Paper Trails

What is the Employment Tax Increment Financing Credit?

There are many headaches that come with operating a business.  Hiring and labor costs are right at the top of this list.  Fortunately, there are many lesser known state programs that business can take advantage of to assist them in offsetting some business costs.  One of these lesser known Maine programs is know as Employment Tax Increment Financing (ETIF) program.  Let’s take a look at what the Employment Tax Increment Financing Credit is.

What is the Employment Tax Increment Financing Credit?

Employment Tax Increment Financing (ETIF) is a Maine state program that assists Maine businesses hire new employees.  This program pays anywhere from 1.35% up to 3.6% of qualified employee income back to the business.  Businesses can receive these payments for up to 10 years.  The percentage of income that a business can receive is based on the level of local unemployment.  Eligible companies in the Pine Tree Development Zone program receive the highest reimbursement rate of 3.6%.

Which businesses qualify for this plan?

There are some regulations around which businesses qualify to receive this reimbursement.  Businesses must:

  • Be a non-retail, non-public utility, for-profit business.
  • Hire 5 or more new full-time, qualified employees within two calendar years of becoming certified.

As stated above, businesses must hire 5 or more qualified employees.  So, what is a qualified employee?  Qualified employees must:

  • Work a job that provides a total income above the county average. Wages, bonuses, commissions, and employer payments toward benefits such as retirement and health insurance count towards the total income measure.
  • Be provided access to a group health care plan.
  • Be provided access to group retirement benefits, subject to ERISA, such as a 401-K or pension plan.

How can businesses apply for the ETIF Credit?

Businesses that plan to hire 5 or more new employees within two calendar years of becoming certified can begin the application process.  For example, if your company is ETIF-certified in 2023, you will have until the end of 2024 to hire the five new qualified employees.  Below are the steps of the application process:

  • Submit a But For letter (sample provided here) prior to any public announcement of your project. The letter is your statement that, without ETIF benefits, your business would not be creating new jobs in Maine.
  • DECD acknowledges receipt of your But For letter and gives the green light to submit a full application.
  • Submit a completed application.  2023 application can be found hereApplication instructions are here.
  • DECD reviews the application and, if all requirements are met, approves it.
  • Once you are approved, you are clear to file for an ETIF payment during the next reporting season, which occurs each March.

Once businesses are approved, they must complete this Vendor Activation Form in order to receive payment from the state.

Next, you must submit your ETIF report annually to receive payments.  Follow these steps to do this:

  • Fill out and submit an annual report by March 15th each year. (For example, your CY2023 report will be due March 15, 2024.)
  • In late January each year, DECD mails an annual reminder and instructions for online filing of reimbursement requests.
  • The Legislature charges DECD with collecting information necessary for the State to administer the ETIF program. To ensure full program compliance, reporting is mandatory.

Lastly, remember to keep your employee documentation current, including all W-2s, plus records of health insurance, retirement contributions, and other benefits.