March 21, 2024

New Jersey Rolls Out $35 Million NJ RISE Incentives to Reclaim Tax Revenue from Neighboring States

By Barry Halpern, Partner, Tax & Business Services

New Jersey Rolls Out $35 Million NJ RISE Incentives to Reclaim Tax Revenue from Neighboring States State & Local Tax

In response to states like New York that impose the “convenience of the employer” rule, the New Jersey Economic Development Authority (NJEDA) board recently approved a significant countermeasure with its New Jersey Reassigning In-State Employees (NJ RISE) Program. This pioneering $35 million pilot program incentivizes businesses to relocate New Jersey residents working out-of-state back to New Jersey.

In previous alerts, we discussed how New Jersey has been critical of the way some of its neighboring states (New York) were taxing its residents. As part of significant legislation, New Jersey established its version of the “convenience of the employer” rule as a direct challenge to those states.   

With NJ RISE, New Jersey has now taken another step in its combat against the so-called “convenience of the employer” states (e.g., New York and Delaware”) in hopes of bolstering tax revenue by keeping residents’ income taxes within state boundaries. This innovative $35 million pilot program aims to lure businesses to reposition New Jersey residents working out-of-state back to New Jersey.

NJ RISE specifically targets businesses principally located outside of New Jersey and has New Jersey-resident employees assigned to work in states that adhere to the “convenience of employer” rule for income taxation. In such cases, the income of these employees, even when working from home in New Jersey, gets taxed by the state of the employer’s location – a loss to New Jersey’s tax coffers.

With NJ RISE, eligible businesses can receive grants equal to the amount of New Jersey Gross Income Tax withholdings of the reassigned resident employees during a tax year, capped at $500,000 per business and a total of up to $35 million per state fiscal year. This not only incentivizes the reassignment of employees but promises a revitalized stream of income tax revenue for New Jersey.

To be eligible to apply for a grant, a business:   

  • Must principally located in another state.
  • Have more than 25 full-time employees.
  • Apply to New Jersey Economic Development Agency (NJ EDA) on or before July 1, 2028.

In awarding the grants, the NJ EDA could require eligible businesses to make certain capital investments or provide compensation increases to the reassigned employees.

The NJ RISE program is set to launch in the coming months. The NJEDA will review completed applications on a rolling basis, adopting a first-come, first-served approach. Companies looking to apply for NJ RISE should consider familiarizing themselves with all the requirements to prepare for the program so their application could be at the forefront of consideration before the funding gets capped.

For additional information regarding New Jersey incentive opportunities and its impact on your business or other state business credits and incentives opportunities, contact Barry Halpern at [email protected], or your Marcum State and Local Credits and Incentives professional.