Perks of Operating a Business in New Jersey from an Accountant’s Perspective
October 22, 2018
By Jenifer Pento, CPA
New Jersey, the Garden State, is known for growing fruits and vegetables; it’s also known for growing businesses. As many are aware, New Jersey is the home to a highly educated, diverse and skilled labor force. It is the home of Princeton University, which is widely recognized as the #1 university nationwide. Businesses looking to hire have a large talent pool from which to choose. New Jersey has a high national ranking in the health care industry and is also known for being affluent. What many people may not realize is that there are several tax benefits for companies that choose to operate in New Jersey.
In July of 2018, Governor Murphy signed the Garden State Film and Digital Media Jobs Act. This bill will allow taxpayers, provided certain conditions are met, a credit in an amount of up to 37% of the qualified film production expenses and up to 27% of qualified digital media expenses of the taxpayer during a period on or after July 1, 2018 but before July 1, 2023. The taxpayer must submit a tax credit verification report prepared by a certified public accountant licensed in this state. The state will be allotting up to $75 million in tax credits for qualified film production expenditures and $10 million in tax credits for digital media expenditures in fiscal year 2019 and in each fiscal year thereafter prior to fiscal year 2024. This is a nice incentive designed to draw productions to New Jersey and will ignite economic growth and industry development.
The Angel Investor Tax Credit Act was created to fuel investment in New Jersey emerging technology businesses. This includes advanced computing, advanced materials, biotechnology, electronic device technology, information technology, life sciences, medical device technology, mobile communications technology and renewable energy technology. This law provides a tax credit up to 10% of the qualified investment in a New Jersey emerging technology business, up to a maximum allowed credit of $500,000 for each qualified investment. The maximum that will be approved each year by the Economic Development Authority under the guidance of the Division of Taxation is $25 million. The eligible technology business must meet certain criteria in which it must commercialize eligible technologies in the state and incur qualified research expenses or pilot scale manufacturing. There must be fewer than 225 full-time employees of whom at least 75% work in New Jersey and it must maintain an office, conduct business, employ or own capital/property in New Jersey.
The New Jobs Investment Tax Credit is available for investment in new or expanded business facilities that create new jobs in New Jersey. The investment must create at least 5 new jobs (50 for large businesses) with median annual compensation that meets threshold amounts. Determining whether the business is considered small/mid-size or large is based upon annual payroll and gross receipts amounts for the four prior years through the current year. Be aware that the average book value of all real and tangible personal property in New Jersey must have increased over the prior year. The New Jobs Investment Tax Credit is taken in five equal annual installments and may not reduce the tax liability for the tax year below the required statutory minimum. An accountant can assist the taxpayer to determine if they are entitled to a refund of any aggregate annual remaining credits.
The New Jersey Urban Enterprise Zone (‘UEZ”) Program offers tax credits up to $1,500 for new permanent full-time employees hired and up to an 8% Corporate Business Tax credit on qualified investments. The business must be registered with the State of New Jersey, located within one of the several designated zones, be in tax compliance with the State of New Jersey and be certified by the New Jersey UEZ program. There are many other tax benefits for businesses who participate in the program.
Working with the right accountant, New Jersey business owners can navigate through and maximize different tax savings and credits, which can often be complex to calculate. There are plenty of opportunities to take advantage of. Then, watch as businesses blossom in the Garden State.