Both sides weigh in as Pine Tree Development Zone tax incentive program faces renewal

A controversial state tax incentive program is up for renewal this year, but some members of the legislature aren’t sure it should be extended again. And it’s not the first time the program’s benefits to the state have been questioned.

In 2003, the legislature created the Pine Tree Development Zone program, which grants 10-year state income tax credits and sales tax exemptions to businesses that create jobs in certain industries that have an overall compensation package better than the county average. The only counties that don’t qualify for the incentives are Cumberland and York counties, although some specific municipalities within those counties are eligible, according to a Maine Office of Business Development explainer.

Sectors eligible for the incentives include biotechnology; aquaculture and marine technology; composite materials technology; environmental technology; advanced forestry and agriculture technologies; manufacturing and precision manufacturing; information technology; and financial services.

The program was last renewed in 2021. Before that, the program had been set to expire in December 2018, although state legislators extended the incentives for three additional years, despite criticism over the years that the program didn’t contribute meaningfully to job creation and economic development in distressed communities.

The program is again up for renewal, and voices of support and opposition came out to be heard at a Feb. 15 public hearing convened by the Joint Standing Committees on Appropriations and Financial Affairs and Innovation, Development, Economic Advancement & Business (IDEA).

“This program has been extended and redesigned many times, and yet, evaluations from the Legislature's watchdog agency determined that the program is unable to show evidence of efficacy, despite the legislature's attempts to improve it,” noted Maura Pillsbury, a tax analyst at the Maine Center for Economic Policy, in testimony dated Feb. 15.

This week, the Maine State Chamber of Commerce signaled its support for the program, with Linda Caprara, the chamber’s vice president of advocacy, providing testimony.

“The Legislature has made some changes to the program over the past few years,” she noted in her testimony. “Changes have included clarifying job creation as the main goal of the program, requiring that companies add at least one new job before qualifying for benefits. We feel that this was appropriate.”

In a March 2 advocacy email blast, the Maine State Chamber of Commerce called the program “one of the only economic development tools we have” in the state, adding that “businesses need stable tax policy.”

A 2021 legislative report shows that the companies participating in the Pine Tree Development Zone had 4,775 employees certified eligible for the program, who collectively earned $283.85 million.

Citing the report in its email blast, the chamber noted that between 2018-20, "participating companies employed over 24,000 people in Maine each year, and cumulatively provided over $4.3 billion in wages and invested over $1.1 billion here in Maine.”

However, those figures reflect the total number of Mainers employed by the companies in the program — not the number that the legislative report says are eligible for the incentive program. The legislative report does indeed note that the investments associated with program-qualified businesses exceeded $1.18 billion between those years.

Emailed interview requests to members of the IDEA committee were not immediately returned. The IDEA committee will hold a work session focused on the biennial budget on the morning of March 3.