Tax News Highlights: New Jersey Enacts Changes to Tax Incentives

| 11/6/2014

New Jersey Gov. Chris Christie signed the Economic Opportunity Act of 2014 on Oct. 24, 2014. The act makes several changes to two existing economic development incentive programs administered by the New Jersey Economic Development Authority including the Grow New Jersey (Grow NJ) tax credit and the Economic Redevelopment and Growth (ERG) program.

Grow NJ Tax Credit
The Grow NJ tax credit is available to businesses that create or retain jobs and make capital investment in a qualified area. Businesses can apply for the credit to reduce corporate business and insurance premium taxes. Eligibility for the credit includes making, acquiring, or leasing a certain minimum capital investment at a qualified business at which it will retain or create a certain number of full-time jobs. The credit can range from $500 to $15,000 per job, per year. The new legislation includes the following noteworthy changes:

  • Modifies the calculation of the tax credit under the incentive program (though the program retains certain exceptions in which projects will continue to earn retention tax credits equal to 100 percent of the base amount, plus any applicable bonuses). Before the legislation, the tax credit for a retained full-time job was equal to 50 percent of the gross amount of eligible tax credit for each retained full-time job. Under the new law, the credit available is the lesser of either:
    • 50 percent of the gross amount of eligible tax credit for each full-time job
    • 10 percent of the capital investment divided by the number of retained and new full-time jobs per year
  • Includes Atlantic City as a “Garden State Growth Zone,” making the city eligible for maximum tax incentives. Other cities included are Camden, Trenton, Paterson, and Passaic.
  • Updates the definition of projects classified as “mega projects,” which are projects that qualify for larger tax credits than they would otherwise. Mega projects now include eligible capital investments of at least $20 million in a business facility located in an area designated as in need of redevelopment and those that retain more than 150 full-time positions in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean, or Salem counties.
  • Reduces the minimum required capital improvement for the rehabilitation and improvement of warehousing, logistics, or research and development premises.
  • Creates a new bonus of $1,000 per full-time job added or retained for investing in a vacant property or business facility with more than one million square feet of office or laboratory space that has been available for occupancy for a period of longer than one year.
  • Relaxes qualification requirements for incubator facilities.
  • No longer treats acquisition costs of real property, with the exception of the Garden State Growth Zones, as a capital investment.
  • Allows not-for-profit organizations in Garden State Growth Zone municipalities and qualified incubator facilities in any incentive area to file consolidated tax credit applications for projects that encompass several individual businesses that normally would not, on their own, qualify for tax credits.
  • Removes caps on credits available for projects located in Camden and Atlantic City.
  • Imposes a new $25,000 minimum amount of tax credits that recipients are able to sell to other taxpayers.

ERG Program
Developers with residential projects located in areas targeted for growth can apply for tax credits that can be assigned to lenders for project financing. The legislation extends the application deadline for these projects from July 1, 2015, to July 1, 2016. In addition, the deadline for obtaining certificates of occupancy for such projects is extended from July 28, 2015, to July 28, 2018.

As a result of the signed legislation, businesses in New Jersey contemplating expansion or retention should re-examine the Grow NJ and ERG incentive programs in conjunction with the new legislation set forth in the act.


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