HP1227, LD 1781, item 1, An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs

An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs

Be it enacted by the People of the State of Maine as follows:

Sec. 1. 36 MRSA §5219-RR is enacted to read:

§ 5219-RR. Tax credit for major shipbuilding facility investment

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

A. "Certified applicant" means a qualified applicant that has received a certificate of approval from the commissioner pursuant to this section.

B. "Commissioner" means the Commissioner of Economic and Community Development.

C. "Employment" means, for each calendar year, the amount determined by adding the total number of qualified employees of a certified applicant on each of 6 consecutive measurement days of that calendar year as chosen by the certified applicant and then dividing that sum by 6.

D. "Exception year" means a calendar year in which a certified applicant has employment of less than 5,000 if the Maine income taxes deducted and withheld by the certified applicant from qualified employees for that year total at least $6,000,000. Beginning January 1, 2023, "exception year" means a calendar year in which a certified applicant has employment of less than 4,000 if the total Maine income taxes deducted and withheld by the certified applicant from qualified employees for that year totals at least $6,000,000. A certified applicant is allowed 2 exception years between January 1, 2020 and December 31, 2039.

E. "Facility" includes real estate, tangible personal property, fixtures, machinery and equipment.

F. "Measurement day" means the last business day of every other month of a calendar year.

G. "Qualified applicant" means an applicant for a tax credit under this section that satisfies each of the following requirements:

(1) The applicant owns or operates or proposes to construct a shipbuilding facility within the State;

(2) The applicant proposes to make a qualified investment; and

(3) The applicant employs at least 5,000 qualified employees at the time the application is filed.

H. "Qualified employee" means a person:

(1) Who is a full-time employee of the certified or qualified applicant, as the case may be;

(2) Whose income from that employment is taxable under chapter 803;

(3) For whom a retirement program is provided subject to the federal Employee Retirement Income Security Act of 1974, 29 United States Code, Sections 1001 to 1461, as amended;

(4) For whom group health insurance is provided; and

(5) Whose income calculated on a calendar year basis is greater than the average annual per capita income in the State.

I. "Qualified investment" means expenditures incurred on or after January 1, 2018 that total at least $100,000,000 and are related to the construction, improvement, modernization or expansion of a shipbuilding facility within the State, including, without limitation, all expenditures for investigation; planning; design; engineering; permitting; acquisition; financing; construction; demolition; alteration; relocation; remodeling; repair; reconstruction; design, purchase or installation of machinery and equipment; clearing; filling; grading; reclamation of land; activities undertaken to upgrade a waterway serving the facility; training of employees; capitalized interest; professional services, including, but not limited to, architectural, engineering, legal, accounting or financial services; administration; environmental and utility costs, including, without limitation, sewage treatment plants, water, air and solid waste equipment and treatment plants, environmental protection devices, electrical facilities, storm or sanitary sewer lines, water lines or amenities, any other utility services, preparation of environmental impact studies, informing the public about the facility and environmental impact and environmental remediation, mitigation, clean-up and protection costs; related offices, support facilities and structures; and any of the foregoing expenditures made or costs incurred prior to or after the effective date of this section or certification of an applicant. "Qualified investment" includes only expenditures that are capitalized for federal income tax purposes. Except for employees who are engaged in the design, engineering and construction of the facility, "qualified investment" does not include the salaries or other compensation paid to the employees of the qualified applicant or of any affiliate of the qualified applicant. "Qualified investment" does not include any expenditure included as a qualified investment by an applicant under chapter 919.

2. Procedures for application; certificate of approval. This subsection governs the application and approval process for the tax credit under this section.

A. A qualified applicant may apply to the commissioner for a certificate of approval. An applicant shall submit to the commissioner information demonstrating that the applicant is a qualified applicant. A certified applicant may hold only one certificate under this section at any time.

B. The commissioner, within 30 days of receipt of an application under paragraph A, shall review the information contained in the application and issue a written determination as to whether the applicant is a qualified applicant. If the commissioner determines that the applicant is a qualified applicant, the commissioner shall issue a certificate of approval to the qualified applicant at the time of the determination. If the commissioner determines that the applicant is not a qualified applicant, the commissioner shall issue a denial of the application at the time of the determination.

C. Upon issuance of a certificate of approval to a qualified applicant, the commissioner shall enter into an agreement on behalf of the State with the qualified applicant. That agreement must provide that:

(1) The State shall allow the credit provided for in this section as it is in effect on the date the certificate of approval is issued for as long as the qualified applicant qualifies for the credit provided for in this section on the date the certificate is issued;

(2) The qualified applicant, when awarding contracts, purchasing supplies or subcontracting work related to a qualified investment, shall give preference, to the greatest extent possible, to Maine workers, companies and bidders as long as the supplies, products and bids meet the standards required by the qualified applicant for best value, including, without limitation, quality and delivery, and are competitively priced; and

(3) The qualified applicant, in conjunction with the Department of Economic and Community Development, shall sponsor regional seminars for Maine businesses on how to do business with the qualified applicant.

D. If a certified applicant proposes to transfer, including, without limitation, transfer by operation of law, all or substantially all of the shipbuilding facility in which a qualified investment was made to another person or if a person proposes to acquire 50% or more of the voting stock of the certified applicant, application may be made to the commissioner to approve transfer of the certificate of approval to that person in connection with the transfer of the stock or facility. The commissioner shall grant the transfer of the certificate only if:

(1) The transferee of the shipbuilding facility or of the certified applicant's stock is a member of the certified applicant's affiliated group as defined in section 5102, subsection 1-B at the time of the transfer; or

(2) The transferee of the shipbuilding facility or of the certified applicant's stock is not a member of the certified applicant's affiliated group as defined in section 5102, subsection 1-B at the time of the transfer and the commissioner finds that the transferee intends to continue the operations of the shipbuilding facility in substantially the same manner as prior to the transfer and has the financial capability to do so. In addition, prior to approval of any transfer, the commissioner may request and be provided with the report and audit of the transferor pursuant to section 6854. The commissioner may condition the approval of the transfer based upon the findings of the report and audit.

If the commissioner grants a transfer of the certificate of approval, the transferee must be treated as the certified applicant for all purposes of this section. For purposes of calculation of employment and qualified investments of the certified applicant, the qualified employees and the qualified investments of the transferor prior to transfer must be considered the qualified employees and qualified investments of the transferee.

E. A certificate of approval must be revoked by the commissioner if the certified applicant has not made qualified investments of at least $100,000,000 within 5 years after issuance of the certificate of approval. A certified applicant whose certificate of approval is revoked within 5 years after issuance of the certificate of approval shall pay to the State the amount of any credits claimed by the certified applicant under this section prior to revocation of the certificate. A certified applicant whose certificate of approval is revoked between 6 and 10 years after issuance of the certificate of approval shall pay to the State the amount of any credit claimed by the certified applicant under this section between the 6th year and the year in which the certificate is revoked.

F. The applicant or certified applicant may appeal in accordance with Title 5, chapter 375, subchapter 7 any determination, action or failure to act by the commissioner or the State Tax Assessor.

3. Credit. A certified applicant is allowed a credit against the tax otherwise due under this Part as provided in this subsection.

A. Beginning with the tax year following the calendar year during which the qualified investment reaches $100,000,000 and for each of the following 19 tax years, a certified applicant is allowed a credit against the tax due under this Part in each tax year in an amount equal to 3% of the certified applicant's total qualified investment.

B. The credit allowed under this subsection must be applied after subtraction of all other credits for which the certified applicant is eligible. Any unused credit is fully refundable.

4. Limitations. The following are limitations on the credit allowed under subsection 3.

A. Cumulative credits taken under this section may not exceed $60,000,000 to any certified applicant or transferee.

B. A credit is not allowed for any calendar year beginning before January 1, 2020 or after December 31, 2039.

C. Until January 1, 2023, a credit is not allowed for a calendar year in which the qualified applicant has employment of less than 5,000 unless that calendar year is an exception year. Beginning January 1, 2023, a credit is not allowed for a calendar year in which the qualified applicant has employment of less than 4,000 unless that calendar year is an exception year. The amount of the credit in an exception year is provided for in subsection 9.

5. Annual reporting by certified applicant. On or before March 1st annually a certified applicant shall file a report with the State Tax Assessor and the commissioner for the immediately preceding calendar year, referred to in this section as "the report year," containing the following information:

A. The employment of the certified applicant for the report year; and

B. The incremental level of qualified investments made during the report year.

The State Tax Assessor may prescribe forms for the annual reports described in this subsection. The report required by this subsection is not subject to the confidentiality provisions of section 191 and may be made available to the public upon request.

6. Audit of report. The State Tax Assessor has the authority to audit any report or return filed under this section to ensure the certified applicant was eligible for the credit claimed by the certified applicant. If the certified applicant has claimed a credit in an amount that the State Tax Assessor concludes exceeded the amount that the certified applicant was entitled to claim for that calendar year, the State Tax Assessor shall issue an assessment for that amount pursuant to section 141. A certified applicant may seek reconsideration of any determination or assessment pursuant to section 151.

7. Report to Legislature. The State Tax Assessor shall report to the joint standing committee of the Legislature having jurisdiction over taxation matters aggregate data on employment levels and qualified investment amounts of a certified applicant for each year beginning with expenditures incurred on or after January 1, 2018. The report must be made during the first regular session of each Legislature, beginning with the 129th Legislature.

8. Accelerated credit. If a certified applicant has employment in any calendar year of at least 5,250, the credit authorized in subsection 3 must be increased to 110% of the credit due otherwise under subsection 3.

9. Decelerated credit in exception year. The credit due a certified applicant in an exception year is determined pursuant to this subsection.

A. If a certified applicant has employment in an exception year of less than 5,000 but at least 4,750, the credit authorized in subsection 3 for that year must be decreased to 90% of the credit otherwise due under subsection 3.

B. If a certified applicant has employment in an exception year of less than 4,750 but at least 4,500, the credit authorized in subsection 3 for that year must be decreased to 80% of the credit otherwise due under subsection 3.

C. If a certified applicant has employment in an exception year of less than 4,500 but at least 4,250, the credit authorized in subsection 3 for that year must be decreased to 70% of the credit otherwise due under subsection 3.

D. If a certified applicant has employment in an exception year of less than 4,250 but at least 4,000, the credit authorized in subsection 3 for that year must be decreased to 60% of the credit otherwise due under subsection 3.

E. If a certified applicant has employment in an exception year of less than 4,000, the credit authorized in subsection 3 for that year must be decreased to 50% of the credit otherwise due under subsection 3.

summary

For tax years beginning on or after January 1, 2020 and continuing for the next 19 years, this bill provides a tax incentive for major investments in a shipbuilding facility and the preservation of jobs at that shipbuilding facility by allowing the shipbuilding facility an annual income tax credit equal to 3% of the shipbuilding facility's total qualified investment, as long as certain employment levels are maintained. In order to qualify for the credit, the shipbuilding facility must make expenditures after January 1, 2018 of at least $100,000,000 that are related to the construction, improvement, modernization or expansion of the shipbuilding facility and maintain at least 5,000 employees. If the shipbuilding facility employs at least 5,250 employees, the facility is entitled to an amount equal to 110% of the credit. The facility may employ fewer than 5,000 employees in 2 separate years within the 20-year period and still qualify for the credit, but at a prorated reduction.

The purpose of this bill is to encourage major investments in shipbuilding facilities in this State, to ensure the long-term survival of the shipbuilding industry, to preserve numerous opportunities for jobs for the people of this State and to make the State more competitive in the shipbuilding industry and thus ensure the preservation and betterment of the economy of the State for the benefit of its people.

HP1227 LD 1781	Session - 128th Maine Legislature		LR 2789 Item 1
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