SENATE GOP VOTE AGAINST BILL TO SAFEGUARD TAXPAYER DOLLARS

Measure seeks to recoup taxpayer funds abused under New Markets Tax Credit program

AUGUSTA – In a party-line vote of 19 to 15, Senate Republicans tanked a bill that would safeguard taxpayer dollars meant to spur job growth and allow the state to recoup taxpayer funds abused under the New Markets Capital Investment Program.

Democrats on the Labor, Commerce, Research and Economic Development Committee (LCRED) crafted the amended the  bill that would give the state the authority to recoup or revoke taxpayer dollars from a deal deemed to be sham transactions. It also adds stronger taxpayer and consumer protections by eliminating the one-day loan scheme used by Cate Street Capital and requires an independent review of the program by the Government Oversight Committee.

Sen. John Patrick of Rumford

“What happened with Cate Street is a sham transaction and the taxpayers of Maine have been on the hook for this,” said Democratic State Senator John Patrick of Rumford, who serves on the state’s LCRED committee. “It’s wrong that we are allowing out of state financiers to abuse one-day loans and make phony investments. Something needs to be done and this bill seeks to do something with common sense.”

Cate Street Capital, the New Hampshire-based private equity firm, which owned the Great Northern Paper mill, used the New Markets program to help lower the taxes it paid on a $40 million investment in the East Millinocket mill. At the time, the company promised the investment would lead to more jobs and a resurgence at the mill. But after one year, the company filed for bankruptcy and laid off 200 workers.

The measure comes in the wake of investigative reports from the Portland Press Herald uncovering how Cate Street Capital and Louisiana finance firms took millions of dollars in taxpayer funds from the tax credit program as part of an illusory and sophisticated tax scheme meant to avoid tax liability. The U.S. Internal Revenue Services calls these kinds of schemes “sham transactions.”

The Maine House passed the measure by a vote of 100 to 42 last night. The bill remains in non-concurrence with the House. It will go back to the House where they can choose to “insist” on passage of the bill which would effectively kill the bill or “recede and concur” which would refer the bill to the Taxation Committee.

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