Bill to Extend Bath Iron Works Tax Deal Cuts Minimum Investment Requirement and Expands Definition of Qualified Expenses

When enacted into law in 1997, the original 20-year, $60-million tax deal from the state of Maine to General Dynamics subsidiary Bath Iron Works was intended to subsidize the cost of a shipyard “modernization” the company said would position it to be a viable and competitive business for decades.

It required the company invest at least $200-million in its facility and allowed for a $3-million annual tax credit to defray the costs incurred from planning, design, engineering, construction, demolition, remodeling, repair, and other expenditures related to the infrastructure project.

But newly proposed legislation to extend the credit, made available online for the first time this week, requires the company to invest only half the amount mandated in the original act and expands the definition of a “qualified investment,” potentially allowing the company to claim reimbursement on employee training.

Other provisions appear unchanged or altered less substantially. Bath Iron Works, which is not named in the bill, would still be allowed up to $3-million in annual credits, or 3 percent of a minimum $100-million investment made after Jan. 1, 2018. Under the bill, tax benefits would be available to Bath Iron Works between Jan. 1, 2020, and Dec. 31, 2039.

When asked by email about the rationale for the proposed changes, including the reduction in the minimum investment provision, the bill’s sponsor, Rep. Jennifer DeChant (D-Bath), said, “This bill is a starting point for the Taxation Committee to begin with. Starting point.”

DeChant said the language on employee training was added at the request of union officials, and the committee “may remove it as it has in similar bills.”

She added, “This bill will be changed and amended throughout the process. It is rare that an original bill introduced is exactly what comes out of the Committee process.”

Another General Dynamics subsidiary, nuclear submarine maker Electric Boat, is benefiting from millions of dollars in government funding set aside in recent years for workforce training in Rhode Island and Connecticut, where it operates shipyards.

Bruce Gagnon, an activist with Veterans For Peace who has led efforts to oppose the Maine legislation, admonished DeChant and other lawmakers when the bill became public.

“We have 43,000 children living in poverty in Maine,” Gagnon wrote in an email, “and we’ve got a string of elected officials who seem willing to ignore that terrible reality and in turn hand over $60 mil in corporate welfare to an entity that has shown massive profits and clearly has no need for support from an already financially strapped state.”

He added, “Many of these same legislators complained about Trump’s recent federal tax cut for the rich…but turn their heads and support a similar move in our state.”

If the legislation, officially titled “An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs,” is signed into law, any company benefiting from the credit would be required to “maintain at least 5,000 employees.” However, the bill states, a shipbuilder “may employ fewer than 5,000 employees in 2 separate years within the 20-year period and still qualify for the credit, but at a prorated reduction.”

In its definitions section, the bill also states a so-called “exception year” after Jan. 1, 2023 “means a calendar year in which a certified applicant has employment of less than 4,000.”

To capitalize on the credit, Bath Iron Works must provide its  employees with a retirement program, health insurance benefits, and yearly salaries above Maine’s average annual per capita income, estimated at $44,053 in 2016 by the U.S. Department of Commerce’s Bureau of Economic Analysis.

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