LD 430
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Page 1 of 2 An Act to Encourage Equity Equivalent Loans or Investments in Nonprofit Communi... LD 430 Title Page
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LR 653
Item 1

 
(6) Has enough expert assistance available to it to
underwrite, document and service and collect loans and
assist its clients.

 
B.__"Certificate" means a tax credit certificate issued by
the authority under this subchapter.

 
C.__"Equity equivalent loan" means a loan made by an
investor to a borrower on terms that are substantially
equivalent to an equity investment as set forth in rules
established by the authority, or with the following
characteristics:

 
(1) The loan is carried as an investment on the
investor's balance sheet in accordance with generally
accepted accounting principles as defined in Title 5,
section 1660-D, subsection 13;

 
(2) It is a general obligation of the borrower that is
not secured by any borrower assets;

 
(3) It is fully subordinated to the right of repayment
of all other creditors of the borrower;

 
(4) It does not give the investor the right to
accelerate payment unless the borrower ceases its
normal operations;

 
(5) It carries an interest rate that is not tied to any
income received by the borrower and is at least 400
basis points below the prime rate of interest as
reported by The Wall Street Journal at the time the
loan is made with interest-only payments during the
term of the loan; and

 
(6) It has an original term of at least 10 years or has
a rolling term and an indeterminate maturity and
provides that no demand for payment may be made without
180 days' notice.

 
D.__"Investment" means an equity equivalent loan made to a
borrower.

 
E.__"Investor" means a financial institution as defined in
Title 36, section 5206-D, subsection 8 or an insurer as
defined in Title 24-A, section 4.

 
2.__Administration.__The authority shall administer
eligibility for credits under this section and shall adopt rules
for the allocation, administration and revocation of

 
certificates.__Rules adopted under this section are routine
technical rules as defined in Title 5, chapter 375, subchapter
II-A.__The authority shall certify all eligible investments and
allocate certificates to eligible investors.

 
3.__Application; certificate.__An investor must file an
application with the authority for a certificate before the end
of the calendar year and prior to making an investment.__The
authority may charge an application fee of up to $250.__The
certificate must authorize a total amount of tax credit over the
duration of the certificate equal to 60% of the face amount of
the investment.__The certificate must authorize the credit to be
claimed in 10 equal installments over a period of 10 years.__An
investor must demonstrate that the investment would not have been
made in the absence of a credit and must sign an agreement with
the authority that the investor will not require the investment
to be repaid for 10 years, unless the borrower ceases normal
operations.__A certificate expires 10 years after issuance.

 
4.__Limitation.__The following limitations apply to
certificates issued under this section.

 
A.__The authority may issue new certificates each fiscal
year from fiscal year 2001-02 to fiscal year 2005-06
allocating up to $100,000 annually in new credits.__A
certificate may not be allocated and in effect if it would
result in new credits eligible to be claimed by investors
under this section in the aggregate in excess of $100,000 in
any one calendar year.

 
B.__The amount of a certificate allocated under this section
for any one investor in any one tax year may not exceed 25%
of the total tax credits available for that tax year.

 
C.__Investments in any one borrower may not be eligible for
more than 25% of the total tax credits available annually.

 
D.__Certificates must be issued on a first-come first-served
basis, except that rules established by the authority may
establish reserved credits to ensure certificates are
distributed on a statewide basis.

 
E.__Certificates may not be issued after fiscal year 2005-
06.

 
F.__A certificate may not be issued for an investment in a
borrower that has failed to provide the information required
in subsection 6, paragraphs A and B.

 
5.__Revocation.__The authority shall revoke a certificate and
notify the State Tax Assessor if it finds that:

 
A.__The investment no longer meets the requirements of this
section; or

 
B.__The investor has failed to report to the authority as
required by subsection 6.

 
6.__Reports.__The following reports are required under this
section.

 
A.__Each investor and borrower shall report annually to the
authority any information requested by the authority to
verify continuing eligibility for a certificate.

 
B.__Each borrower shall report annually to the Department of
Economic and Community Development any information requested
by that department to verify that the proceeds of the
investments made under this section are directed toward
public benefits, including, but not limited to, job creation
and retention, quality of the jobs created and retained,
community development and improvement and development and
expansion of small business entrepreneurship.__Information
relating to jobs created and retained must include the
number of jobs categorized by the major groupings of the
occupational employment statistics program of the United
States Department of Labor, the average wages of jobs
created and retained and the benefits associated with those
jobs.__The Department of Economic and Community Development
shall notify the authority if a borrower fails to report as
required by this paragraph.

 
C.__The Department of Economic and Community Development
shall report to the joint standing committee of the
Legislature having jurisdiction over taxation matters by
January 15, 2005 regarding the operation of this section.__
The report must include data concerning the numbers of
investors and borrowers participating in the credit program,
the value of certificates issued and the public benefit of
the credit program including the information reported to the
department under paragraph B.

 
Sec. 3. 36 MRSA §2527 is enacted to read:

 
§2527.__Equity equivalent loan credit

 
1.__Definitions.__As used in this section, unless the context
otherwise indicates, the following terms have the following
meanings.

 
A.__"Authority"__means the Finance Authority of Maine.

 
B.__"Certificate" means a tax credit certificate issued by
the authority under Title 10, chapter 110, subchapter XI.

 
2.__Credit.__A taxpayer is allowed a credit against the tax
imposed by this chapter otherwise due in an amount equal to the
annual credit amount authorized by a certificate issued to the
taxpayer.

 
3.__Credit nonrefundable.__The credit may not reduce the tax
otherwise due under this chapter below zero for any taxable year.

 
4.__Carry-over.__Credits not claimed because of the
limitations in Title 10, section 1100-Y, subsection 4 may be
claimed in the following taxable year in which the credit may be
claimed; however, the limitations of Title 10, section 1100-Y,
subsection 4 also apply to carry-over years.

 
5.__Carry-back.__Credits may not be carried back to prior
years.

 
6.__Recapture.__If the authority revokes a certificate, an
additional tax is added to the tax imposed on the taxpayer under
this chapter for the taxable year in which the revocation occurs.__
The additional tax is equal to the excess of the amount of the
certificate revoked over the amount of certificate not yet
claimed.

 
Sec. 4. 36 MRSA §5216-D is enacted to read:

 
§5216-D.__Equity equivalent loan credit

 
1.__Definitions.__As used in this section, unless the context
otherwise indicates, the following terms have the following
meanings.

 
A.__"Authority"__means the Finance Authority of Maine.

 
B.__"Certificate" means a tax credit certificate issued by
the authority under Title 10, chapter 110, subchapter XI.

 
2.__Credit.__A taxpayer is allowed a credit against the tax
imposed by this Part otherwise due in an amount equal to the
annual credit amount authorized by a certificate issued to the
taxpayer.

 
3.__Credit nonrefundable.__The credit may not reduce the tax
otherwise due under this chapter below zero for any taxable year.

 
4.__Carry-over.__Credits not claimed because of the
limitations in Title 10, section 1100-Y, subsection 4 may be
claimed in the following taxable year in which the credit may be
claimed; however, the limitations of Title 10, section 1100-Y,
subsection 4 also apply to carry-over years.

 
5.__Carry-back.__Credits may not be carried back to prior
years.

 
6.__Recapture.__If the authority revokes a certificate, an
additional tax is added to the tax imposed on the taxpayer under
this Part for the taxable year in which the revocation occurs.__
The additional tax is equal to the excess of the amount of the
certificate revoked over the amount of certificate not yet
claimed.

 
SUMMARY

 
This bill establishes a credit against the income tax, the
insurance premium tax and the bank franchise tax for investments
in eligible nonprofit economic development organizations. The
credit would be equal to 6% of the face value of the investment
annually for 10 years. The total of the aggregate additional new
credits that may be authorized each year is limited to $100,000.
No new credits may be authorized after fiscal year 2005-06.
Investors and borrowers are required to report annually regarding
activities. Authorization for a credit may be revoked and
previous credits recaptured if the investor fails to meet
eligibility requirements.


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