A 20-year-old tax credit program that has benefited Bath Iron Works by $60 million will end next year unless the Legislature votes to renew it.
The Shipbuilders Tax Credit, which was custom-made for BIW, was designed to encourage heavy investment and hiring by the company but could be at risk in a political environment at the State House in which tax breaks of all kinds are under scrutiny.
The tax credit, launched in 1997, has sheltered up to $3.5 million per year in employee taxes for the shipyard in exchange for the company investing at least $200 million in its infrastructure and maintaining at least 3,500 full-time employees who have health insurance and retirement plans.
The tax credit program reached its long-term financial cap of $60 million during the current fiscal year, which ends June 30, 2018, and was set to sunset in December 2018.
In a written statement, the company said the credit is “very important to our future” and the jobs of 5,700 employees.
“We have never operated in a more competitive environment for new ships, and allowing the tax benefits we currently receive to continue is a significant contributor to that effort,” the statement reads.
Last month, a panel of legislative leaders unanimously allowed a bill that would extend the program, An Act to Encourage Major Investments in Shipbuilding Facilities and the Preservation of Jobs, to be considered in January when the full Legislature returns to Augusta.
Rep. Jennifer Dechant, D-Bath, who sponsored the bill, said she and others are working out the details before sending the concept to the Legislature’s Taxation Committee. The text of most new bills won’t be available until December or January.
Renewal of the program comes amid an ongoing study of Maine’s system of tax credits and economic development incentive programs, which range from benefits aimed at fisheries to reimbursements for equipment upgrades. The study, which was launched by legislation, is being done by the Office of Program Evaluation and Government Oversight, which is directed by the Legislature’s Government Oversight Committee.
In August, OPEGA released its findings on Pine Tree Development Zones. The report found that the success of the program — and whether taxpayers are seeing a return on their investment in terms of new jobs — was hard to gauge because it would require the publication of proprietary taxpayer data and a burden on the more than 200 participants.
Whether the tax credits are worth what they cost is a key question, said Rep. Ryan Tipping, D-Orono, who co-chairs the Legislature’s Taxation Committee.
“There’s a strong bipartisan feeling in Augusta that we need to make sure we’re wise using taxpayer money and that we have a chance to make sure that tax expenditures are doing the job they’re supposed to do,” Tipping said. The Taxation Committee has not yet discussed the Shipbuilding Tax Credit in depth, Tipping said.
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