An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs
Maine Legislature, Session 128, LD 1781
Committee: Taxation
Sponsors: DeCHANT, VITELLI, ESPLING, FREDETTE, GIDEON, GOLDEN, PIERCE, JACKSON, MASON, THIBODEAU
Amends: 36 MRSA §5219-R

Legislative Document
No. 1781
H.P. 1227
House of Representatives, January 11, 2018
An Act To Encourage New Major Investments in Shipbuilding 
Facilities and the Preservation of Jobs
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203.
Reference to the Committee on Taxation suggested and ordered printed.
ROBERT B. HUNT
Clerk
Presented by Representative DeCHANT of Bath.
Cosponsored by Senator VITELLI of Sagadahoc and
Representatives: ESPLING of New Gloucester, FREDETTE of Newport, Speaker GIDEON of 
Freeport, GOLDEN of Lewiston, PIERCE of Dresden, Senators: JACKSON of Aroostook, 
MASON of Androscoggin, President THIBODEAU of Waldo.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §5219-RR is enacted to read:
§5219-RR.  Tax credit for major shipbuilding facility investment
1.  Definitions.  As used in this section, unless the context otherwise indicates, the 
following terms have the following meanings.
A.  "Certified applicant" means a qualified applicant that has received a certificate of 
approval from the commissioner pursuant to this section.
B.  
"Commissioner" means the Commissioner of Economic and Community 
Development.
C.  "Employment" means, for each calendar year, the amount determined by adding 
the total number of qualified employees of a certified applicant on each of 6 
consecutive measurement days of that calendar year as chosen by the certified 
applicant and then dividing that sum by 6.
D.  "Exception year" means a calendar year in which a certified applicant has 
employment of less than 5,000 if the Maine income taxes deducted and withheld by 
the certified applicant from qualified employees for that year total at least 
$6,000,000.  Beginning January 1, 2023, "exception year" means a calendar year in 
which a certified applicant has employment of less than 4,000 if the total Maine 
income taxes deducted and withheld by the certified applicant from qualified 
employees for that year totals at least $6,000,000.  A certified applicant is allowed 2 
exception years between January 1, 2020 and December 31, 2039.
E.  "Facility" includes real estate, tangible personal property, fixtures, machinery and 
equipment.
F.  "Measurement day" means the last business day of every other month of a 
calendar year.
G.  "Qualified applicant" means an applicant for a tax credit under this section that 
satisfies each of the following requirements:
(1)  The applicant owns or operates or proposes to construct a shipbuilding 
facility within the State;
(2)  The applicant proposes to make a qualified investment; and
(3)  The applicant employs at least 5,000 qualified employees at the time the 
application is filed.
H.  "Qualified employee" means a person:
(1)  Who is a full-time employee of the certified or qualified applicant, as the 
case may be;
(2)  Whose income from that employment is taxable under chapter 803;
(3)  For whom a retirement program is provided subject to the federal Employee 
Retirement Income Security Act of 1974, 29 United States Code, Sections 1001 
to 1461, as amended;
(4)  For whom group health insurance is provided; and
(5)  Whose income calculated on a calendar year basis is greater than the average 
annual per capita income in the State.
I.  "Qualified investment" means expenditures incurred on or after January 1, 2018 
that total at least $100,000,000 and are related to the construction, improvement, 
modernization or expansion of a shipbuilding facility within the State, including, 
without limitation, all expenditures for investigation; planning; design; engineering; 
permitting; acquisition; financing; construction; demolition; alteration; relocation; 
remodeling; repair; reconstruction; design, purchase or installation of machinery and 
equipment; clearing; filling; grading; reclamation of land; activities undertaken to 
upgrade a waterway serving the facility; training of employees; capitalized interest; 
professional services, including, but not limited to, architectural, engineering, legal, 
accounting or financial services; administration; environmental and utility costs, 
including, without limitation, sewage treatment plants, water, air and solid waste 
equipment and treatment plants, environmental protection devices, electrical 
facilities, storm or sanitary sewer lines, water lines or amenities, any other utility 
services, preparation of environmental impact studies, informing the public about the 
facility and environmental impact and environmental remediation, mitigation, clean-
up and protection costs; related offices, support facilities and structures; and any of 
the foregoing expenditures made or costs incurred prior to or after the effective date 
of this section or certification of an applicant.  "Qualified investment" includes only 
expenditures that are capitalized for federal income tax purposes.  Except for 
employees who are engaged in the design, engineering and construction of the 
facility, "qualified investment" does not include the salaries or other compensation 
paid to the employees of the qualified applicant or of any affiliate of the qualified 
applicant.  "Qualified investment" does not include any expenditure included as a 
qualified investment by an applicant under chapter 919.
2.  Procedures for application; certificate of approval.  This subsection governs 
the application and approval process for the tax credit under this section.
A.  A qualified applicant may apply to the commissioner for a certificate of approval.  
An applicant shall submit to the commissioner information demonstrating that the 
applicant is a qualified applicant.  A certified applicant may hold only one certificate 
under this section at any time.
B.  The commissioner, within 30 days of receipt of an application under paragraph A, 
shall review the information contained in the application and issue a written 
determination as to whether the applicant is a qualified applicant.  
If the 
commissioner determines that the applicant is a qualified applicant, the commissioner 
shall issue a certificate of approval to the qualified applicant at the time of the 
determination.  If the commissioner determines that the applicant is not a qualified 
applicant, the commissioner shall issue a denial of the application at the time of the 
determination.
C.  Upon issuance of a certificate of approval to a qualified applicant, the 
commissioner shall enter into an agreement on behalf of the State with the qualified 
applicant. That agreement must provide that:
(1)  The State shall allow the credit provided for in this section as it is in effect on 
the date the certificate of approval is issued for as long as the qualified applicant 
qualifies for the credit provided for in this section on the date the certificate is 
issued;
(2)  The qualified applicant, when awarding contracts, purchasing supplies or 
subcontracting work related to a qualified investment, shall give preference, to 
the greatest extent possible, to Maine workers, companies and bidders as long as 
the supplies, products and bids meet the standards required by the qualified 
applicant for best value, including, without limitation, quality and delivery, and 
are competitively priced; and
(3)  The qualified applicant, in conjunction with the Department of Economic and 
Community Development, shall sponsor regional seminars for Maine businesses 
on how to do business with the qualified applicant.
D.  If a certified applicant proposes to transfer, including, without limitation, transfer 
by operation of law, all or substantially all of the shipbuilding facility in which a 
qualified investment was made to another person or if a person proposes to acquire 
50% or more of the voting stock of the certified applicant, application may be made 
to the commissioner to approve transfer of the certificate of approval to that person in 
connection with the transfer of the stock or facility.  The commissioner shall grant the 
transfer of the certificate only if:
(1)  The transferee of the shipbuilding facility or of the certified applicant's stock 
is a member of the certified applicant's affiliated group as defined in section 
5102, subsection 1-B at the time of the transfer; or
(2)  The transferee of the shipbuilding facility or of the certified applicant's stock 
is not a member of the certified applicant's affiliated group as defined in section 
5102, subsection 1-B at the time of the transfer and the commissioner finds that 
the transferee intends to continue the operations of the shipbuilding facility in 
substantially the same manner as prior to the transfer and has the financial 
capability to do so.  
In addition, prior to approval of any transfer, the 
commissioner may request and be provided with the report and audit of the 
transferor pursuant to section 6854.  The commissioner may condition the 
approval of the transfer based upon the findings of the report and audit.
If the commissioner grants a transfer of the certificate of approval, the transferee 
must be treated as the certified applicant for all purposes of this section.  For 
purposes of calculation of employment and qualified investments of the certified 
applicant, the qualified employees and the qualified investments of the transferor 
prior to transfer must be considered the qualified employees and qualified 
investments of the transferee.
E.  A certificate of approval must be revoked by the commissioner if the certified 
applicant has not made qualified investments of at least $100,000,000 within 5 years 
after issuance of the certificate of approval.  A certified applicant whose certificate of 
approval is revoked within 5 years after issuance of the certificate of approval shall 
pay to the State the amount of any credits claimed by the certified applicant under 
this section prior to revocation of the certificate.  A certified applicant whose 
certificate of approval is revoked between 6 and 10 years after issuance of the 
certificate of approval shall pay to the State the amount of any credit claimed by the 
certified applicant under this section between the 6th year and the year in which the 
certificate is revoked.
F.  The applicant or certified applicant may appeal in accordance with Title 5, chapter 
375, subchapter 7 any determination, action or failure to act by the commissioner or 
the State Tax Assessor.
3.  Credit.  A certified applicant is allowed a credit against the tax otherwise due 
under this Part as provided in this subsection.
A.  Beginning with the tax year following the calendar year during which the 
qualified investment reaches $100,000,000 and for each of the following 19 tax years, 
a certified applicant is allowed a credit against the tax due under this Part in each tax 
year in an amount equal to 3% of the certified applicant's total qualified investment.
B.  The credit allowed under this subsection must be applied after subtraction of all 
other credits for which the certified applicant is eligible.  Any unused credit is fully 
refundable.
4.  Limitations.  The following are limitations on the credit allowed under subsection 
3.
A.  Cumulative credits taken under this section may not exceed $60,000,000 to any 
certified applicant or transferee.
B.  A credit is not allowed for any calendar year beginning before January 1, 2020 or 
after December 31, 2039.
C.  Until January 1, 2023, a credit is not allowed for a calendar year in which the 
qualified applicant has employment of less than 5,000 unless that calendar year is an 
exception year. Beginning January 1, 2023, a credit is not allowed for a calendar year 
in which the qualified applicant has employment of less than 4,000 unless that 
calendar year is an exception year.  The amount of the credit in an exception year is 
provided for in subsection 9.
5.  Annual reporting by certified applicant.  On or before March 1st annually a 
certified applicant shall file a report with the State Tax Assessor and the commissioner 
for the immediately preceding calendar year, referred to in this section as "the report 
year," containing the following information:
A.  The employment of the certified applicant for the report year; and
B.  The incremental level of qualified investments made during the report year.
The State Tax Assessor may prescribe forms for the annual reports described in this 
subsection.  The report required by this subsection is not subject to the confidentiality 
provisions of section 191 and may be made available to the public upon request.
6.  Audit of report.  The State Tax Assessor has the authority to audit any report or 
return filed under this section to ensure the certified applicant was eligible for the credit 
claimed by the certified applicant.  If the certified applicant has claimed a credit in an 
amount that the State Tax Assessor concludes exceeded the amount that the certified 
applicant was entitled to claim for that calendar year, the State Tax Assessor shall issue 
an assessment for that amount pursuant to section 141.  A certified applicant may seek 
reconsideration of any determination or assessment pursuant to section 151.
7.  Report to Legislature.  The State Tax Assessor shall report to the joint standing 
committee of the Legislature having jurisdiction over taxation matters aggregate data on 
employment levels and qualified investment amounts of a certified applicant for each 
year beginning with expenditures incurred on or after January 1, 2018.  The report must 
be made during the first regular session of each Legislature, beginning with the 129th 
Legislature.
8.  Accelerated credit.  If a certified applicant has employment in any calendar year 
of at least 5,250, the credit authorized in subsection 3 must be increased to 110% of the 
credit due otherwise under subsection 3.
9.  Decelerated credit in exception year.  The credit due a certified applicant in an 
exception year is determined pursuant to this subsection.
A.  If a certified applicant has employment in an exception year of less than 5,000 but 
at least 4,750, the credit authorized in subsection 3 for that year must be decreased to 
90% of the credit otherwise due under subsection 3.
B.  If a certified applicant has employment in an exception year of less than 4,750 but 
at least 4,500, the credit authorized in subsection 3 for that year must be decreased to 
80% of the credit otherwise due under subsection 3.
C.  If a certified applicant has employment in an exception year of less than 4,500 but 
at least 4,250, the credit authorized in subsection 3 for that year must be decreased to 
70% of the credit otherwise due under subsection 3.
D.  If a certified applicant has employment in an exception year of less than 4,250 but 
at least 4,000, the credit authorized in subsection 3 for that year must be decreased to 
60% of the credit otherwise due under subsection 3.
E.  If a certified applicant has employment in an exception year of less than 4,000, the 
credit authorized in subsection 3 for that year must be decreased to 50% of the credit 
otherwise due under subsection 3.
SUMMARY
For tax years beginning on or after January 1, 2020 and continuing for the next 19 
years, this bill provides a tax incentive for major investments in a shipbuilding facility 
and the preservation of jobs at that shipbuilding facility by allowing the shipbuilding 
facility an annual income tax credit equal to 3% of the shipbuilding facility's total 
qualified investment, as long as certain employment levels are maintained.  In order to 
qualify for the credit, the shipbuilding facility must make expenditures after January 1, 
2018 of at least $100,000,000 that are related to the construction, improvement, 
modernization or expansion of the shipbuilding facility and maintain at least 5,000 
employees.  If the shipbuilding facility employs at least 5,250 employees, the facility is 
entitled to an amount equal to 110% of the credit.  The facility may employ fewer than 
5,000 employees in 2 separate years within the 20-year period and still qualify for the 
credit, but at a prorated reduction.
The purpose of this bill is to encourage major investments in shipbuilding facilities in 
this State, to ensure the long-term survival of the shipbuilding industry, to preserve 
numerous opportunities for jobs for the people of this State and to make the State more 
competitive in the shipbuilding industry and thus ensure the preservation and betterment 
of the economy of the State for the benefit of its people.