The Maine Seed Capital Tax Credit Program has successfully attracted private venture capital to early stage, high growth businesses for over 30 years. In recent years, however the annual $5 million ceiling has been used up earlier each year. In 2019, the $5 million ceiling was oversubscribed on the first business day of January. With no additional tax credit available until January 2020, it has become much more of a challenge for companies to raise needed venture capital.
The Program is administered by the Finance Authority of Maine (FAME). Recognizing the problem of the absence of credit for the remainder of this year, FAME developed a legislative proposal to increase the credit from $5 million each year to $15 million. That increase would provide companies and investors with the certainty to move forward with aggressive growth plans. To help pay for the increase, the FAME bill would drop the credit percentage from 50% to 40% and reduce the maximum credit available to any one business. The fiscal note added to the bill projects a first year cost to the State of $1.3 million and a second year cost of $2.9 million.
The good news is that the Legislature showed very strong bipartisan support for the bill. The bad news is that State budget realities did not allow the Legislature to fund the projected fiscal cost of the Program increase in this Session. As a result, the FAME bill was carried over to the Second Regular Session of the Legislature, which convenes in January.
Unless the Legislature is able to act on the bill in a Special Session, which is unlikely, the existing rules will apply to the $5 million of credits that will come available in January. It’s likely that the $5 million will again be fully allocated on the first business day of 2020. FAME will review all applications received during business hours on Thursday, January 2. If the amount of credit requested exceeds $5 million, FAME will pro-rate the $5 million over all accepted applications. That means that no one need line up in the middle of the night to get a place in line. On the other hand, it also means that you will have no way of knowing what percentage of credit is available because it will depend on the amount of applications received on that day.
Governor Mills has created a Task Force and charged it with developing an economic development plan for the State by November of this year. It would greatly help the chances of getting an increase in the Seed Capital Tax Credit if the FAME proposal is included in the report of the Task Force. Led by Commissioner Heather Johnson of the Department of Economic and Community Development and FAME CEO Bruce Wagner, the Task Force is seeking input from the public at large on its strategic plan both at public sessions and in written form. 
The web site for the Task Force is at https://www.maine.gov/decd/programs/strategic-plan.

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