PORTLAND, Maine — Maine’s papermakers in 2015 received many of the biggest payments from a program that gives tax breaks for equipment and facilities.
The state has allowed businesses to recover property taxes paid on certain equipment and facilities put in service roughly between 1995 and 2007. About 1,400 companies tapped that reimbursement program in the last year. Among the top were papermakers such as Verso, Lincoln Paper and Tissue and Sappi.
The state makes the payments through the Business Equipment Tax Reimbursement program, or BETR (pronounced “better”). Payments from BETR totalled about $33.3 million, or around 1 percent of the state’s annual budget, during the state’s fiscal year ended June 2015.
Those payments for the state’s 2015 fiscal year went out to reimburse companies for equipment they had in operation during the 2013 calendar year, with some of the largest reimbursements going to paper companies, some of which stopped operating this year.
Of the total reimbursed against 2013 property taxes, about 10 percent went to companies owned by Verso Paper Corp., controlled by Apollo Global Management.
Other major recipients of reimbursements include the parent company of paper maker Sappi, Poland Spring owner Nestle, Hannaford owner Delhaize and National Semiconductor owner Texas Instruments and Bath Iron Works owner General Dynamics.
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Those aren’t the only tax breaks received from the state, but those under the BETR program are the only ones disclosed individually. For some companies, Bath Iron Works in particular, the state’s annual report discloses other incentives, including the at least $3 million-per-year shipbuilding facility credit that the company can claim for 20 years. That credit started in 1997.
As a condition of that credit, the company has to report its annual investments, which it listed as $389 million through 2014, when it invested another $30.5 million in facility improvements.
A new model
In recent years, the state has shifted away from the reimbursement model for such business equipment incentives, preferring local exemptions for the equipment.
The difference is that a business benefits from the exemption immediately, rather than having to pay the local tax and then file for a reimbursement check from the state in a later year. The shift has contributed to a steady decline in major recipients for the BETR program.
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The total going to companies receiving $1,000 or more in reimbursements has decreased in recent years.
The Legislature’s reduction in reimbursement rates also contributed to that decline during the past two years, dropping to 90 percent and then 80 percent in 2014. The full reimbursement will be available to companies in the budget approved for fiscal years 2016 and 2017.
The shift away from a reimbursement model for those tax breaks has many implications, which came to the forefront in budget talks during the last legislative session, when Gov. Paul LePage’s initial budget proposed transitioning companies using the BETR program to the exemption program, called BETE.
The change stood to lower tax revenue for municipalities, raising opposition from many communities, including Bangor, which has about 300 businesses with property that is reimbursed under the BETR program, according to legislative testimony earlier this year by Bangor assessor Philip Drew.
The city collects about $1.7 million in taxes from that property, which is then reimbursed in full or in part (the rate declines after 12 years of exemptions). Under the exemption program, the state reimburses municipalities for 50 percent of the revenue they don’t collect, meaning the current revenue on any property in the BETR program would have been cut in half.
For disclosure, the shift to BETE means one other thing: property tax breaks will not need to be individually disclosed by business.
Since the BETR checks are cut by the state, the Department of Economic and Community Development and Maine Revenue Services discloses that all in one place. That will continue until all of qualifying property is out of commission.
But disclosures of exempt property under the BETE program likely won’t be as detailed. New accounting rules that take effect in fiscal year 2017 require municipalities to report tax abatements with economic development goals by program, but don’t require disclosure by recipient.