Will Maine Republican leaders continue payouts for corporate scam artists?

Will Maine Republican leaders continue payouts for corporate scam artists?

A bill proposed by Democratic Representative Ryan Fecteau of Biddeford to close loopholes in the New Markets corporate tax credit program and recoup tens of millions of dollars lost to out-of-state investment firms through sham transactions faces an uncertain future. After a vote along party lines last month to stop the bill from being considered during the 2016 legislative session, the Legislative Council will today hear Fecteau’s appeal.

“The New Markets credit was an admirable idea that was supposed to help develop businesses in low-income communities,” said Fecteau in a statement. “Instead shrewd investors misused the intent of people’s tax dollars. We need to pass reform right now so that the misuse ends, the taxpayers get their money back and the program starts doing what it’s supposed to.”

The bill is a reaction to last year’s revelations that out-of-state investors have been bilking the state for millions of dollars in tax credits through single-day loans and other shady practices.

One particularly egregious case involves a scheme orchestrated by Cate Street Capital, a New Hampshire private equity firm that claimed it would bring $40 million in investments to the Great Northern paper mill it owned in East Millinocket.

As Whit Richardson at the Portland Press Herald reported:

“But of the $40 million, $32 million was in the form of one-day loans, $7 million was used to pay down high-interest debt and the rest went to brokers’ fees. None of the money was used to modernize the mill as described in the initial application to the program, yet taxpayers will pay $16 million to the investors. The mill closed and filed for bankruptcy last year.”

Richardson’s reporting revealed that $91 million, nearly half of the money meant to be invested in low-income communities through the tax credit program, “never made its way to the designated companies for new upgrades or expansions.”

Fecteau’s bill would reform the Maine New Markets Capital Investment Credit by directing the governor and state tax assessor to recapture tax credits associated with sham transactions. It would also designate the Finance Authority of Maine, instead of Community Development Entities, as the “owner” of tax credits issued under the program and increase accountability for future projects by establishing jobs creation and job quality standards.

Republican leaders, some of whom have taken campaign contributions from companies associated with the New Markets scam, seem unlikely to approve Fecteau’s appeal, allowing those firms to continue to collect tens of millions of dollars from the state in refundable tax credits.

Photo: Republican Senate leaders via official website.

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