which that applicant is not applying for a tax credit certificate and except that, if the entity applying for a tax credit certificate is a partnership, limited liability company, S corporation, nontaxable trust or any other entity that is treated as a flow-through entity for tax purposes under the federal Internal Revenue Code, the aggregate limit of $500,000 or $200,000, as applicable, applies to each individual partner, member, stockholder, beneficiary or equity owner of the entity and not to the entity itself. This paragraph does not limit other investment by any applicant for which that applicant is not applying for a tax credit certificate. [2003, c. 451, Pt. E, §4 (AMD).]

E. Each business receiving an investment from a private venture capital fund, which investment is used as the basis for the issuance of a tax credit certificate, must have annual gross sales of $3,000,000 or less and the operation of the business must be the full-time professional activity of the principal owner, as determined by the authority. The principal owner and principal owner's spouse, if any, are not eligible for a credit for investment in that business or for an investment by the private venture capital fund in that business. A tax credit certificate may not be issued to a parent, brother, sister or child of a principal owner if the parent, brother, sister or child has any existing ownership interest in that business or for an investment by the private venture capital fund in that business. [2001, c. 446, §2 (AMD); 2001, c. 446, §6 (AFF).]

F. Each investment received by a business from a private venture capital fund, which investment is used as the basis for the issuance of a tax credit certificate, must be expended on plant maintenance and construction, equipment, research and development or working capital for the business or on such other business activity as may be approved by the authority. [1997, c. 774, §1 (AMD).]

G. The authority shall establish limits on repayment of the investment by an individual in and the investments made by a private venture capital fund, which investment is used as the basis for the issuance of a tax credit certificate. The investments must be at risk in the private venture capital fund and the business, respectively. [1997, c. 774, §1 (AMD).]

H. The investors in a private venture capital fund are not entitled to the credit for collective ownership in excess of 50% of any business. An investor in a private venture capital fund determined by the authority to be a principal owner of a business and the principal owner's spouse, if any, are not entitled to a credit with respect to investment in that business, nor are the principal owner's parents, siblings or children entitled to a credit if they have any existing ownership interest in the business. [2001, c. 446, §2 (AMD); 2001, c. 446, §6 (AFF).]

[ 2009, c. 470, §3 (AMD) .]

2-B. Eligibility of private venture capital funds for tax credit certificate until July 1, 2001.

[ 1999, c. 752, §2 (NEW); 1999, c. 752, §6 (AFF); MRSA T. 10, §1100-T, sub-§2-B (RP) .]

3. Priority. The authority may reserve $500,000 in tax credit authorization for "natural resource enterprises," as defined in section 963-A, subsection 41.

[ 1995, c. 462, Pt. A, §19 (AMD) .]

4. Total of credits authorized. The authority may issue tax credit certificates to investors eligible pursuant to subsections 2 and 2-A in an aggregate amount not to exceed $2,000,000 up to and including calendar year 1996, $3,000,000 up to and including calendar year 1997, $5,500,000 up to and including calendar year 1998, $8,000,000 up to and including calendar year 2001, $11,000,000 up to and including calendar year 2002, $14,000,000 up to and including calendar year 2003, $17,000,000 up to and including calendar year 2004, $20,000,000 up to and including calendar year 2005, $23,000,000 up to and including calendar year 2006, $26,000,000 up to and including calendar year 2007 and $30,000,000 thereafter. The authority may provide that investors eligible for a tax credit under this section in a year when there is insufficient credit available are entitled to take the credit when it becomes available.

[ 2003, c. 451, Pt. E, §5 (AMD) .]

5. Revocation of tax credit certificate. The authority may revoke a tax credit certificate if any representation to the authority in connection with the application for the certificate proves to have been false when made or if the applicant violates any conditions established by the authority and stated in the tax credit certificate. The revocation may be in full or in part as the authority may determine. The authority shall specify the amount of credit being revoked and shall send notice of the revocation to the investor and to the State Tax Assessor.

[ 1987, c. 854, §§2, 5 (NEW) .]

6. Reports. Any business eligible to have investors receive a tax credit under this section must report to the authority, in a manner to be determined by the authority, the following information regarding its activities in the State over the calendar year in which the investment occurred:

A. The total amount of private investment received; [2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF).]

B. The total number of persons employed as of December 31st; [2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF).]

C. The total numbers of jobs created and retained; [2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF).]

D. Total annual payroll; and [2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF).]

E. Total sales revenue. [2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF).]

[ 2001, c. 642, §10 (NEW); 2001, c. 642, §12 (AFF) .]

SECTION HISTORY

1987, c. 854, §§2,5 (NEW). 1989, c. 502, §A28 (AMD). 1989, c. 765, §4 (AMD). 1991, c. 854, §§A7-11 (AMD). 1995, c. 424, §§2-4 (AMD). 1995, c. 462, §A19 (AMD). 1995, c. 658, §§3,4 (AMD). 1997, c. 774, §1 (AMD). 1997, c. 782, §§1-4 (AMD). 1999, c. 504, §10 (AMD). 1999, c. 752, §§1-3 (AMD). 2001, c. 446, §§1-3 (AMD). 2001, c. 446, §6 (AFF). 2001, c. 642, §§4-10 (AMD). 2001, c. 642, §12 (AFF). 2003, c. 20, §§X1-5 (AMD). 2003, c. 451, §§E1-5 (AMD). 2009, c. 470, §§2, 3 (AMD). MRSA T.10, §1100T/2B (AMD).