Sec. 1. 36 MRSA §5206, as amended by PL 1997, c. 746, §14 and affected by §24, is repealed and the following enacted in its place:

§5206.__Franchise tax on financial institutions

A tax is imposed for each calendar year or fiscal year ending during that calendar year upon the franchise or privilege of doing business in this State of every financial institution that has Maine net income or Maine assets and that has a substantial physical presence in this State sufficient to satisfy the requirements of the due process and commerce clauses of the United States Constitution.__A financial institution is subject to tax under this section even if it is treated as a partnership, S corporation or entity disregarded as separate from its owner for federal income tax purposes under the Code.

1.__Franchise tax amount.__The tax is the sum of:

A.__One percent of the financial institution's Maine net income; and

B.__Eight cents per $1,000 of the financial institution's Maine assets.

3.__Credit against tax.__In each taxable year in which a financial institution sustains a book net operating loss, a credit must be allowed against the franchise tax on assets under subsection 1, paragraph B.__The credit must be computed by multiplying the book net operating loss by the applicable franchise tax rate imposed by subsection 1, paragraph A.__The total amount of any credit allowed may not exceed the franchise tax on assets due under subsection 1, paragraph B.__In any tax year in which there is excess credit, the excess credit must be carried forward for no more than the next 5 tax years and may be applied against the tax computed under subsection 1.

5.__Adjustment to Maine net income.__For purposes of this section, Maine net income must be decreased, for taxable years ending in 2000, by an amount equal to the difference between the income earned on an equity equivalent loan and the income that would have been earned on a market rate loan.

Sec. 2. 36 MRSA §5206-D, sub-§7-A is enacted to read:

7-A.__Equity equivalent loan.__"Equity equivalent loan" means a loan made at a below market rate in accordance with regulations of the United States Office of Comptroller of the Currency to a nonprofit community development financial institution located in this State.