The Maine New Markets Capital Investment Program attracts investment capital to low income communities by allowing investors to receive a state tax credit on equity investments they make in qualified Community Development Entities (CDE). This program is modeled after the federal New Markets Federal Tax Credit Program from the year 2011
The idea is to give investors, be they out-of-state or in-state, tax credits on equity investments they make in what are considered to be ‘Qualified’ Community Development Entities.
If a U. S. based partnership or corporation becomes certified as a CDE investor this allows them to become an eligible for certain tax credits and other incentives available through the New Markets Tax Credit Program.
Keeping the focus of this article on Maine New Markets Capital Investment Program, these tax credits are design to also attract private and ‘outside’ investment into areas that are that are economically struggling as defined by the governing body that issues the certification for a CDE.
What needs to be understood is the Maine NMTC are not just stacks of cash given to a company or an individual. The tax credits are based upon the dollar value of the equity investments and applied against their federal income tax over a period of seven years with a maximum total of 39% the corporation or company’s original investment amount.
Two important points here with the first being that a tax credit is an amount of money that someone, or a business, can subtract from the taxes they owe to the government.
If a corporation makes an equity investment in the state of Maine with the original investment being $100,000.00 for example; this corporation can deduct $5,571.00 from the federal taxes they owe each year for the next seven years.
The big ‘Out Cry’ against The Maine New Markets Capital Investment Program was that tax credits were going to partnerships and corporations outside of the state of Maine and people wanted to know why these tax credits were not going to companies within the state of Maine.
The answer is simple if you’ll step back from your emotions and think logically and clearly; to get more money coming into the state of Maine, it must come from outside the state of Maine.
And a report from the Office of Program Evaluation and Government Accountability (OPEGA) did show that they residents of the state of Maine did, in fact, benefit from the Maine New Markets Capital Investment Program. (Reference: http://bangordailynews.com/2015/05/06/opinion/maines-new-markets-incentive-has-delivered-on-its-promise-should-be-expanded)
The real issue here is to understand that not each individual project was successful, but the program as a whole, was successful. Another factor to consider is the natural, and sad, tendency for people to always being looking for something negative and then screaming about it from the top of the world.