Pine Tree Development Zone FAQs
1. Can wages paid by a qualified Pine Tree Development Zone (“PTDZ”) business to a qualified employee after the beginning of the tax year, but before the date of certification be included in the numerator of the apportionment factor?
Yes. Wages paid to all qualified employees during the entire year are included in both the numerator and denominator of the apportionment factor.
2. Assume a qualified PTDZ business (parent) wholly owns a subsidiary. The parent has no employees and the subsidiary has 20 employees. Does the parent qualify for the PTDZ credit?
There are two possibilities for this scenario: 1) The employees may be hired by either the parent or the subsidiary if they form a single business enterprise as defined by the Department of Economic and Community Development; or 2) If the two companies do not form a single business enterprise, the employees must be hired and employed directly by the parent in order to be qualified employees. In this case, if the parent does not hire any employees engaged in the qualified activity, it will not qualify for PTDZ benefits. If the parent does hire qualified employees, all Maine wages paid by both the parent and subsidiary must be included in the denominator of the apportionment factor, but only qualified wages paid by the parent may be included in the numerator.
3. Can property purchased after the beginning of the tax year but before the date of certification and used in a qualified activity be included in the numerator of the apportionment factor?
No. Property purchased prior to the date of certification is not qualified property and therefore may not be included in the numerator. Such property will be included in the denominator only.
4. Does the numerator of the apportionment factor include property purchased during the year and immediately expensed (i.e. not depreciated)?
Yes, if the property is expensed under IRC section 179. Qualified property includes only real and tangible personal property used in a qualified activity that is capitalized and depreciated or expensed pursuant to IRC section 179 for federal income tax purposes.
5. If a piece of property is used for both qualified and nonqualified activity, can a portion of its value be included in the numerator of the apportionment factor? If so, how do I determine the value to include in the numerator?
Mixed use property may be included in the numerator of the apportionment factor to the extent it is used in a qualified activity. A reasonable method of determining the portion of use in the qualifying activity may be used.
6. When claiming a reimbursement under the Employment Tax Increment Financing program, must I identify the amount of withholding specific to the positions that qualify under the PTDZ program, or can I use an average withholding amount?
You must identify the ordinary amount of withholding from each qualified employee. Averages may not be used. Do not include any additional voluntary withholding requested by the employee.
7. If a qualified business places property in a separate legal entity such as an LLC for purposes unrelated to tax planning, is that property included in the numerator of the apportionment factor?
The property is qualified and will be included in both the numerator and denominator if the qualified business and the separate legal entity form a single business enterprise as defined by DECD. Otherwise, only property owned directly by the qualified business may be included in the numerator even if, due to their unitary nature, both companies must file a combined report. Maine property from both businesses must be included in the denominator of the apportionment factor for calculating the PTDZ credit.
8. Is the value of qualified PTDZ property limited to the amount specified in the approval letter I received from DECD?
No. The amounts identified in the approval letter are estimates based on figures supplied in the PTDZ application.