TAX CREDIT PROGRAMS
Pine Tree Development Zones
Tax Increment Financing (TIF)
Employment Tax Increment Financing (ETIF)
Business Equipment Property Tax Reimbursement (BETR) Program
Maine Seed Capital Tax Credit Program
Jobs and Investment Tax Credit
Research Expense Credit
Super R&D Tax Credit
Sales Tax Exemptions

ADDITIONAL PROGRAMS
Electric Rate Programs Through Utility Companies
Economic Development Infrastructure Grant
Venture Capital Investors

Pine Tree Development Zones
Program Summary. The Pine Tree Development Zone program legislation introduced by Governor John Baldacci in early 2003 and enacted by a two-thirds majority vote of the Maine Legislature later that year, uses a combination of tax incentives to spur economic development in targeted areas of the state where unemployment is relatively high, and wages are relatively low.

Benefits Highlighted. In addition to existing incentive programs, such as business equipment tax reimbursement, job training, and financing programs, effective January 1, 2004, qualified new and expanding businesses have access to:

• An enhanced ETIF (Employment Tax Increment Financing) program that returns a company 80% of the state income tax withholdings of 5 or more net new qualified employees for up to ten years;
• A 100% refund of corporate income tax and insurance premium tax for years one through five, and 50% for years six through ten;
• A local option TIF (Tax Increment Financing) that may return some or all of the new property taxes to a company and will not be counted against a municipality’s existing TIF area and value caps;
• (Effective Fall 2004) Reduced electricity rates, as requested by Central Maine Power Company, Bangor Hydro Company and Maine Public Service Company, and approved by the Public Utilities Commission; and
• (Effective July 1, 2005) A 100% sales and use tax exemption for zone-related construction materials and equipment purchases.

All Pine Tree Development Zone benefits can be “layered” over other available benefits. For example, Aroostook County is home to a federally-designated, Rural Empowerment Zone, entitling companies to federal tax credits up to $3,000 per employee. The federal tax credits can be taken in addition to the State tax credits for businesses located both in the Empowerment Zone and the Pine Tree Zone. And Lewiston has several inner-city parcels federally-designated as an Enterprise Community with associated benefits.

Eligible Businesses: Eligible businesses include firms engaged in manufacturing, financial services, and Maine’s seven targeted technology sectors: biotechnology, aquaculture and marine technology, composite materials technology, environmental technology, advanced technologies for forestry and agriculture, information technology and precision manufacturing technology.

Designation of Zones: Regional applications were received at the Maine Department of Economic and Community Development on January 30, 2004. Following staff review and recommendations, Governor Baldacci announced on February 26, 2004, the eight zones that have received preliminary designation. The four pre-designated zones include: Aroostook County, Androscoggin Valley, Penobscot Valley and Washington County-Downeast. In addition, four “at-large” zones were designated: PenQuis, Kennebec Valley, Midcoast and Southern Maine. Qualified businesses will be able to begin seeking zone certification following the Governor's announcement.

Contact: Contact Dave Milan at (207)469-7368 for general zone information.

Local Micro-Loan Program
Small businesses who demonstrate the ability to be successful, but can not access bank financing, may qualify for a Micro-Loan for startup, expansion or working capital needs.

With the help of Bucksport’s Micro-Loan Program, which includes the valuable service of technical assistance for your small business and a friendly one-on-one atmosphere, the sky is the limit!

• Up to $25,000.
• Interest rate set by Micro-Loan Committee and fixed for the life of the loan.
• Collateral will be required in the form of business and/or personal assets.
• Terms determined by Micro-Loan Committee.
• Post-loan technical assistance.
• Must provide jobs for Low/Moderate individuals.

Small Business Administration 504 Loan Program
Planning an expansion? You can benefit from attractive, fixed asset financing through the SBA 504 Loan Program. With 504, you get long-term fixed rate financing at a reasonable interest rate. And, you typically put in only 10%.

• Up to $1,000,000
• Up to 40% of project costs
• Rates based on 5 and 10 year U.S. Treasury market rate, plus a premium over the base treasury rate
• 10 year term for machinery & equipment
• 20 year term for commercial real estate

Eastern Maine Development Corporation is a Certified Development Corporation for the SBA 504, serving the needs of businesses in Hancock County

Small Business Administration Pre-Qualification (Pre-Qual) Loan Program
The Small Business Administration created this program for existing and startup businesses that are having difficulty accessing bank financing. The Pre-Qual was developed to address the following markets: women, veteran and minority-owned businesses, as well as exporters and rural markets.

• Up to $250,000.
• Up to 80% loan guaranty.
• 2.25% to 4.75% over prime, fixed or variable.
• Collateral will be required the form of business and/or personal assets.
• Up to 25-year term.

Eastern Maine Development Corporation is an intermediary for the Pre-Qual to businesses in Hancock County.

Rural Development Intermediary Relending Program
This program, sponsored by the U.S. Department of Agriculture, Rural Development Division, assists healthy growing businesses with special financing needs. Its objective is to create job opportunities and stimulate economic activity in rural communities.

• Up to $150,000.
• Up to 50% of project costs.
• Up to Wall Street prime rate, fixed.
• Up to 15-year term.

Eastern Maine Development Corporation is an intermediary for the IRP, serving the needs of businesses in Hancock County.

Business Assistance Program
Eligible Businesses:
Businesses that have a significant impact on their local or regional economy that require financing to carry out an economic development project leading to the creation or retention of jobs principally for low and moderate income persons. Businesses located in Auburn, Bangor, Lewiston or Portland are not eligible.

Program Summary:
The program provides a grant to a local government to either loan or grant up to $400,000 to businesses to finance fixed assets including capital equipment, commercial or industrial buildings, fixtures or property improvements. This financing must represent a critical component of a business' development or expansion and must lead to the creation or retention of jobs for low and moderate-income persons. Program applicants must demonstrate that all other financing opportunities have been exhausted. Financing terms are determined by DECD in accordance with the needs of the business.

Program Example:
When Gerber Childrenswear announced its intention to cease operations in Fort Kent, the town worked with its regional development corporation and the state to identify ownership capable of restarting the facility. A new company, Kent Textiles, Inc., formed to purchase and restart operations at the children's clothing manufacturing plant. The town, in conjunction with the new company, applied for and received a Business Assistance grant of $300,000 to enable the company to purchase the factory and rehire 150 former Gerber employees. The company is the largest private employer in the community and one of the largest in Aroostook County.

Development Fund Loan Program
Eligible Businesses:
A business creating or retaining jobs for low and moderate income persons that requires "gap" financing that cannot be obtained from other public sources.

Program Summary:
The Development Fund Program can provide up to $200,000 of "gap" financing for up to 40% of a business' development activities. The financing can be used for either fixed asset investments or working capital. Loans are provided at favorable terms and conditions as determined by DECD in accordance with the business' needs. Businesses receiving Development Fund support must create or retain jobs, principally for persons of low to moderate income.

Program Examples:
EchoVision is a new software duplication company that copies and packages software for retail sales in Damariscotta. Their $50,000 Development Fund Loan allowed them to hire five new employees with a goal of 10 new employees by the end of 1998.

Humpty Dumpty Potato Chip Company, located in Scarborough, had been purchased in the 1980's by an out-of-state concern that neglected its assets. As market share and quality declined the company was sold to new owners who sought to revitalize the business. The Development Fund was combined with other sources of public and private financing to purchase new equipment and provide working capital. Humpty Dumpty now employs over 100 workers.

Small Enterprise Growth Program
Eligible Businesses:
Businesses with a distinct competitive advantage in a strong marketplace. The business must employ 25 or fewer or have gross sales of $2,000,000 or less within the past 12 months. Borrower must be engaged or involved in at least one of the following: Marine Science, Biotechnology, Manufacturing, Exporting, Software Development, Environmental Sciences, Value Added Natural Resources and/ or other enterprises that the Board determines will further the purposes and intent of the program.

Program Summary:
This program provides financing for small Maine companies that demonstrate a potential for high growth and public benefit. The program will seek adequate risk adjusted returns on investment. Financing is limited to a maximum of $150,000 per loan and must be matched with other financing sources. The SEGP may also charge the borrower for its out-of-pocket expenses associated with closing and administering this loan in excess of $1,500.

Candidate Example:
A company is developing immunoassay test kits for herbicides and is seeking $1,00,000 to commercialize the product, which has already completed prototype testing. There is a strong market for the product and the company has an excellent management team in place.

Computer Loan Program
Loan funds may be used for computer purchases, upgrades, software and computer related equipment, including scanners.

• Up to $3,000.
• The interest rate will be 8%.
• Up to 3-year term. There is no pre-payment penalty.
• Collateral will be the equipment purchased with the loan funds. Additional collateral may be required. Borrowers will be required to personally guarantee the loans.

Eastern Maine Development Corporation offers the Computer Loan Program to existing or startup businesses in Hancock County.

TAX CREDIT PROGRAMS
Tax Increment Financing (TIF)
TIFs aren’t just a "carrot" used to attract business interest. We believe that making it easy for the right businesses to come to Bucksport is a sound investment. So TIFs are an important part of our entrance strategy for interested businesses.

Eligible Businesses:
Any business making significant capital investments within its municipality wherein the municipality is willing to support the investment financially through the use of the revenue stream of new property taxes resulting from these investments.

Program Summary:
TIF is strictly a local financing tool wherein a municipality may use all, or a portion of, the new property taxes that result from an investment project within a designated district to assist in that project's financing. The municipality has the option of issuing bonds (which are retired using the tax increment), or paying the tax increment directly to the investing business to cover project costs. Tax Increment Financing districts may be designated for a period of up to 30 years. Bonds may be issued under this program for up to 20 years. The designation of a TIF district requires a public hearing and the majority vote of the municipal legislative body.

Program Example:
A business expects to invest $500,000 in buildings and site improvements on vacant land (currently valued at $100,000), and install $400,000 in manufacturing machinery and equipment. The municipality's property tax mil rate is $20 per $1,000 of valuation, and the business will have a tax obligation of $20,000 per year once the investments are recorded on the tax rolls. Of this tax obligation, $18,000 is incremental, and thus eligible for TIF.

Scenario 1 (Credit Enhancement Agreement):
The municipality agrees to "capture" 75% of the incremental tax revenues for a period of fifteen years and return them to the business to assist in financing the new building. The business would receive $13,500 in the first year of the TIF, though subsequent payments might be adjusted for equipment depreciation, real estate appreciation, and future capital investments. All things being equal, however, the business would receive approximately $202,500 over the life of the TIF.

Scenario 2 (Municipal Bond Financing):
The business needs a road and utilities installed for $150,000. The municipality agrees to pay this cost, issuing a 20-year TIF bond in the amount of $150,000. Annual debt service on the bond will be $12,338, which the municipality will "capture" out of the incremental taxes.

Employment Tax Increment Financing (ETIF)
Eligible Businesses:
Any business that hires a minimum of 15 net new employees within a two year period, where those employees are: 1) paid a wage that exceeds the average per capita income in the county of employment; 2) provided with group health insurance, and; 3) provided with an ERISA qualified retirement program. The business must also be able to demonstrate that their expansion project will not go forward without ETIF funds.

Program Summary:

ETIF is available to assist in the financing of business investment projects that create at least 15 net new, high quality jobs in Maine. An ETIF-approved business would receive either 30, 50 or 75 percent of the state income tax withholdings paid by qualified employees for up to ten years. (Qualifying jobs created in labor market areas with higher than average unemployment earn a 50 percent reimbursement, while those in areas at or below the state average earn a 30 percent reimbursement. Qualifying jobs created in labor market areas with 150 percent of the state unemployment rate earn a 75 percent reimbursement.) The amount of annual payment is based upon the actual number of qualified employees above the company's base level of employment. The company may not accrue ETIF benefits for any period of time wherein employment, wages and/or employee benefits fail to meet the minimum qualification criteria. (Also, please note that ETIF cannot be taken concurrently with the Jobs & Investment Tax Credit.)

Program Example:
A company is considering adding 30 jobs and investing $1 million in Androscoggin County. The new jobs will be equally divided in pay at $8, $9.50 and $11 per hour. All employees are provided with group health insurance and a retirement program. The company is looking at other states also, and will base its location decision upon the projected return on investment. Androscoggin County's average annual per capita income is $19,012 ($9.14/hr), and the labor market area unemployment rate is above the state average. In this scenario, 20 of the 30 new employees would be considered "qualified" by virtue of their wages (those above $9.14/hr) and benefits, entitling the company to seek ETIF approval. When the company demonstrates that ETIF provides a return that will result in the investment being made in Maine, the application will be approved. Assuming 1) an average state income tax withholding rate of 3.5%, 2) that employment levels and wages do not change, and 3) the company remains qualified, the company would then be eligible for an annual reimbursement of $7,480 for ten years -- a total of $74,800.

Business Equipment Property Tax Reimbursement (BETR) Program
Eligible Businesses:
Any business (except public utilities, radio paging services, mobile communications, cable television, satellite-based direct television broadcast, multi-channel, multi-point television distribution services, certain energy facilities, most natural gas pipelines, and property used to produce or transmit energy primarily for resale) that pays property taxes on qualified business property.

Program Summary:
The program reimburses, for up to 12 years (less any number of years for which an Investment Tax Credit was claimed), all local property taxes paid on eligible business property. Once the business pays its taxes, it has 60 days in which to file for BETR. Once Maine Revenue Services receives the BETR form, a check will be issued, within 180 days.

Law defines the definition of eligible business property, but generally means personal property first placed in service in Maine after April 1, 1995. Eligible property includes certain property affixed or attached to a building or other real estate if it is used to further a particular trade or business on that site and so may include property which would be classified as real property for other purposes. Starting with property tax year April 1, 1997, office furniture, lamps and lighting fixtures are not eligible for reimbursement and are excluded from the program.

Program Example:
Cote's Cookie Co. purchased a $1,00,000 dough-mixing machine on July 7, 1997. When the town assessed the new machinery on April 1, 1998 they valued the property at $95,000. Based on the town's mil rate of 15, the company paid a local property tax of $1425 on the eligible equipment. The company then filed an application with the Maine Revenue Service for the BETR program within 60 days of paying the tax. The company received full reimbursement of the $1425 it paid in equipment property tax, and will continue to be eligible for reimbursement for up to a total of 12 years.

Maine Seed Capital Tax Credit Program Business Assistance Program
This program is designed to encourage equity investment in young business ventures, directly and through private venture capital funds. FAME may authorize State income tax credits to investors for up to 40% of the cash equity they provide to eligible Maine businesses. Investments may be used for fixed assets, research or working capital.

Eligible Businesses:
• Businesses located in Maine.
• Investors must own less than 50% of the business.
• Immediate relatives of principal owners are not eligible.
• Annual gross sales of less than $3 million.
• Business must: 1) be a manufacturer or 2) a service provider with 60% of sales derived from outside the State or to out-of-state residents or 3) develop or apply advanced technologies or 4) bring significant permanent capital into the State.
• Must be the professional, full-time activity of at least one of the principal owners.

Program Summary:
• Tax credits = up to 40% of investment* .
• Investors may provide up to $200,000 per business.
• Aggregate investment limit per business is $1 million for which tax credit may be received (can receive additional investments without credit).
• Investment must be at risk for 5 years.
• A tax credit must be taken in increments of fifteen percent (15%) over six (6) years with the final ten percent (10%) taken in year seven (7). In no event shall the credit for any one taxable year exceed fifty percent (50%) of the total tax due by the investor for that taxable year before application of the credit. To the extent this limitation requires the taxpayer to take the credit over move than seven (7) years, unused credits may be carried forward no more than fifteen (15) years.

Special rules for venture capital funds:
• Investors may provide up to $1,000,000 per venture capital fund in any consecutive three-year period.
• Investors in any one venture capital fund cannot receive more than $1,000,000 in credits, but may invest more without credit.
• Investors in venture capital funds may receive up to 20% of this credit at the time of investment in the fund if the fund is located in Maine, is Maine owned and controlled and has as a major investment objective, investing in eligible Maine business.
• The remaining amount of an investor's tax credit will be awarded when and if the venture capital fund invests sufficient moneys in an eligible Maine business. Credits will be revoked if not substantiated within three (3) years.
• Investment into venture capital funds must be at risk and not to be repaid principal without FAME consent for five (5) years. Dividends, royalties, interest, stock options or warrants and other forms of return which are not in the nature of return of principal are allowed.

Jobs and Investment Tax Credit
Eligible Businesses:
Any business, other than a public utility, that invests at least $5 million in a taxable year in most types of personal property in Maine and creates 100 new jobs over the ensuing 2 year period.

Program Summary:
The program provides a 10% credit against Maine income taxes for investment in most types of personal property that generate at least 1 00 new jobs within two years of the date the investment is placed in service, as long as the investment is at least $5 million for the taxable year. Qualifying jobs must provide wages greater than the average per capita income in the labor market area where the jobs are located, and be covered by retirement and group health insurance programs. The credit amount is limited to the lesser of $500,000 per year or the tax otherwise due. Unused credit may be carried forward for up to 6 years. Thus, the total credit can be up to $3,500,000 for an investment of $35 million or greater. (Please note, the Jobs and Investment Tax Credit may not be taken concurrently with the Employment Tax Increment Financing Program.)

Program Example:
Metalmania Corp. is a medium-sized metal manufacturer that is in growth mode. The company invested $35,000,000 during 1996 in new and used machinery and equipment and added I 00 new jobs by the end of 1997. The company is eligible for a $3,500,000 (10% x $35,000,000) tax credit under Maine's Jobs and Investment Tax Program. Metalmania Corp. can take advantage of the credit by reducing its income tax liability by a maximum of $500,000 each year for 7 years.

Research Expense Credit
Eligible Businesses:
Any business that engages in research and development activities in Maine that meet the definitions in Section 41 of the Internal Revenue Code. Such expenses include certain in-house and contract research expenses if they relate to discovering information that is technological in nature and intended for use in developing a new or improved business component.

Program Summary:
The program provides a 5% income tax credit to companies that incur qualifying research expenses in excess of a base period amount. The base amount is the average research expenses incurred over the prior 3 years. The program also provides a 7.5% credit to companies that incur basic research payments to qualified organizations such as educational institutions and certain other research organizations. The credit is limited to the first $25,000 of tax plus 75% of the tax over $25,000 per year. The credit can be forwarded for up to 15 years.

Program Example:
ABC Co. incurred $4,000,000 in research costs during the year. In the prior 3 years the company's average research expense amounted to $3,000,000. The company is eligible for an income tax credit of 5 % of the $1,000,000 excess ($4,000,000 minus $3,000,000) or $50,000. In addition, ABC Co. made $2,500,000 in basic research payments to the local university. The company is eligible for an income tax credit of 7.5% of $2,500,000 or $187,500. The company is eligible for a total credit of $237,500 ($50,000 plus $187,500). The company can carry forward any portion of the unused credit for 15 years.

Super R&D Tax Credit
Eligible Business:
Businesses that qualify for the research expense credit and whose qualified research expenses conducted in Maine for the taxable year exceed 150% of the average research expenses for the three taxable years prior to September 1997.

Program Summary:
The credit is equal to the amount of qualified research expenses conducted in Maine for the taxable year that exceed 150% of the average research expenses for the three taxable years prior to September 1997. The credit is limited to 50% of the net tax due (tax due after the allowance of all other credits) and cannot reduce the taxpayer's tax due to less than the net tax due in the preceding taxable year. Any unused portion of the credit may be carried forward up to five years.

Program Example:
Big Company had qualifying research expenses of $5,000,000 in 1998. Average research expenses for the three taxable years prior to September 1997 were $ 1,000,000. The Maine net tax due for 1997 was $2,000,000. 50% of the 1998 net tax due is $1,500,000 before this credit. The credit amount is $3,500,000 ($5,000,000 - ($1,000,000 x 150%)). However, since the credit cannot reduce the tax liability of the taxpayer ($3,000,000) to less than the net tax liability of the preceding tax year ($2,000,000), the credit that may be taken in 1998 is $1,000,000 ($2,000,000 1997 net tax due - $3,000,000 1998 next tax due before the credit). The remaining unused credit ($2,500,000) may be carried forward up to five years.

Sales Tax Exemptions
Manufacturing:
Sales of machinery and equipment used by the purchaser directly and primarily in the production of tangible personal property is eligible for a sales tax exemption. In addition, items consumed or destroyed directly or primarily in production, and repair and replacement parts for qualified production equipment are exempt from sales tax.

R&D:
Sales of machinery and equipment used by the purchaser directly and exclusively in research and development is eligible for a sales tax exemption.

Fuel & Electricity for Use in Manufacturing:
This program exempts from sales tax 95% of the sales price of all fuel and electricity purchased for use at a manufacturing facility.

Custom Computer Programming:
This program exempts from sales tax the purchase of custom computer programming effective October 1, 1997. Any business that purchases custom computer programming is eligible.

Biotechnology:
Sales of machinery, equipment, instruments and supplies used by the purchaser directly and primarily in a biotechnology application are eligible for a sales tax exemption.

ADDITIONAL PROGRAMS
Electric Rate Programs Through Utility Companies
Central Maine Power Company (CMP), is the electric utility for most of Bucksport. CMP helps businesses grow through incentives, partnerships with other organizations, and a commitment to stability in electric delivery prices.

Bangor Hydro Electric Company, is the electric utility for a portion of Bucksport. You may be eligible for partial reimbursement of the cost of your lighting project through Bangor Hydro's Commercial Lighting Incentive Program (CLIP). With CLIP, you'll save money now, and in the future, by reducing your energy expenses.

While each of these companies programs are slightly different, all of them offer resources to new and expanding businesses with Standard Industrial Classification (SIC) Codes less than 4,000.

Economic Development Infrastructure Grant
Eligible Businesses:
New and expanding businesses that require the development, expansion or rehabilitation of public infrastructure to meet their requirements.

Program Summary:
The program provides grants to municipalities of up to $400,000 for the construction of public infrastructure projects such as; water lines, roads, utilities, publicly owned buildings, waste water treatments, and rail spurs. This infrastructure must represent a critical component of a business' development or expansion and must lead to the creation or retention of jobs for low and moderate-income persons.

Program Examples:
The Town of Machiasport received a grant for $400,000 to construct a public fish pier adjacent to a new, state-of-the-art, $2 million fish processing facility developed by Atlantic Salmon of Maine, Inc. The company is a leader in the burgeoning salmon aquaculture industry in Washington County. The expansion will create 30 new, natural resource-based jobs.

The Town of Farmington received a grant for $260,000 to expand and renovate a publicly owned manufacturing facility. The project represents an excellent example of the adaptive reuse of an historic school building. M.T.E., Inc., a manufacturer of electronic wiring harnesses and electric sub-assemblies, will be creating 32 new jobs.

Venture Capital Investors
CEI Ventures, Inc.
CEI Ventures, Inc., a wholly-owned subsidiary of Coastal Enterprises, Inc., was formed to raise, manage and invest socially responsible venture capital funds. Coastal Ventures Limited Partnership is the first such fund, capitalized in 1996 at $5.5 million. The fund seeks to make equity investments of between $50,000-$500,000 in growing Maine companies which can generate above-average equity returns over a five to seven-year time horizon, and meet social goals. Pesticide detection, mail order, and software businesses exemplify some of the products and services developed with monies from this fund.

Coastal Ventures is a partnership initially funded by investments from 20 institutional investors, including eight Maine banks, national foundations and national social investors. Coastal Ventures seeks to co-invest where appropriate with these investors, other venture capital firms, and private investors.