January 16, 2014

New Jersey Economic Opportunity Act of 2013 – Incentives for Development in the Garden State

New Jersey Economic Opportunity Act of 2013 – Incentives for Development in the Garden State Tax & Business
New Jersey Economic Opportunity Act of 2013 – Incentives for Development in the Garden State

The New Jersey Economic Opportunity Act of 2013 was recently enacted into law on September 18, 2013 to attract new business development in the State of New Jersey and enhance job creation and retention efforts with the goal of strengthening New Jersey’s competitive position in the global economy.

This act streamlines the five existing economic development incentive programs in New Jersey into two programs, the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth Program (ERG).  Grow NJ is the State’s main job creation and retention incentive program and ERG is New Jersey’s key developer program.  Both programs have been enhanced through the reduction of eligibility thresholds and the addition of qualifying geographical regions.  These programs will sunset on July 1, 2019.

The New Jersey Economic Development Authority (EDA) is no longer accepting applications for assistance under prior programs, including the Business Employment Incentive Program (BEIP), the Business Retention and Relocation Assistance Grant Program (BRRAG), and the Urban Transit Hub Tax Credit Program (UTHTC), but applications that have been submitted prior to the enactment of the new law will be processed.

The Grow NJ incentive program targets businesses that are creating or retaining jobs and making capital investments in qualified incentive areas.  The Act offers broader incentives and tax credits for businesses that invest and create jobs in New Jersey.  A qualified project must meet minimum capital investment and jobs-created or jobs-retained thresholds in order to be eligible for the tax credit. These thresholds are reduced for businesses located in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean and Salem counties and for businesses located in a newly created Garden State Growth Zone, which encompasses the four cities with the lowest median family income.

Under Grow NJ, the base tax credit ranges from $500 to $5,000 per job, per year; however, additional tax credits are awarded for particular project types and project locations that can increase the total tax credit to as much as $15,000 per job, per year. The amount of the tax credit is tied to the project type, the number of jobs created or retained by the project, and the location of the project.  The tax credit is awarded for a period of 10 years.

The New Jersey Economic Opportunity Act also addresses and expands the Economic Redevelopment and Growth Program (ERG).  ERG is a program designed to bridge construction project financing gaps for projects located in areas targeted for growth in New Jersey.  The ERG Program applies to projects having insufficient revenues to support the project debt service under standard financing agreements.  The underlying rationale of the program is to incentivize redevelopment and create additional jobs through the construction of capital improvements.

The ERG Program provides incentive tax credits that can be assigned to lenders for project financing for residential projects of up to 20% of the total project cost, plus an additional 10% (total 30%) if the project constructs and reserves at least 10% of the residential units for moderate income housing.  Qualified residential projects must have a minimum total project cost ranging between $5 million and $17.5 million, depending on the location of the project.

Additionally, the ERG Program provides incentive reimbursements of up to 20% of the total project cost for commercial projects, plus up to an additional 20% (total 40%) of additional grant funding for projects located in a New Jersey Garden State Zone (GSGZ), a distressed municipality, and other targeted areas.

Incentive tax credits awarded under the Grow NJ program allows business to apply the tax credit dollar for dollar against certain tax liabilities, including the corporation business tax.  It can also be used as a gap-financing tool for development, whereby a developer assigns the tax credit to a financial institution over the life of the tax credit (typically 10 years) in exchange for up-front capital. In the case of the ERG Program, the up-front capital cannot be less than 75 percent of the value of the total tax credit.

Should you have any questions related to this Tax Flash or would like to discuss how to qualify for these benefits please contact your Marcum LLP tax professional.

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