An Act To Improve the Seed Capital Investment Tax Credit Program ( -)
Maine Legislature, Session 124, LD 1666
Committee: Taxation
Sponsors: MITCHELL, CAIN, ALFOND, PERRY, RECTOR, BRYANT, FLEMINGS
Amends: 10 MRSA §1100-T, 36 MRSA §5216-B

. SECOND REGULAR SESSION-2010 
Legislative Document 
No. 1666 
S.P.631 
In Senate, December 21, 2009 
An Act To Improve the Seed Capital Investment Tax Credit 
Program 
( -) 
Approved for introduCtion by a majority of the Legislative Council pursuant to Joint Rule 
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203. 
Reference to the Committee on Taxation suggested and ordered printed. 
. Presented by President MITCHELL of Kennebec. 
Cosponsored by Representative CAIN of Orono and 
9tfJ(}~ 
JOY J. O'BRIEN 
Secretary of the Senate 
Senators: ALFOND ofCumberlarid, GOODALL ofSagadahoc, PERRY of Penobscot, 
RECTOR of Knox, Representatives: BRYANT of Windham, FLEMINGS of Bar Harbor, . 
SHAW of Standish .. 
Printed on recycled pnper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 10 MRSA §1100-T, sub-§2, ';lA, as amended by PL 2003, c. 451, Pt. E, 
§ 1, is further amended to read: 
A. A tax credit certificate may be issued in an aniount not more than 4Q%. 60% 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. 
Sec. 2. 10 MRS A §1100-T, sub-§2-A, €f[A, as amended by PL 2003, c. 451, Pt. 
E, §4, is further amended to read: 
A. A tax credit ,certificate may be issued to an individual '.vho invests investor in a 
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private venture capital fund in an amount that: 
(1) Is not more than 4Q%. 60% of the amount of cash actually invested in or 
unconditionally committed ',0 a private venture capital fund in any calendar year' 
by the individual or entity, except that ","ith 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 tEU( 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 vear bv the individual 
or entity; and 
(2) Does not exceed 4Q%. 60% of the amount of cash invested by the fund in 
eligible businesses, eJwept that with respect to fund investments that are made in 
eligible businesses that are located in a high unemployment area, as determined 
b,' rule of the authority under subsection 2, a ta)( credit celiificate 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 tEU( credit certificates in an 
amount not to e)weed 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 
dosigHated investing in eligible business,es of this State as a major investment 
objective. The credit may be revoked to the e)uent that the private venture capital 
fund does not make investments eligible for the taJ( credit in an amount sufficient 
to qualify for the credits ; .... ithin 3 years after the date of the taJ( credit certificates. 
Notv"ithstanding any revocation pursuant to this subparagraph, each investor 
remains eligible for taJ( credit certificates for eligible investments as and v,rhen 
made by the private venture capital fund. 
The aggregate amount of credits issued to investors in a fund may not exceed 4Q%. 
60% of the amount of cash invested by the fund in eligible businesses, e)wept that 
. 't't'ith respect to fund investments in eligible businesses that are located in a high 
unemployment area, the aggregate amount of tan credits issued to investors in a fund. 
mav not e1weed 60% of the cash invested bv the fund in elieoible businesses. 
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Sec. 3. 10MRSA §1100-T, sub-§2-A,~, as amended by PL 2003, c. 451, Pt. 
E, §4, is further amended to read: 
D. The investment with respect to which any hldividual or entity is applying for a tax 
credit certificate may not be more than an aggregate of $500,000 in anyone 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 i,ndividual partner, member, 
stockholder, benefici!).ry 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. ' 
Sec. 4. 10 MRSA §1100-T, sub-§2-A, ~, as amended by PL 2001, c. 446, §2 
and affected by §6, is further amended to read: 
E. Each busiriess 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 bllsiness or for a:n 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 bv the orivate 
venture caoital fund in that business. 
Sec. 5. 10 MRSA §1100-T, sub-§2-A,~, as amended by PL 2001, c. 446, §2 
and affected by §6, is further amended to read: 
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H. The investors in a private venture' capital fund are not entitled to tfle .1! credit for 
collective mvnership the investment in an eligible business to the extent the private 
venture capital fund owns in excess of 50% of any that business at the time of the 
application forthe tax credit certificate. An investor in a private venture capital fund 
determined by the authority to be a principal Qwner of a business and the principal 
owner's spouse, if any, are not entitled to a credit with resp~ct to investment in tha:t 
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. 
Sec. 6. 10 MRSA §1100-T, sub-§4,as amended by PL 2003, c. 451, Pt. E, §5, is , 
further amended to read: 
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 cale!1dar 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 
aOO~ $30,000,000 up to 'and including calendar year 2011 and $50,000,000 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 erititled to take the credit when it 
becomes available. 
Sec. 7. 36 MR.SA §5216-B, sub-§2, as amended by PL 2003, c. 451, Pt. E, §8, is 
further amended to re'ad: 
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2. Credit. An investor is entitled to a credit against the tax otherwise due under this 
Part equal to the amount of the tax credit certificate issued by the Finance Authority of 
Maine in accordance with Title 10, section 1100-T and as limited by this section. In the 
case of partnerships; limited liability companies, S corporations, nontaxable trusts and 
any other entities that are treated as flow-through entities for tax purposes under the 
Code, the individual partn€?rs, members, stockholders, beneficiaries or equity owners of 
such entities must be treated as the investors under this section and are allowed.a credit 
against the tax otherwise due from them under this,Part in proportion to their respective 
interests in ,those partnerships, limited liability companies; S corporations, trusts or other 
flow-through entities or pursuant to an executed agreement among the partners, members 
or equity owners documenting an alternate allocation method. Credits may be allocated to: 
partners, members or equity owners that are exempt from taxation under Section 
501(c)(3), 501(c)(4) or 501(c)(6) of the Code, and ,those partners, members or owners 
must' be treated as taxpayers for the purposes of this subsect'iori:Excepi as limited or 
authorized by subsection 3 or 4, 25% Of the 'credit must be taken in the taxable year the 
investment is made and 25% per year must be taken in each of the next 3 taxable years. 
Notwithstanding other provisions of this subsection,' for credits authorized for 
investments made after September 15, 2009 and before December 31, 2009, 16.67% of 
the credit must be taken in the taxable year the investment is made, 16.67% of the credit 
must betaken in the next taxable year and 33.33% of the credit must.be taken in each. 
subsequent taxable year; and for credits authorized for investments made during calendar 
year 2010; 16.66% of the credit must be taken in the taxable year the investment is made 
and 27.78% of the credit must be taken in each subsequent taxable year. 
Sec. 8. 36 MRSA §5216-B, sub-§3, as enacted by PL 1987, c. 854, §§4 and 5, is 
amended to read: 
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3. Credit refundable. The credit allowed under this section is fully refundable, 
except that for residents of Maine the amount of the credit, allowed under this section for 
anyone taxable year sflaU may not exceed 50% of the tax imposed by this Part on the 
investor for the taxable year before application of the credit., 
SUMMAR.Y 
This bill changes the seed capital investment tax credit program by increasing the 
existing credit from 40% of an eligible investment to' 60% and applying it uniformly' 
across the State rather than basing it on unemployment rates. The bill eliminates the up-
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front tax credit for investors in certain venture capital funds and makes changes to the 
conditions and restrictions related to business ownership by investors in private venture 
capital funds. The bill retains the current amount of $30,000,000 as the aggregate amount 
of credits that the Finance Authority of Maine may issue through the end of calendar year 
2011 and then increases the amount to $50,000,000 starting in 2012. It allows investors 
entitledto the credit that are part of a partnership, corporation or similar entity to ~lIocate 
the credit using an alternate allocation method rather than allocating the credit in direct 
proportion to their respective interests in those partnerships, 'corporations or similar 
entities. It adds the partners, members or equity owners of certain nonprofit, civic and 
charitable organizations to the list of those entitled to the credit and states that they must 
be treated as taxpayers for the purposes of this refundable credit. The bill provides an 
exception to the provision that specifies that 25% of the tax credit must be taken in the 
year the investment is made for certain time periods and provides a schedule that 
. specifies what percentage must be taken in each taxable year. The bill also makes the tax 
credit refundable to provide an incentive for investment in Maine businesses.