D. The investment with respect to which any individual or entity is applying for a tax credit certificate may not be more than an aggregate of $200,000 in any one eligible business invested in by a private venture capital fund in any 3 consecutive calendar years, except that this paragraph does not limit other investment by any applicant for which that applicant is not applying for a tax credit certificate and except that, if the entity applying for a tax credit certificate is a partnership, limited liability company, S corporation, nontaxable trust or any other entity that is treated as a flow-through entity for tax purposes under the federal Internal Revenue Code, the aggregate limit of $200,000 applies to each individual partner, member, stockholder, beneficiary or equity owner of the entity and not to the entity itself.

E. Each business receiving an investment from a private venture capital fund, which investment is used as the basis for the issuance of a tax credit certificate, must have annual gross sales of $2,000,000 $3,000,000 or less and the operation of the business must be the full-time professional activity of the principal owner, as determined by the authority. The principal owner and principal owner's spouse, if any, are not eligible for a credit for investment in that business or for an investment by the private venture capital fund in that business. A tax credit certificate may not be issued to a parent, brother, sister or child of a principal owner if the parent, brother, sister or child has any existing ownership interest in that business or in for an investment by the private venture capital fund in that business.

H. The investors qualifying for the credit must collectively own less than 1/2 of the private venture capital fund and less than 1/2 of any business in which an investment is made by the private venture capital fund, which investment is used as the basis for the issuance of a tax credit in a private venture capital fund are not entitled to the credit for collective ownership in excess of 50% of any business. An investor in a private venture capital fund determined by the authority to be a principal owner of a business and the principal owner's spouse, if any, are not entitled to a credit with respect to investment in that business, nor are the principal owner's parents,

siblings or children entitled to a credit if they have any existing ownership interest in the business.

Sec. 3. 10 MRSA §1100-T, sub-§4, as amended by PL 1999, c. 752, §3, is further amended to read:

4. Total of credits authorized. The authority may issue tax credit certificates to investors eligible pursuant to subsections 2, and 2-A and 2-B in an aggregate amount not to exceed $2,000,000 up to and including calendar year 1996, $3,000,000 up to and including calendar year 1997, $5,500,000 up to and including calendar year 1998, and $8,000,000 up to and including calendar year 2001, $10,000,000 up to and including calendar year 2002, $11,000,000 up to and including calendar year 2003 and $12,000,000 thereafter. The authority may provide that investors eligible for a tax credit under this section in a year when there is insufficient credit available are entitled to take the credit when it becomes available.

Sec. 4. Application. This Act applies to tax credit certificates issued on or after the effective date of this Act for investments made on or after the effective date of this Act.

SUMMARY

This bill amends the Maine Seed Capital Tax Credit Program. The changes increase the amount of the tax credit from 30% to 40% of an eligible investment, authorize the use of the credit for investments in certain private venture capital funds and allow the credit to flow through certain entities to the underlying taxpayer. In addition, the bill increases the total authorized amount of tax credits that may be issued under the program from $8,000,000 to $12,000,000 over a 4-year period.