- State Tax Incentives for New Jersey Businesses and Developers: New Jersey State Legislature Passes Economic Opportunity Act of 2013
- September 26, 2013
- Law Firm: Obermayer Rebmann Maxwell Hippel LLP - Philadelphia Office
After several months of revisions and debate, the New Jersey Economic Opportunity Act of 2013 (the “Act”) has been passed by both houses of the New Jersey state legislature and was signed by Governor Chris Christie on September 18, 2013. Under the auspices of the New Jersey Economic Development Authority (the “EDA”), the Act is designed to spur economic development in the State of New Jersey through the expansion of existing economic development incentive programs (including the Grow New Jersey Assistance Program, the Economic Redevelopment and Growth Grant Program and the Urban Transit Hub Tax Credit Program) and the awarding of tax credits, bonuses and other financial incentives to New Jersey domestic businesses and developers.
With the goal of creating more jobs throughout the state, the Act geographically extends the existing economic incentive programs to regions previously ineligible for tax credits under the existing economic incentive programs. The Act identifies “smart growth” areas in which bonuses are offered to help spur development by attracting new businesses. Further, the current qualification standards for businesses to participate in the economic incentive programs will be changed under the Act to permit broader participation by more businesses in all industries.
Grow New Jersey Assistance Program
In particular, the Grow NJ Assistance Program (“GNJAP”) under the old law provides grants of corporate business tax credits to businesses creating or retaining at least one hundred jobs in New Jersey and making a capital investment of at least twenty million dollars at a qualified business facility. The purpose of GNJAP is to prevent jobs from relocating outside New Jersey. A “qualified business facility” means any building, complex of buildings or structural components of buildings, and all machinery and equipment located within a qualified incentive area, used in connection with the operation of a business that is not engaged in final point of sale retail business at that location unless the building, complex of buildings or structural components of buildings, and all machinery and equipment located within a qualified incentive area, are used in connection with the operation of: (a) a final point of sale retail business located in a designated Garden State Growth Zone that will include a retail facility of at least 150,000 square feet, of which at least 50 percent is occupied by either a full service supermarket or grocery store; or (b) a tourism destination project located in the Atlantic City Tourism District.
Qualified incentive credits are available in the amount of up to eight thousand dollars per each new or retained full time job per year for up to ten years. Businesses may also be eligible for an additional five thousand dollars per year for a period of ten years for each new or retained full-time job located at the qualified business facility, so long as additional criteria are met. The GNJAP also provides bonus potential for an additional three thousand dollars per job per year for a period of ten years provided even more stringent criteria are satisfied.
Under the Act, the existing GNJAP will be expanded to allow New Jersey to meet or exceed the financial incentives offered to domestic businesses by its neighboring states. Additionally, the capital investment requirement under GNJAP of twenty million dollars has been removed and replaced with capital investment amount requirements per square foot for particular types of projects (i.e.- $20 per square foot for the rehabilitation, improvement, fit-out or retrofit of an existing industrial property). Similarly, the employee eligibility standards have also been adjusted. For example, for a technology startup company or a manufacturing company, there is a minimum requirement of ten new or twenty-five retained full-time jobs. However, it is important to note that the Act implements a time period for program eligibility not to exceed ten years.
Economic Redevelopment Growth Grant Program
Additionally, while under the old law there exist several economic incentive programs designed for redevelopment, the Act streamlines incentives for developers with the Economic Redevelopment and Growth Grant Program (“ERGGP”) being the sole program offering incentives to developers. The ERGGP provides both state and local incentive grants to developers under certain conditions.
The ERGGP is designed to build public infrastructure while simultaneously awarding bonuses for attaining public policy objectives. Under the old law, the ERGCP provides an incentive grant to eligible developers of up to seventy-five percent of the annual incremental state tax and/or local tax revenue. In order to receive funding under the ERGGP: (a) the project must be located in a qualifying area; (b) any project that includes residential units must include at least twenty percent for occupancy by low or moderate income households; (c) a project financing gap must exist; and (d) for a local grant, the overall public assistance provided to the project must result in net benefits to the municipality and for a state grant, the overall public assistance provided to the project must result in net benefits to the state. Under the ERGGP, the term of each approved state and local grant may extend for up to twenty years.
Financially speaking, the Act adjusts the current ERGGP project caps and provides bonuses for certain financing gaps. Under the Act, the maximum amount of any State redevelopment incentive grant shall be equal to up to thirty percent of the total project costs or forty percent in Garden State Growth Zones. The maximum amount of any local municipal redevelopment incentive grant shall be one hundred percent if the developer is a municipal redeveloper or for all other developers, the State maximums apply.
The Act also redesigns the ERGGP program structure to encourage more applications. Under the Act, the ERGGP would no longer refer to requirements for “workforce housing.” Rather, in an effort to simplify this requirement, workforce housing would be replaced with “moderate income housing,” which is defined by the Fair Housing Act. This distinction is important because it simplifies the eligibility requirements by adopting the Federal standards outlined in the Fair Housing Act.
Developers are also eligible, under the Act, to be repaid money they have contributed to the Clean-Energy Program fund, which is referred to as the “societal-benefits charge.” The Act also permits refunds for developers with respect to other utilities.
Urban Transit Hub Tax Credit Program
Under the old law, the Urban Transit Hub Tax Program (“UTHTP”) provides developers, owners or tenants making qualified capital investments within a designated Urban Transit Hub with tax credits equal up to one hundred percent of the qualified capital investment made within an eight year period. Ten percent of the credit per year must be applied to corporate business tax liability, insurance premiums tax or gross income tax liability.
In order to qualify under the UTHTP, developers or owners must invest a minimum of fifty million dollars in a single business facility located in one of the nine designated urban transit hubs that employs at least two hundred fifty employees. Tenants, on the other hand, must occupy space in a qualified business facility that represents at least seventeen million five hundred thousand dollars of capital investment in the facility and employs at least two hundred fifty employees in that facility. Up to three tenants can aggregate to meet the employee requirement. Projects under the UTHTP that retain two hundred fifty full-time jobs are eligible for tax credits of up to eighty percent (80%) of the qualified capital investment. On the other hand, projects creating at least two hundred full-time jobs are qualified for up to one hundred percent of their qualified capital investment. Total credits under the UTHTP are capped at one billion seven hundred fifty million dollars.
Under the Act, the existing one billion seven hundred fifty million dollar cap on the EDA’s grant of tax credits to eligible businesses under the UTHTCP is increased to two billion five hundred million dollars. Additionally, eligibility criteria under UTHTCP was added for maritime, manufacturing and logistics businesses. The existing Business Retention and Relocation Assistance Grant Program and the Business Employment Incentive Programs are phased out under the Act.