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Petition the Maine Technology Institute to Include Fiscal Sponsorship as a Function:

In the mid-seventies refundable tax credits came into use in the USA and were readily incorporated into Maine's economic development policy. When the Maine Capital Corporation was established, by the Maine Legislature, its charter provided for a 50% tax credit to attract investors and a provision making corporate small business companies tax-exempt. The two provisions make sense only if the tax credit is treated as a refundable tax credit, one in which if no taxes are owed, the tax payers owed the investors a 50% refund on their investment.

In the 1970’s, under the leadership of Governor Longley’s board, made up of the CEO’s of Maine’s most prosperous business, the Legislature declared central management of the economy to be an essential government function, which must be done through public private relationships. In The Governor’s Task Force report of 1976 [1] the following justification supported the recommendation that two complimentary corporations be chartered by the Legislature, the Maine Capital Corporation and the Maine Development Corporation. The statute chartering the Maine Capital Corporation [2] included the following rationalization:
The Legislature finds that one of the limiting factors on the beneficial economic development of the State is the limited availability of capital for the long-term needs of
Maine businesses and entrepreneurs. In particular, the lack of equity capital to finance new business ventures and the expansion or recapitalization of existing businesses is critical. This lack of equity capital may prevent worthwhile businesses from being established; it may also force businesses to use debt capital where equity capital would be more appropriate. This creates debt service demands which a new or expanding venture may not be able to meet successfully, causing the venture to fail because of the lack of availability of the appropriate kind of capital.

..This impediment to the development and expansion of viable Maine businesses affects all the people of Maine adversely and is one factor resulting in existing conditions of unemployment, underemployment, low per capital income and resource underutilization. By restraining economic development, it sustains burdensome pressures on State Government to provide services to those citizens who are unable to provide for themselves.

..To help correct this situation, it is appropriate to use the profit motive of private investors to achieve additional economic development in the State. This can be accomplished by establishing an investment corporation to provide equity capital for Maine businesses and by establishing limited tax credits for investors in the corporation to encourage the formation and use of private capital for the critical public purpose of maintaining and strengthening the state's economy.

What is true for the upper crust of the economy is true for every sector of the economy but the ensuing economic policies developed by the state targeted “quality jobs” defined by the Legislature as jobs providing higher than average incomes and benefits. The upper crust of the economy was favored over the remainder of the economy which was burdened with tax payer subsidizing the top. The Legislature’s policies developed specific terms and conditions for its targeted sector, while the remainder of the economy was left to subsidize the top while operating under standard capitalization terms, deemed to be a hardship in The Governor’s Task Force report of 1976 

Under these policies a gulf grew between the upper crust of the economy and the rest of the economy. The middle was diminished and the burden of the general welfare burden on the state increased alongside the new burden created by corporate welfare. Nationally, since the mid-seventies,  the top of the economy has accumulated more wealth, and correspondingly, the giving sector of the economy doubled in size. Today’s economic sectors in Maine are composed of two wealth re-distributive sectors and one wealth creating sector (free enterprise). The state redistributes public funds to its private partners in return for the creation of “quality jobs”, replacing the wealth creation equation which exists between employee and employer in a free enterprise system with social justice. The private philanthropy sector redistributes wealth through foundations and private giving to a plethora of causes, as tax deductible contributions. The concept of “social enterprises” is emergent in recognition that performance of a “public benefit” is not exclusive to the non-profit model, but is also achievable within a free enterprise system.

Fiscal sponsorship allows for a non-profit corporation with IRS 501(c)(3) status to sponsor projects of entities not processing the IRS 501(c)(3) status but having a purpose consistent with the non-profit purpose of the fiscal sponsor.

While the Maine Technology Institute is defined as a “broad public charity” in its statutory charter, and while that charter grants the board, wide authority over its functions, the only current function of the MTI charity is to provide matching funds for companies already significantly capitalized.

§15302. Maine Technology Institute 2 Purpose The institute, through a public and private partnership, shall encourage, promote, stimulate and support research and development activity leading to the commercialization of new products and services in the State's technology-intensive industrial sectors to enhance the competitive position of those sectors and increase the likelihood that one or more of the sectors will support clusters of industrial activity and to create new jobs for Maine people. The institute is one element of the State's economic development strategy and will contribute to the long-term development of a state wide research, development and product deployment infrastructure. [ 1999, c. 401, Pt. AAA, §3 (NEW).]
 Maine Made Products is a state program and does not have the corporate non-profit status to function as a fiscal sponsor, and yet all Maine makers developing products for the market, involve technology. All Maine companies developing products are consistent with the non-profit purpose of MTI.

By offering fiscal sponsorship as a service available to all Maine Made businesses, developing products for the market, MTI would become consistent with its statutory definition as a “broad public charity”.

It is standard practice for a fiscal sponsor to charge a management fee for its services. The project being sponsored does its own fundraising. Adding fiscal sponsorship to the functions of the Maine Technology Institute would not add an additional burden on the taxpayers, unlike the current function of the charity- providing matching funds to private enterprises. However, it would make capitalization without debt identified in The Governor’s Task Force report of 1976, available to a broad spectrum of the economy.

By eliminating some of the inequities created by the Longley Doctrine, the middle sector of the economy, will see a revival, creating opportunities for growth for the bottom sector of the economy, lessening the burden of general welfare on the state, if not the ever-expanding burden of corporate welfare.

[1] Governor’s Task Force for Economic Redevelopment-1976
[2] orporation.pdf


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