FAME bans 'one-day loans' for New Markets Tax Credit program

The Finance Authority of Maine voted Thursday to ban the use of “one-day loans” to qualify for economic development incentives under the state’s New Markets Tax Credit program, two months after putting an emergency rule in place halting the practice.

The Bangor Daily News reported Thursday that the state finance authority’s board approved the new rule.

A Maine Sunday Telegram investigation published in April highlighted the use of one-day loans in the New Markets Tax Credit program, focusing on a deal by Great Northern Paper mill’s investors, Cate Street Capital.

The investigation showed that the East Millinocket paper mill’s investors inflated the value of their investment with a $31.8 million one-day loan and another $8.2 million that was used to pay old debts. The structuring of that finance deal allowed the investors to receive nearly $16 million in tax credits, even though none of the $40 million used to qualify was put into capital improvements at the mill.

FAME CEO Bruce Wagner told the BDN in August that the Cate Street Capital deal would not be allowed under the new rule.

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