Maine enacts refundable income tax credit for headquarters

Maine Gov. Paul LePage has signed legislation that creates a refundable corporate and personal income tax credit for the construction or expansion of major business headquarters in the state as long as certain investment and employment levels are met. The credit, which a taxpayer may claim for 20 years, is equal to 2% of the taxpayer’s qualified investment (i.e., an investment of at least $35 million to design, permit, construct, modify, equip or expand the taxpayer’s headquarters in Maine). At the time a taxpayer applies for the credit, all of the following criteria must be satisfied:

– The taxpayer’s headquarters are or will be located in Maine;

– The taxpayer employs at least 5,000 full-time employees worldwide of which at least 25% are or will be based in Maine;

– The taxpayer has business locations in at least three other states or foreign countries; and

– The taxpayer intends to make a qualified investment in the state within five years following the date of the application.

In addition, a credit is not allowed for any tax year during which the taxpayer does not meet or exceed the following employment targets as measured on the last day of the tax year:

– For each of the first ten tax years for which the credit is claimed, there must be a total of at least 80 additional full-time employees based in Maine (i.e., perform more than 50% of employee-related activities at the Maine headquarters) whose jobs were added since the first day of the first tax year for which the credit was claimed multiplied by the number of years for which the credit has been claimed; and

– For each tax year after the tenth tax year for which the credit is claimed, the taxpayer must employ a total of at least 800 additional full-time employees based in Maine whose jobs were added since the first day of the first tax year for which the credit was claimed.

A taxpayer seeking a credit must apply to the Maine Department of Economic and Community Development (DECD) for a certificate of approval. Within 30 days of receiving an application, the DECD must determine whether the taxpayer qualifies for the credit and issue either a certificate of approval or a written denial indicating why the taxpayer is not qualified. Upon making the qualified investment and completing the headquarters and employment criteria, a certified taxpayer must submit an application to the DECD for a certificate of completion. If the DECD determines that a qualified investment has been made, the taxpayer’s headquarters is located in the state, and at least 25% of the taxpayer’s full-time employees are based in the state, the DECD will issue a certificate of completion to the taxpayer. The DECD may not issue certificates of approval that total, in the aggregate, more than $100 million of qualified investment or any individual certificate of approval for more than $40 million of qualified investment. In addition, cumulative credits may not exceed $16 million under any one certificate.

A taxpayer must obtain approval from the DECD to transfer a certificate of approval or a certificate of completion to another person. A certificate of approval or certificate of completion may be transferred only if (1) all or substantially all of the taxpayer’s assets are, or will be, transferred to the transferee, or (2) at least 50% of the taxpayer’s voting stock is, or will be, acquired by the transferee.

The DECD will revoke a certificate of approval if the taxpayer or a person to whom a certificate of approval has been transferred fails to make a qualified investment within five years of the date of the certificate of approval. The DECD must also revoke a certificate of approval or a certificate of completion if the taxpayer ceases operations of the headquarters in Maine or the certificate of approval or certificate of completion is transferred to another person without approval. A taxpayer whose certificate of completion is revoked within five years after the issue date must return the total credits claimed within 60 days. A taxpayer whose certificate of completion is revoked between six and ten years after the issue date must return the total credits claimed from the sixth to tenth year within 60 days.

By March 1 of each year, a taxpayer that has received a certificate of approval must file a report with the DECD for the tax year ending during the immediately preceding calendar year (i.e., the “report year”) containing (1) the number of full-time employees based in Maine on the last day of the tax year ending during the calendar year immediately preceding the report year; and (2) the incremental amount of qualified investment made in the report year.

Qualified investments must be made by December 31, 2022, to be eligible for the credit.

L.D. 1639 (S.P. 591), Laws 2017, effective 90 days after adjournment of legislative session

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