Dirigo Business Incentives Tax Credit
Eligibility and certification
The credit is available only to for-profit businesses primarily engaged in eligible sectors, such as agriculture, manufacturing, long-distance freight transportation, software publishing, data processing, computer design and specific research and development activities. Businesses must first apply and receive approval from the DECD. The DECD will issue a letter of certification valid for five years. Certain businesses are excluded, including public utilities, employment tax increment financing (ETIF) participants, holders of specified credits and those with qualifying layoffs in the past two tax years.
Qualified investment and training expenses
Eligible capital investment includes expenditures exceeding $50,000, incurred after the certification letter is issued, for ‘eligible business property’ placed in service during the tax year. Property must be used exclusively in the certified activity. Certain property is excluded, including affiliate purchases, primarily retail-use assets, excise-taxed vehicles or watercraft and real property placed in service before the claim year.
Qualified employee training programs must train at least three employees, with a minimum of 20 training hours each, and must either pay regular wages for training hours or provide benefits exceeding $2,000 per participant. Training must begin on or after the certification date and be delivered through a registered apprenticeship, on-the-job training, Maine Community College System programs or higher-education programs.
Credit calculation and refundability
Beginning in 2025, the credit equals 5% of eligible capital investment placed in service in Cumberland, Sagadahoc and York counties, and 10% of qualified capital investment placed in service in all other counties, plus $2,000 for each employee completing a qualified training program within the year. A credit reduction applies if qualified property is moved outside the state during the tax year.
The credit is refundable up to $500,000 per tax year, with a $2 million annual cap for all credits, including carryovers. Unused credits may be carried forward for up to four years.
Recapture, disallowance and layoffs
If qualified property generating the credit is removed from service before the fifth anniversary of being placed in service, a proportional recapture of the credit applies. Unused carryover amounts will also be disallowed if the property is removed during the five-year period or if there is a reduction of qualified employees. The training credit is not recaptured unless the related year’s capital portion is also recaptured.
Takeaways
The Dirigo Business Incentives Tax Credit, originally enacted in 2023, offers a refundable tax credit for both capital investment and employee training beginning with the 2025 tax year, but only for certified qualified activities in certain sectors. Taxpayers must substantiate both capital investment and employee training costs incurred to claim the credit. Businesses must apply to the program and receive prior approval from the DECD to receive incentives.
Maine businesses with questions about the new incentives should speak to their credits and incentives advisers or contact them to begin an eligibility review.
