An Act To Extend and Improve the Maine Seed Capital Tax Credit Program
Maine Legislature, Session 126, LD 0743
Committee: Taxation
Sponsors: VALENTINO, HOBBINS, ALFOND, CAIN, DUTREMBLE, GOODALL, WOODBURY, BENNETT, BERRY, KNIGHT
Amends: 10 MRSA §1100-T, 36 MRSA §5216-B

Legislative Document 
No. 743 
S.P. 281 
In Senate, February 28, 2013 
An Act To Extend and Improve the Maine Seed Capital Tax Credit 
Program 
Reference to the Committee on Taxation suggested and ordered printed. 
DAREK M. GRANT 
Secretary of the Senate 
Presented by Senator VALENTINO of York. 
Cosponsored by Representative HOBBINS of Saco and 
Senators: President ALFOND of Cumberland, CAIN of Penobscot, DUTREMBLE of York, 
GOODALL of Sagadahoc, WOODBURY of Cumberland, Representatives: BENNETT of 
Kennebunk, BERRY of Bowdoinham, KNIGHT of Livermore Falls. 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1.  10 MRSA §1100-T, sub-§1-A, as enacted by PL 2011, c. 454, §2, is 
amended to read: 
1-A.  Private venture capital fund.  As used in this section, "private venture capital 
fund" means a professionally managed pool of capital organized for a limited life to make 
equity or equity-like investments in unrelated private companies using capital derived 
from multiple limited partners or members at least half of which, measured in dollar 
commitments, are unaffiliated and unrelated, and includes any venture capital fund 
licensed by the United States Small Business Administration.  The authority may require 
such information as may be necessary or desirable for determining whether an entity 
qualifies as a private venture capital fund.  An entity that otherwise qualifies as a private 
venture capital fund may elect not to be treated as a private venture capital fund for 
purposes of this section with respect to any proposed investment. 
Sec. 2.  10 MRSA §1100-T, sub-§2, as amended by PL 2011, c. 454, §§3 and 4, 
is further amended to read: 
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.  For investments made in tax years beginning before January 1, 2012, 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.  For investments made in tax years beginning on or after 
January 1, 2012, a tax credit certificate may be issued to an investor other than a 
private venture capital fund in an amount not more than 60% of the amount of cash 
actually invested in an eligible Maine business in any calendar year.  For investments 
made in tax years beginning on or after January 1, 2014, a tax credit certificate may 
be issued to an investor other than a private venture capital fund in an amount not 
more than 50% of the amount of cash actually invested in an eligible Maine business 
in any calendar year.  Rules adopted pursuant to this section are routine technical 
rules as defined in Title 5, chapter 375, subchapter 2-A. 
B.  The Maine business must be determined by the authority to be a manufacturer or a 
producer of a value-added natural resource product; 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; or 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.  The business must certify that the investment is necessary to allow the 
business to create or retain jobs in the State. 
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. 
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 
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 but not as a private venture capital fund, the aggregate limit of 
$500,000 applies to each individual partner, member, stockholder, beneficiary or 
equity owner of the entity and not to the entity itself. 
E.  The For investments made in tax years beginning before January 1, 2014, the 
business receiving the investment must have annual gross sales of $3,000,000 or less 
and the.  For investments made in tax years beginning on or after January 1, 2014, the 
business receiving the investment must have annual gross sales of $5,000,000 or less.  
The operation of the business must be the full-time a substantial professional activity 
of at least one of the principal owner owners, 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. 
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. 
G.  The authority shall establish limits on repayment of the investment.  The 
investment must be at risk in the business. 
H.  The investors qualifying for the credit must each own less than 1/2 of the 
business. 
I.  The business receiving the investment may not be in violation of the requirements 
of subsection 6. 
Sec. 3.  10 MRSA §1100-T, sub-§2-C, ¶¶B, D, E and H, as enacted by PL 
2011, c. 454, §6, are amended to read: 
B.  As used in this subsection, unless the context otherwise indicates, "eligible 
business" means a business located in the State that has certified that an investment is 
necessary to allow the business to create or retain jobs in the State and that, as 
determined by the authority: 
(1)  Is a manufacturer or a producer of a value-added natural resource product; 
(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; or 
(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. 
D.  The investment with respect to which any entity private venture capital fund is 
applying for a tax credit certificate may not be more than an aggregate of $500,000 
$4,000,000 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 an 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 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 an applicant for which 
that applicant is not applying for a tax credit certificate.  A private venture capital 
fund must certify to the authority that it will be in compliance with these limitations.  
The tax credit certificate issued to a private venture capital fund may be revoked and 
any credit taken recaptured pursuant to Title 36, section 5216-B, subsection 5 if the 
fund is not in compliance with this paragraph. 
E.  An For investments made in tax years beginning before January 1, 2014, an 
eligible 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, may not 
have annual gross sales of more than $3,000,000 and the.  For investments made in 
tax years beginning on or after January 1, 2014, an eligible 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, may not have annual gross sales of more 
than $5,000,000.  The operation of the business must be the full-time a substantial 
professional activity of the principal owner one or more individuals who are not 
managers of the private venture capital fund, as determined by the authority. A tax 
credit certificate may not be issued to a private venture capital fund if an investor in a 
manager of the fund is a principal owner of the eligible business or a spouse, parent, 
sibling or child of a principal owner and if the spouse, parent, sibling or child has any 
existing ownership interest in the business. A private venture capital fund must 
certify to the authority that it will be in compliance with these limitations.   The tax 
credit certificate issued to a private venture capital fund may be revoked and any 
credit taken recaptured pursuant to Title 36, section 5216-B, subsection 5 if the fund 
is not in compliance with this paragraph. 
H.  A private venture capital fund is not entitled to the credit if it owns in excess of 
50% of the an eligible business, except that, if the private venture capital fund is 
issued a tax credit certificate and later makes an additional investment that increases 
its ownership to more than 50%, the existing tax credit certificate remains valid and is 
not subject to revocation due to the ownership percentage as long as there was no 
intent to take controlling ownership at the time of the initial qualified investment. 
Sec. 4.  10 MRSA §1100-T, sub-§4, as amended by PL 2011, c. 454, §7, is 
further amended to read: 
4.  Total of credits authorized.  The authority may issue tax credit certificates to 
investors eligible pursuant to subsections 2, 2-A and 2-C 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 up to and including calendar year 2013, in 
addition to which, the authority may issue tax credit certificates to investors eligible 
pursuant to subsections 2, 2-A and 2-C in an annual amount not to exceed $2,000,000 for 
investments made between June 1, 2013 and December 31, 2013, $4,000,000 for 
investments made in calendar year 2014 and $5,000,000 each year for investments made 
in calendar years beginning with 2015.  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 subject to limitations established by 
the authority by rule.  Rules adopted pursuant to this subsection are routine technical 
rules as defined in Title 5, chapter 375, subchapter 2-A. 
Sec. 5.  36 MRSA §5216-B, sub-§2, as amended by PL 2011, c. 454, §16, is 
further amended to read: 
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.  Except 
with respect to tax credit certificates issued under Title 10, section 1100-T, subsection 
2-C, 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 partners, 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.  Except as limited or authorized by subsection 3 or 4, 
25% of the credit must be taken in the taxable year in which the investment is made and 
25% per year must be taken in each of the next 3 taxable years.  With respect to tax credit 
certificates issued under Title 10, section 1100-T, subsection 2-C, the credits are fully 
refundable and the investor may file a return requesting a refund for an investment for 
which it has received a tax credit certificate on or after January 1st of the calendar year 
after the calendar year in which the investment was made. 
Sec. 6.  36 MRSA §5216-B, sub-§4, as enacted by PL 1987, c. 854, §§4 and 5, is 
amended to read: 
4.  Carry forward.  Credits not taken because of the limitation in subsection 3 shall 
must be taken in the next taxable year in which the credit may be taken, provided that; the 
limitation of subsection 3 shall also apply applies to the carry-forward years.  In no case 
may this carry-forward period exceed 15 years for investments made prior to June 1, 
2013 or 8 years for investments made on or after June 1, 2013. 
SUMMARY 
This bill extends the Maine Seed Capital Tax Credit Program, which is approaching 
the statutory cap on credits that can be authorized, and makes a number of improvements 
and clarifications.  The bill makes the amount of the tax credit the same for individual 
investors and venture capital funds, clarifies that producers of value-added natural 
resource products are eligible, removes the ambiguous eligibility for businesses that 
"bring capital into the State" and specifies that eligible businesses must certify that the 
investment is necessary to allow the business to create or retain jobs in the State.  The bill 
increases the maximum annual sales limit of $3,000,000, which has been in effect since 
1997, to $5,000,000 for investments made in 2014 or after.  The bill authorizes additional 
tax credits of $2,000,000 for investments made between June 1, 2013 and December 31, 
2013, $4,000,000 for investments made in calendar year 2014 and $5,000,000 each year 
for investments made in each subsequent year.  An investor in a venture capital fund 
requesting a refundable tax credit may not file for a refund until the calendar year after 
the calendar year in which the investment is made.