Important Notice: Additional $10 Million in Tax Credits Now Available for 2020
Under newly enacted law (PL 2020, Ch. 616), tax credit authority for 2020 was expanded from $5 million dollars to $15 million for the calendar year. Having already awarded $5 million in credits on January 2, 2020, FAME now has the authority to issue up to $10 million in tax credits under the program for eligible investments made in eligible companies ON OR AFTER April 1, 2020. Investments made prior to April 1, 2020 are not eligible, and credits already issued in 2020 for investments made on or about January 2, 2020 will not be adjusted.
Other Important Changes
The new legislation made additional program changes, effective April 1, 2020:
- Credits are now authorized at 40% (down from 50%) of eligible investment;
- The maximum cumulative qualified investment in each company was reduced to $3.5 million dollars (down from $5 million).
- There is now a limit of qualified investment in any one company in any one year of $2 million dollars.
The limits set forth in #2 and #3 above will be applied commencing with applications received on or after April 1, 2020, and will count all investments already made in companies, both cumulatively and earlier in 2020.
Process Updates and Modifications
FAME will begin processing applications on April 1, 2020. While the forms are the same (and available on our website), we have changed our process in light of our offices being closed to the public due to the COVID-19 pandemic.
We are asking that business and investor applications be submitted on paper, with checks, by regular USPS mail or commercial delivery services like FedEx or UPS, as was the normal course pre-pandemic. Importantly, we are also asking that electronic copies of such applications be delivered by email to or . If no electronic copy is provided, we cannot guarantee that it will be timely processed. We are not accepting hand-delivered applications, as our offices are currently closed to the public.
We do not think new credits will be fully utilized on April 1. In fact, we believe that credits will last for several months, if not until the end of the year. However, this is just a good faith estimate based on past administration. Participating companies and prospective investors should check with FAME regularly to monitor the balance of remaining credits during the course of the year.
The Maine Seed Capital Tax Credit Program is designed to encourage equity investments in Maine businesses, directly and through private venture capital funds. FAME may authorize state income tax credits to investors for 40% of the cash equity provided to eligible Maine businesses. Investments may be used for fixed assets, research or working capital.
- Businesses located in Maine.
- Investor must own less than 50% of the business and may not otherwise control the business (as determined by FAME).
- Principal owners and their immediate relatives are not eligible.
- Annual gross sales of less than $5,000,000.
- Business must either:
- be a manufacturer;
- provide goods or services with 60% of sales derived from outside the state or to out-of-state residents, but with a majority of company employees in Maine;
- develop or apply advanced technologies;
- be a value-added natural resource enterprise; or
- 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.
Amount of credits available each year is expanded as of April 1, 2020 to $15,000,000.
Starting on January 1 each year, credits are issued on a first-come, first-servedbasis to investors who submit a complete application. If you have questions, including whether credits remain available for any year, please contact Jennifer Cummings, Director of Business Programs, Christopher Roney, General Counsel, or Michelle MacKenzie, Commercial Lending Assistant, at 800-228-3734 or 207-623-3263 (TTY: 207-626-2717).
- Tax credits equal to 40% of the investment.
- An investor may provide up to $500,000 per business in any consecutive three-year period.
- Aggregate investment limit per business is $3,500,000 for which tax credit may be received.
- Investments must be at risk for five 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.
- Credits must be taken in increments of 25% (of the credit) per year starting in the year of the investment. For investment not made through private venture capital funds, credits used cannot exceed 40% 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 four 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 three-year period.
- No one company can receive investments of more than $3,500,000 lifetime or more than $2,000,000 annually, qualifying for credits, including investments through a private venture capital fund, but may receive more without credits.
- Private venture capital funds may not own more than 50% of a company receiving investments, or otherwise control the business (as determined by FAME).
- 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 five 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.
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.
A business must apply for eligibility prior to receiving investments for tax credits. If the business has more than ten (10) employees, the Employment Plan must be included with the Business Application along with all supporting documents referenced in the Enclosures section on page 2 of the application.
Submit the Individual Investor Application along with all supporting documents referenced in the Enclosures section on page 2 of the application.
Private Venture Capital Funds
Submit the Private Venture Fund Application along with all supporting documents referenced in the Enclosures section on page 2 of the application.
A completed application must contain the appropriate Maine Seed Capital Tax Credit application form:
- Maine Seed Capital Tax Credit Business Application
- Maine Seed Capital Tax Credit Individual Investor Application
- Maine Seed Capital Tax Credit Private Venture Fund Application
and all supporting documents referenced within it. Businesses with more than ten (10) employees must also submit a completed Employment Plan form.
For best results, please download .pdf forms locally, then open and complete them with Adobe Acrobat. If you don’t have Acrobat, you can download a free version of Adobe Acrobat Reader here. Complete, save, and email your completed forms to mmackenzie@FAMEmaine.com. You may also mail printed forms to the Finance Authority of Maine, PO Box 949, Augusta, ME 04332-0949. We are not accepting hand-delivered applications as our office is closed due to the COVID-19 pandemic.
The Maine Office of Securities provides industry information and resources. In addition to fielding consumer complaints, the office also welcomes questions about investments, financial professionals, and securities laws. MOS also protects Maine investors by licensing broker-dealers, agents, investment advisers, and investment adviser representatives; reviewing registration statements and exemption filings for securities issuers that are seeking to sell in Maine; and investigating and prosecuting violations of the securities laws.