An Act To Establish a Maine Low-income Housing Tax Credit
Maine Legislature, Session 129, LD 1265
Committee: Taxation
Sponsors: POULIOT, COLLINGS, VITELLI
Amends: 36 MRSA §2537

Legislative Document
No. 1265
S.P. 385
In Senate, March 14, 2019
An Act To Establish a Maine Low-income Housing Tax Credit
Reference to the Committee on Taxation suggested and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator POULIOT of Kennebec.
Cosponsored by Representative COLLINGS of Portland and
Senator: VITELLI of Sagadahoc.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §2537 is enacted to read:
§2537.  Credit for low-income housing development
A taxpayer is allowed a credit against the tax otherwise due under this chapter as 
determined under chapter 916.
Sec. 2.  36 MRSA c. 916 is enacted to read:
CHAPTER 916
LOW-INCOME HOUSING DEVELOPMENT TAX CREDIT
§6701.  Definitions
As used in this chapter, unless the context otherwise indicates, the following terms 
have the following meanings.
1.  Allocation certificate.  "Allocation certificate" means a statement issued by the 
authority under section 6702, subsection 2 certifying that a development qualifies for the 
credit and specifying the amount of the credit allowed.
2.  Authority.  "Authority" means the Maine State Housing Authority under Title 
30-A, chapter 201.
3.  Compliance period.  "Compliance period" means the period of 15 years 
beginning with the first taxable year of the credit period.
4.  Credit.  "Credit" means the low-income housing development tax credit allowed 
pursuant to section 6702, subsection 1.
5.  Credit period.  "Credit period" means the period of 6 taxable years beginning 
with the taxable year in which a qualified development is placed in service.  If a qualified 
development is composed of more than one building, the development is placed in service 
in the taxable year during which the last building of the qualified development is placed 
in service.
6.  Federal tax credit.  "Federal tax credit" means the federal low-income housing 
tax credit provided by Section 42 of the Code.
7.  Qualified allocation plan.  "Qualified allocation plan" means the qualified 
allocation plan adopted by the authority pursuant to Section 42(m) of the Code.
8.  Qualified basis.  "Qualified basis" means the qualified basis of the development 
as determined pursuant to Section 42 of the Code.
9.  Qualified development.  "Qualified development" means a qualified low-income 
housing project, as defined in Section 42 of the Code, that is financed with tax-exempt 
bonds pursuant to Section 42 of the Code and that is located in the State and is 
determined by the authority to be eligible for a federal tax credit whether or not a federal 
tax credit is allocated to the development.
10.  Qualified taxpayer.  "Qualified taxpayer" means a person that owns a direct or 
indirect interest in a qualified development and is subject to the taxes imposed by Part 8.
§6702.  Low-income housing development tax credit
1.  Tax credit allowed.  During each calendar year, the authority may allocate a 
credit in the form of an allocation certificate to a qualified taxpayer under subsection 2.  
The full amount of the credit may be claimed by the qualified taxpayer against the 
qualified taxpayer's taxes imposed by Part 8 for each taxable year of the credit period.
2.  Allocation certificate.  The authority shall allocate a credit to a qualified taxpayer 
by issuing to the taxpayer an allocation certificate.  The authority may determine the time 
at which the allocation certificate is issued.  Unless otherwise provided in this chapter or 
the context clearly requires otherwise, the authority shall determine eligibility for a credit 
and allocate credits in accordance with the standards and requirements set forth in Section 
of the Code.  The credit must be in an amount determined by the authority, subject to 
the following:
A.  The credit must be necessary for the financial feasibility of the qualified 
development;
B.  The credit may not exceed the amount of the federal tax credit awarded to the 
qualified taxpayer.  Notwithstanding that the federal tax credit is claimed over 10 
years, the state credit must be claimed over the 6-year credit period.  An annual credit 
may exceed the annual federal tax credit for any year of the credit period;
C.  The credit must be made pursuant to the qualified allocation plan; and
D.  The credit combined with the federal tax credit must be in the least amount 
necessary to ensure the financial feasibility of a qualified development.
3.  Pass-through entities.  If a qualified taxpayer receiving a credit is a partnership, 
limited liability company, S corporation or similar pass-through entity, the taxpayer may 
allocate the credit among its constituent taxpayers including partners, shareholders, 
members or other constituent taxpayers in any manner agreed to by the constituent 
taxpayers and, if there are multiple tiers of pass-through entities, the credit may be 
allocated through any number of pass-through entities in any manner agreed to by the 
owners of the pass-through entities. An allocation of a credit through multiple pass-
through entities under this subsection is not a transfer.  The qualified taxpayer shall 
certify to the State Tax Assessor the amount of credit allocated to each constituent 
taxpayer or shall notify the State Tax Assessor that the qualified taxpayer has assigned 
the duty of certification to a constituent taxpayer, and the constituent taxpayer shall 
provide the certification to the State Tax Assessor.  Each constituent taxpayer may claim 
as a credit against the taxpayer's tax under Part 8 the certified amount allocated under this 
subsection to the constituent taxpayer subject to any restrictions in this chapter.
4.  Recorded restrictive covenant; compliance with federal requirements.  The 
authority may not allocate a credit pursuant to this section unless the qualified taxpayer:
A.  Subjects the qualified development to a recorded restrictive covenant requiring 
the development to be maintained and operated as a qualified development during the 
compliance period; and
B.  Beginning with the first taxable year of the compliance period or a longer period 
agreed to between the authority and the qualified taxpayer, ensures the compliance of 
the qualified development with the accessibility and adaptability requirements of the 
federal tax credits and Title VIII of the federal Civil Rights Act of 1968 as amended 
by the federal Fair Housing Amendments Act of 1988.
5.  Application of credit.  A credit may be taken against the taxes imposed by Part 8 
for each taxable year of the credit period.  Any amount of a credit that exceeds the tax 
due for a taxable year may be carried forward as a tax credit against subsequent years' tax 
liability for up to 11 tax years following the tax year in which the allocation was made 
and must be applied first to the earliest years possible.  Any amount of the credit that is 
not used may not be refunded to the taxpayer.
6.  Aggregate amount of credits.  The aggregate amount of all credits allocated by 
the authority in each calendar year may not exceed the total of:
A.  Forty-two million dollars for credits allocated pursuant to subsection 2 and 
section 6705;
B.  An amount totaling all unallocated credits, if any, for the preceding calendar 
years; and
C.  Any credit recaptured under section 6703 or otherwise returned to the authority in 
the calendar year.
§6703.  Recapture of credit
1.  Recapture of credit.  On the last day of any taxable year during the compliance 
period, if the amount of the qualified basis of a qualified development is less than the 
amount of the qualified basis on the last day of the prior taxable year, then the amount of 
the qualified taxpayer's tax liability under Part 8 for that taxable year must be increased 
by the credit recapture amount under subsection 2.
2.  Recapture amount.  The credit recapture amount is an amount equal to the 
aggregate decrease in the credit allowed to the qualified taxpayer for all prior taxable 
years that would have resulted if the accelerated portion of the credit under subsection 3 
were not allowed for all prior taxable years with respect to the reduced amount of 
qualified basis under subsection 1.
3.  Accelerated portion of credit.  The accelerated portion of the credit for the prior 
taxable years for any amount of qualified basis is the difference between:
A.  The aggregate credit allowed under this chapter, not including this subsection, for 
the years with the qualified basis; and
B.  The aggregate credit that would be allowable under this chapter for the years with 
the qualified basis if the aggregate credit that would have been allowable, not 
including this subsection, for the entire compliance period were allowable ratably 
over 15 years.
4.  Reporting of capture of credit.  If the recapture of any credit under this section is 
required in any tax year, the qualified taxpayer must report on the taxpayer's return 
submitted to the State Tax Assessor for that tax year the proportion of credit required to 
be recaptured, the identity of each taxpayer subject to the recapture and the amount of 
credit previously allocated to each taxpayer.
§6704.  Filing requirements
A qualified taxpayer to which a credit has been allocated under section 6702, 
subsection 2 shall file with the qualified taxpayer's income tax return under chapter 823 
and, if applicable, chapter 825 a copy of the allocation certificate issued by the authority 
for the qualified development allowing the credit and, if the qualified taxpayer has 
allocated the credit to constituent taxpayers under section 6702, subsection 3, a copy of 
the certification to the department for the allocation of the credit among the constituent 
taxpayers. A person that has received a portion of a credit as a constituent taxpayer under 
section 6702, subsection 3 shall file with the constituent taxpayer's income tax return 
under chapter 823 a copy of the allocation certificate issued by the authority for the 
qualified development allowing the credit and a copy of the certification for the allocation 
of the credit among the constituent taxpayers.
§6705.  Insurance premium taxes
A qualified taxpayer that is subject to a tax under chapter 357, does not pay taxes 
under Part 8 and is otherwise eligible to claim a credit under this chapter may claim and 
carry forward the credit against the tax under chapter 357 to the same extent as the 
taxpayer would have been able to claim or carry forward the credit under the tax in Part 8. 
All other provisions of this chapter apply to a credit claimed pursuant to this section.
§6706.  Rules
The authority and the State Tax Assessor, in consultation with each other, shall adopt 
rules, respectively, necessary to carry out the provisions of this chapter. Rules adopted 
pursuant to this section are routine technical rules as defined by Title 5, chapter 375, 
subchapter 2-A.
§6707.  Compliance monitoring
The authority, in consultation with the State Tax Assessor, shall monitor and oversee 
compliance with the provisions of this chapter and shall report specific occurrences of 
noncompliance to the State Tax Assessor.
§6708.  Report to the Legislature
1.  Report.  By December 31st of each year in which an allocation has been made 
under this chapter, the authority shall provide a written report to the Legislature for that 
year.  A report under this section must be made available to the public.
2.  Contents of report.  A report under this section must:
A.  Specify the number of qualified developments that have been allocated a tax 
credit during that year and the total number of housing units supported by each 
development;
B.  Describe for each qualified development under paragraph A the geographic 
location of the development, the household type and any specific demographic 
information available about residents intended to be served by the development, the 
income levels intended to be served by the development and the rents authorized for 
the development; and
C.  Provide housing market and demographic information that demonstrates how the 
qualified developments under paragraph A are addressing the need for affordable 
housing within the communities the developments are intended to serve and 
information about any remaining disparities in the affordability of housing within 
those communities.
Sec. 3.  Effective date.  This Act takes effect January 1, 2020.
SUMMARY
This bill creates a tax credit for owners of low-income housing developments that 
qualify for tax credits under federal law and are financed with tax-exempt bonds, located 
in the State and determined by the Maine State Housing Authority to be eligible for a 
federal tax credit whether or not a federal tax credit is allocated to the development. A 
taxpayer that receives the credit must agree to enter a restrictive covenant to maintain and 
operate the development as low-income housing and follow various federal requirements 
for 15 years.  The state tax credit is for 6 years and has a recapture provision if the basis, 
as determined under federal law, of the development goes below a certain amount.  An 
insurance company is allowed to apply the credit against the company's insurance 
premium tax.  The Maine State Housing Authority is required annually to report various 
details of the qualified developments that received a credit for the prior tax year.