94457 Chapter 325 Page 9 94457 FINANCE AUTHORITY OF

94457 Chapter 325 Page 9 94457 FINANCE AUTHORITY OF

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94-457 Chapter 325 page 9
94-457 FINANCE AUTHORITY OF MAINE
Chapter 325: MAINE NEW MARKETS CAPITAL INVESTMENT PROGRAM (Amendment
3)
Summary: This rule establishes the procedures, standards and fees
applicable to applicants under the Authority’s Maine New Markets
Capital Investment Program (the “Program”). Under the Program, the
Authority may allocate tax credit authority to a qualified community
development entity, which allocation acts as a reservation of
refundable tax credits that may subsequently be approved by the
Authority if the qualified community development entity obtains
qualified equity investments as certified by the Authority as provided
by 10 M.R.S.A. §1100-Z.
SECTION 1. DEFINITIONS
1. "Allocation Application" means the Authority’s then current
application for allocation of tax credit authority that is filed by a
CDE with the Authority.
2. "Allocation Application fee" means a non-refundable fee of $1,000
that shall be included with the Allocation Application at the time of
filing with the Authority.
3. “Annual Report fee” means a fee of $250 that shall be included with
the annual report required of a CDE as set forth below in Section 6.
4. "Applicant" means a CDE that files an Allocation Application or
Certification Application with the Authority as contemplated by 10
M.R.S.A. §1100-Z.
5. “CDE” means a Qualified Community Development Entity as defined by
this Rule, or a subsidiary thereof that is also a Qualified Community
Development Entity as defined by this Rule.
6. "CDFI Fund" means the U.S. Department of Treasury, Community
Development Financial Institutions Fund.
7. “Certification Application” means the Authority’s current
application for certification of a qualified equity investment in a
CDE.
8. “Certification Application Fee” means a non-refundable fee of
$2,500 that shall be included with a Certification Application at the
time of filing with the Authority.
9. “Code” means the United States Internal Revenue Code of 1986, as
amended.
10. "Commissioner" means the Maine Commissioner of Administrative and
Financial Services.
11. "Credit allowance date" means, with respect to any qualified
equity investment, the date on which the investment is initially made
in the CDE, and each of the successive six anniversary dates of that
date thereafter, provided the investment is certified by the Authority
as required by this Rule.
12. "Long-term debt security" means any debt instrument issued by a
CDE, at par value or a premium, with an original maturity date of at
least seven years from the date of its issuance, with no acceleration
of repayment, amortization or prepayment features prior to its
original maturity date. The CDE that issues the debt instrument may
not make cash interest payments on the debt instrument during the
period commencing with its issuance and ending on its final credit
allowance date in excess of the cumulative operating income (as
defined in the regulations adopted pursuant to the Code, Section 45D)
of the CDE for the same period, prior to giving effect to interest
expense on such debt instrument. This paragraph does not limit the
holder's ability to accelerate payments on the debt instrument in
situations when the CDE has defaulted on covenants designed to ensure
compliance with 10 M.R.S.A. §1100-Z; 36 M.R.S.A. §191(2)(SS); 36
M.R.S.A. §2351; or the Code, Section 45D.
13. “Low-income community” has the same meaning as set forth in the
Code, Section 45D.
14. “Non-metropolitan census tract” means a census tract located in a
non-metropolitan county as defined by the CDFI Fund.
15. "Purchase price" means the amount of the investment in the CDE for
the qualified equity investment.
16. "Qualified active low-income community business" or “QALICB” has
the same meaning as set forth in the Code, Section 45D and regulations
adopted thereunder, including 26 CFR Sec. 1.45D-1, but shall also
include an entity which, for the most recent calendar year ending
prior to the date of investment by the CDE, can demonstrate that 50%
or more of its gross income was derived from business activities
within, 50% or more of its tangible property was located within; or
50% or more of its services were performed within, a community in a
municipality that according to statistics published by the Maine
Department of Labor, experienced an unemployment rate greater than the
state average, during such period. To the extent statistics are not
reported for such municipality by the Maine Department of Labor, the
rates of the Labor Market Area in which such municipality is located
shall apply.
17. "Qualified community development entity" has the same meaning as
set forth in the Code, Section 45D, except that the entity must have
entered into or be controlled by or under the common control of an
entity that has entered into an allocation agreement with the CDFI
Fund with respect to credits authorized by the Code, Section 45D, and
must be authorized to operate in the State.
18. "Qualified equity investment" or “QEI” means any equity investment
in, or long-term debt security issued by, a CDE that:
A. Has at least 85 percent of its cash purchase price used by the
issuer to make qualified low-income community investments in qualified
active low-income community businesses located in the State by the
second anniversary of the initial credit allowance date;
B. Is acquired after December 31, 2011 at its original issuance solely
in exchange for cash; and
C. Is designated by the issuer as a qualified equity investment and is
certified by the Authority pursuant to 10 M.R.S.A. §1100‑Z(3)(G).
"Qualified equity investment" includes any qualified equity investment
that does not meet the provisions of 10 M.R.S.A. §1100‑Z(3)(G) if the
investment was a qualified equity investment in the hands of a prior
holder. The CDE shall keep sufficiently detailed books and records
with respect to the investments made with the proceeds of the
qualified equity investments to allow the direct tracing of the
proceeds into qualified low-income community investments in qualified
active low-income community businesses in the State.
1 9. “Qualified low-income community investment" or “QLICI”
means any capital or equity investment in, or loan to, any qualified
active low-income community business in the State, made after the
effective date of this rule, but on or before the effective date of
any certification of the Authority under Section 5 of this Rule, so
long as no more than 5% of such investment is used to: (1) refinance
costs, expenses or investments incurred or paid by the qualified
active low-income community business or a related party, prior to the
date of the qualified low-income community investment; (2) make equity
distributions from the qualified active low-income community business
to its owners; (3) acquire an existing Maine business or enterprise;
or (4) pay transaction fees. The maximum amount of qualified
low-income community investments that may be made in any one project
constructed, maintained or operated by the business on a collective
basis with all of its affiliates, with the proceeds of qualified
equity investments that have been certified under 10 M.R.S.A.
§1100-Z(3)(G), is $10,000,000, whether made by one or several CDE’s.
Notwithstanding the foregoing, with respect to any one project
constructed, maintained or operated by a business that is a
manufacturing or value-added production enterprise that projects to
create or retain in excess of 200 direct and indirect jobs as part of
the project for which the investment is made, the maximum QLICI shall
be $40,000,000. For the purposes of demonstrating the number of jobs
the project will create or retain, the applicant may include direct
operational employment of the QALICB, as well as the employment of
businesses in the supply chain for such business, but shall not
include any construction employment or induced employment caused by
consumer spending by employees of the QALICB or its suppliers. The
Application shall be accompanied by an IMPLAN study conducted by a
qualified independent professional or other evidence in either case
determined credible by the Authority. For the purposes of this
section, the term “supply chain” means businesses that regularly
provide goods or services, either directly, or indirectly through
other entities, to the QALICB or to suppliers of the QALICB, for their
business operations. For the purposes of this paragraph, with respect
to projects to which the $10,000,000 limitation applies, the term
“project” shall mean all land, buildings, structures, machinery and
equipment located at the same location and constructed, maintained or
operated by the qualified active low-income community business. For
the purposes of this paragraph, with respect to projects to which the
$40,000,000 limitation applies, the term “project” shall mean, and
refer separately to, each manufacturing or value-added production
facility which projects to create or retain more than 200 jobs,
including the land, buildings, structures, machinery and equipment
functionally related to, and integrated with, the manufacturing or
production process conducted on the site of that facility. The term
“project” shall not mean, and shall not refer separately to, the
component pieces of an integrated manufacturing or production process
conducted on the site of a particular facility.
SECTION 2. APPLICATION PROCESS FOR ALLOCATION OF TAX CREDIT AUTHORITY
1.
A CDE that seeks to obtain an allocation of tax credit authority
from the Authority pursuant to 10 M.R.S.A. §1100-Z shall file an
Allocation Application with the Authority and simultaneously pay
the Allocation Application fee.
2.
Within sixty days of receipt of an Allocation Application for tax
credit authority, the Authority shall either approve the
Allocation Application and, as part of that approval, indicate the
amount of tax credit authority issued to the CDE, or determine
that the Authority intends to deny the Allocation Application. If
the Authority intends to deny the Allocation Application, it shall
inform the CDE by written notice of the grounds for the intended
denial. Upon receipt of the notice of intended denial by the CDE:
A. If the CDE provides additional information required by the
Authority or otherwise completes its Allocation Application within
fifteen days, the Allocation Application must be considered complete
as of the original date of submission and the Authority has an
additional thirty days to either approve or deny the Allocation
Application; or
B.
If the CDE fails to provide the information or complete its
Allocation Application within the fifteen-day period, the
Allocation Application shall be deemed denied and may be
resubmitted in full with a new submission date.
3.
Allocation Applications may be submitted on or after January 1,
2012, via hand-delivery, mail, express mail, courier or electronic
means, provided, however, that the Applicant is responsible for
ensuring receipt of the Application by the Authority. Any
Allocation Application received prior to January 3, 2012 shall be
deemed received on January 3, 2012.
4.
Completed Allocation Applications will be processed in the order
received. Allocation Applications received on the same date shall
be treated as received simultaneously, and, to the extent there
are not sufficient credits available to fully allocate requested
tax credit authority for approved Allocation Applications that
were received on the same date, allocations of available tax
credit authority shall be pro-rated among such Applicants based
upon the amount of authority requested in each such Allocation
Application as a percentage of the total authority requested by
all such Allocation Applications.
SECTION 3. INFORMATION REQUIRED ON OR ATTACHED TO THE ALLOCATION
APPLICATION
The following information shall be required on or attached to the
Allocation Application:
1. The name, address and tax identification number of the CDE, and
evidence of the certification of the entity as a qualified community
development entity by the Secretary of the United States Treasury;
2. A copy of an allocation agreement executed by the CDE, its
controlling entity or other entity controlled by the same controlling
entity, and the CDFI Fund, which includes the State in its service
area;
3.
A certificate executed by an authorized executive officer of the
CDE attesting that the allocation agreement remains in effect and
has not been revoked or canceled by the CDFI Fund;
3.
A description of the amount of tax credit authority requested and
the proposed use of proceeds from any qualified equity investments
received or long-term debt security issued by such CDE for which
it intends to seek certification by the Authority under
10 M.R.S.A. §1100-Z; and
3.
Responses to the following five questions, which must be answered
affirmatively or negatively without explanation or elaboration
(simple yes or no answers), to determine qualification for
participating in the program:
A. Whether the CDFI Fund has awarded multiple rounds of federal New
Markets Tax Credit allocation to the CDE, its controlling entity or
other entity controlled by the same controlling entity;
B. Whether the CDE, its controlling entity or other entity controlled
by the same controlling entity, has participated as a qualified
community development entity in a state New Markets Tax Credit program
or has made an investment in this State that qualifies for federal New
Markets Tax Credits;
C. Whether the CDE, its controlling entity or other entity controlled
by the same controlling entity, has made an investment qualified for
tax credits in a business located in a non-metropolitan census tract;
D. Whether the CDE, its controlling entity or other entity controlled
by the same controlling entity, has made an investment qualified for
tax credits in a state where it did not previously have substantial
operations; and
E. Whether the CDE, its controlling entity or other entity controlled
by the same controlling entity, has explored potential investment
opportunities in this State that would qualify for credits under the
Program.
6. A description of the fees that the Applicant intends to charge for
transactions for which allocation is sought.
SECTION 4. AWARD OF ALLOCATION OF TAX CREDIT AUTHORITY; TERM OF AWARD
1.
A complete Allocation Application that affirmatively answers at
least four of the questions described in Section 3, Subsection 6
of this Rule shall be approved by the Authority and awarded an
allocation of tax credit authority pursuant to 10 M.R.S.A. §1100-Z
in the amount sought in the Allocation Application, but in no
event shall the aggregate allocation to any CDE and its affiliates
exceed $62,500,000 of investments, and provided, further, that
there remains sufficient allocation authority to fully award the
amount sought (up to the per CDE and affiliates limit of
$62,500,000 of investments) of each Allocation Application
approved by the Authority and received on the same date. If there
is not sufficient remaining allocation authority to fully award
allocations to Applicants submitting approved Allocation
Applications received on the same date, the awards among such
Applicants shall be pro-rated as provided in Section 2, Subsection
4 of this Rule. The Authority shall provide written notification
of an award of allocation authority to the Applicant. In no event
shall the Authority authorize more than $250,000,000 in aggregate
investments eligible for tax credit authority, or more aggregate
tax credit authority than such amount that, if all allocated
authority resulted in certified qualified equity investments
eligible for program tax credits simultaneously, no more than
$20,000,000 of credits could be taken or refunded in any one
fiscal year.
2.
An allocation of authority under this Section shall be valid for
up to two years. A CDE obtaining allocation may sub-allocate all
or a portion of its allocation to one or more subsidiary CDE’s,
provided the parent CDE files notice of such sub-allocation to the
Authority, together with a certification that the subsidiary CDE
is a subsidiary and meets all the requirements of a CDE under this
Rule, and all of the information required by Section 3(1) of this
Rule for such subsidiary. In the event that a CDE obtaining an
allocation, or one or more of its subsidiary CDE’s to which it has
sub-allocated, does not receive qualified equity investments
equaling or exceeding the allocation amount within two years of
the date of the allocation, and provide proof of each of the same
to the Authority within ten days of the investment, that portion
of the allocation that exceeds the aggregate amount of qualified
equity investments certified by the Authority for such CDE shall
lapse and no longer be allocated or available to the CDE, and may
be re-allocated by the Authority in accordance with 10 M.R.S.A.
§1100-Z and this Rule.
SECTION 5. CERTIFICATION OF ELIGIBILITY FOR TAX CREDITS
1.
To the extent a CDE obtains equity investments or issues long-term
debt securities within two years of the allocation of tax credit
authority, the CDE may file a Certification Application seeking
that the Authority certify such equity investments or issuance of
long-term debt securities as qualified equity investments eligible
for tax credits under 10 M.R.S.A. §1100-Z. The Certification
Application must contain the following information:
A.
Information regarding the proposed use of the proceeds from
the equity investments or issuance of long-term debt
securities, including: a description of the qualified active
low-income community business in which the proceeds will be
invested; the proposed use or uses of the proceeds by the
qualified active low-income community business; and the
low-income community or communities in which the proceeds will
be expended;
B.
The name and identification number of investor, type of
investment (whether debt or equity), purchase price, and
nature of consideration received and date of receipt, for each
investment for each taxpayer making a equity investment or
being issued a long-term debt security;
C.
A signed certification indicating that the Certification
Application has been executed by an executive officer of the
CDE, declaring under the penalty of perjury:
1.
That the Applicant’s allocation agreement remains in effect and
has not been revoked or canceled by the CDFI Fund; and
2.
That the cash purchase price for the investment has been received;
and
3.
That the statements in the original Allocation Application, as
well as in the Certification Application, including all
accompanying documents and statements, are and remain true,
correct and complete as of the date of the Certification
Application;
D.
A description of the fees to be charged as part of the
investment transaction; and
E.
The Certification Application Fee.
2.
Upon receipt of a completed Certification Application and
accompanying information, verification, and fees, the Authority
shall determine if the Certification Application should be granted
and the investment certified as a qualified equity investment
eligible for tax credits under 10 M.R.S.A. §1100-Z. If the
Authority finds that the investment should be certified, it shall
notify the CDE, the Commissioner, and Maine Revenue Services of
its approval, in writing, including the names of persons eligible
to claim tax credits, and the respective amounts thereof.
SECTION 6. REPORTING REQUIREMENTS; RECAPTURE
1. A CDE that has been awarded tax credit allocation authority
pursuant to Section 4 that has not submitted Certification
Applications as to all of its allocation authority must file an annual
report with the Authority on April 30, 2013 for the preceding calendar
year, and each succeeding April 30 for the preceding calendar year,
until all of its awarded allocation has been certified or has lapsed,
in each case with the Annual Report Fee, providing the following
information:
A.
A summary of activity of the CDE in seeking qualified equity
investments that have not been certified;
B.
The total amount of investment received by the CDE to date
that have not been certified, including investments for which
it intends to seek certification;
C.
To the extent investments have been received and not
certified, the qualified active low-income community business
in which such investments are intended to be re-invested by
the CDE;
D.
To the extent investments have been received but not
certified, the proposed use or uses of the proceeds by the
qualified active low-income community business if so
re-invested by the CDE;
E.
To the extent investments have been received and not
certified, the low-income community or communities in which
the proceeds will be expended by the qualified active
low-income community business if so re-invested by the CDE;
F.
The date by which the CDE intends to file its Certification
Applications;
2. A CDE that has received Certification as to some or all of its tax
credit allocation authority pursuant to Section 4 must file an annual
report with the Authority commencing April 30 of the year following
the calendar year it receives its first Certification, and on each
April 30 thereafter through the April 30 of the year following the
seventh anniversary date of the final Certification, with the Annual
Report Fee, providing the following information:
A.
A summary of activity of the CDE in completing the expenditure of
at least 85 percent of its qualified equity investments in
qualified low-income community investments within twenty four
months of receipt, including: the amounts invested to date; the
qualified active low-income community businesses in which the such
investments have been made by the CDE; the use or uses of the
proceeds of such investments by the qualified active low-income
community businesses; the low-income community or communities in
which the proceeds were expended by the qualified active
low-income community; and the estimated number of jobs created or
retained by the qualified active low-income community businesses
on account of such investments;
B.
Evidence of the maintenance of at least 85 percent of the
qualified equity investments as qualified low-income community
investments, including any repayment of qualified low-income
community equity investments and subsequent reinvestment in other
qualified low-income community investments;
C.
Whether and to what extent any federal new markets tax credits
have been subject to recapture for qualified equity investments
certified by the Authority;
D.
Whether and to what extent any principal repayments or redemptions
have been initiated by the CDE of any qualified equity investments
certified by the Authority.
3. As a condition precedent to certification by the Authority of an
investment as a qualified equity investment, the Applicant will enter
into an agreement with the Authority providing as follows:
A.
The CDE will use at least 85 percent of the qualified equity
investment to make a qualified low-income community investment in
a qualified active low-income community business in this State
within twenty-four months of its receipt of the qualified equity
investment, and maintain such level of qualified low-income
community investments in qualified active low-income community
businesses in the State until the last credit allowance date for
such credits, and notify the Authority and Maine Revenue Services
within thirty days of any failure to comply with this requirement;
B.
The CDE will notify the Authority and Maine Revenue Services
within thirty days of the CDE receiving notice that any amount of
federal tax credits available for the qualified equity investments
for which credits under this Program are certified are being
recaptured under Code section 45D, including the amount of
recapture and the reasons therefore;
C.
The CDE will notify the Authority and Maine Revenue Services
within thirty days of its having made a principal repayment or
full or partial redemption as to a qualified equity investment
that has been certified by the Authority as eligible for federal
tax credits prior to the date that is the final credit allowance
date, including the amount of such repayment or redemption.
4. If the CDE violates the agreement referenced in Section 6(3) of
this Rule, or otherwise is in violation of provisions of 10 M.R.S.A.
§1100-Z; 36 M.R.S.A. §5219-GG; or this Rule, or if an event described
in Section 6(2)(B), (C) or (D) of this Rule has occurred, the tax
credits related to the qualified equity investment certified by the
Authority shall be subject to recapture pursuant to 36 M.R.S.A.
§5219-GG.
5. The Authority may share any information it obtains in any
Allocation Application, Certification Application, or Annual Report
with the Commissioner and/or Maine Revenue Services, and in any event
may notify the Commissioner and/or Maine Revenue Services if it
becomes aware of any event or circumstance that may warrant recapture.
SECTION 7. WAIVER OF RULE
The chief executive officer may waive any requirement of this rule,
except to the extent that the requirement is mandated by statute, in
cases where the deviation from the rule is insubstantial and is not
contrary to the purposes of the program.
S ECTION 8. RETOACTIVE EFFECT OF AMENDMENT 3
The changes made by Amendment 3 of this rule, on both an emergency and
non-emergency basis, shall apply to all Certification Applications not
yet approved on the effective date of such amendments.
STATUTORY AUTHORITY: 10 M.R.S.A. §1100-Z; 36 M.R.S.A. §5219-GG
EFFECTIVE DATE:
January 1, 2012 – filing 2011-480
October 3, 2012 – filing 2012-283 (Amendment 1)
September 1, 2013 – filing 2013-213 (Amendment 2)
September 1, 2015 – filing 2015-165 (Amendment 3) (EMERGENCY)
November 9, 2015 – filing 2015-209 (Amendment 3)