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Maine Seed Capital Tax Credit Program

This program is designed to encourage equity and near-equity investments in eligible Maine businesses, directly and through private venture capital funds. FAME may authorize state income tax credits to investors for up to 60% of the cash equity they provide to eligible Maine businesses. Investments may be used for fixed assets, research or working capital.

Eligibility

Businesses located in Maine.
Investors must own less than 50% of the business.
Principal owners and their immediate relatives are not eligible.
Annual gross sales of less than $3 million.
Business must either: 1) be a manufacturer; 2) provide goods or services with 60% of sales derived from outside the state or to out-of-state residents; 3) develop or apply advanced technologies; 4) bring significant permanent capital into the state; 5) be certified as a visual media production company.
Operating the business must be the professional, full-time activity of at least one of the principal owners.

Basic Terms

Tax credits equal to 60% of the investment (50% for investments made in private venture capital fund).
An investor may provide up to $500,000 per business.
Aggregate investment limit per business is $5 million for which tax credit may be received.
Investments must be at risk for 5 years.
Credits must be taken in increments of 25% (of the credit) per year commencing in the year of the investment. For investment not made through private venture capital funds, credits used cannot exceed 50% of the total tax due by the investor for that taxable year before application of the tax credit, and to the extent this limitation requires the taxpayer to take the credit over more than 4 years, unused credits may be carried forward no more than 15 years. For private venture capital funds, credits are refundable.

Special rules for private venture capital funds

Investors may provide up to $500,000 per business, including through a private venture capital fund in any consecutive 3-year period.
No one company can receive investments of more than $5,000,000 qualifying for credits, including investments through a private venture capital fund, but may receive more without credit.
Private venture capital funds may not own more than 50% of a company receiving investments.
No member of the private venture capital fund may be a principal owner.
Business receiving investment from private venture capital fund must keep operations in state for four years following investment.
Investment into private venture capital funds must be at risk and principal may not be paid without FAME consent for 5 years. Dividends, royalties, interest, stock options or warrants and other forms of return, which are not in the nature of return of principal, are allowed.

Reporting Requirements

Businesses receiving investments for which credits are issued, must file annual reports with information on the total investments received, number of employees and jobs created/retained, annual payroll and total sales revenue. Failure to file reports will result in ineligibility and possible revocation of credits issued.