New Jersey CAFE Program: Tax Credit Certification Guide

New Jersey's museums, theaters, libraries, and historic sites have a meaningful new source of capital for major construction and renovation projects. The Cultural Arts Facilities Expansion (CAFE) Program, administered by the New Jersey Economic Development Authority (NJEDA), has already awarded more than $330 million in tax credits for projects located within New Jersey. For cultural arts organizations weighing an application or already holding an award, the program's compliance side deserves as much attention as the capital project itself. An improperly documented certification can delay, reduce, or even jeopardize a hard-won award.

Key Takeaways

• The New Jersey Cultural Arts Facilities Expansion (CAFE) Program provides transferable tax credits covering up to 100% of eligible project costs, capped at $75 million per project.
• CAFE certification has two parts: a project completion certification supported by a CPA agreed-upon procedures (AUP) report, and annual compliance reports through the five-year eligibility period.
• A qualifying CAFE project needs at least $5 million in capital investment, a demonstrated financing gap, and compliance with prevailing wage and green building standards.
• The NJEDA issues CAFE credits in five equal annual installments after certifying construction is complete, and recipients may sell the credits or use bridge financing.
• An improperly documented AUP report can delay, reduce, or jeopardize a CAFE award, so certification deserves the same attention as the construction project.

What Is the New Jersey CAFE Program?

Established under the Cultural Arts Incentives Program Act (P.L. 2023, c.197), CAFE provides transferable tax credits covering up to 100% of eligible project costs, capped at $75 million per project. A qualifying project must involve at least $5 million in capital investment and cannot be economically feasible without the credit. Applicants must also demonstrate a genuine financing gap.

Who Is Eligible for CAFE Tax Credits?

Eligible applicants include:

• Governmental entities
• Nonprofits with a mission centered on arts, culture, or artistic enrichment
• For-profit organizations receiving a federal or state historic tax credit

The facility being renovated must be open to the public, and the applicant must own or lease the space and operate it directly. Apart from costs related to demolition, remediation, and health or safety concerns, projects generally cannot start construction before the application date. Recipients must also meet a minimum equity contribution requirement, comply with green building standards, and pay prevailing wages on construction and building-service work.

Unlike a grant, the CAFE credit is not paid upfront. Once the NJEDA certifies that construction is complete, the credit is issued in five equal annual installments over a five-year eligibility period. Award recipients may monetize the credit early by selling it, or they may secure bridge financing for construction costs incurred before certification.

What Are the CAFE Certification Requirements?

Certification under CAFE involves two distinct requirements, and organizations should plan for both from the outset.

Project Completion Certification

The first is project completion certification. Once construction is finished and a temporary certificate of occupancy is obtained, the cultural arts institution must submit documentation demonstrating that the project cost requirement was met and that the work was completed in accordance with the tax credit award agreement. Award recipients are required to submit a certification from a CPA in the form of an agreed-upon procedures (AUPs) report on the actual project costs incurred.

Annual Reporting

The second is ongoing annual reporting. From execution of the tax credit award agreement through the end of the eligibility period, recipients submit annual reports confirming continued compliance with program terms.

What Does a CAFE Agreed-Upon Procedures Report Involve?

An AUP engagement is not an audit or a review. The CPA does not offer an opinion on the underlying financial statements; instead, the CPA performs specific procedures and reports the factual findings. For a CAFE engagement, the procedures generally focus on the eligible project costs, including testing that the costs included in the capital investment calculation are properly classified as eligible under the program. The procedures also make sure that ineligible items, such as pre-application demolition or remediation costs not otherwise permitted, are excluded.

Because these procedures are technical in nature, and because the NJEDA reviews every submission closely, precision in scope and documentation matters. A report that omits a required test, or one that is not designed and executed in accordance with the American Institute of Certified Public Accountants (AICPA) attestation standards, can result in delay while the NJEDA requests an amended report.

How EisnerAmper Can Help

EisnerAmper has over 15 years of extensive experience assisting companies participating in New Jersey economic incentive programs. Our professionals understand the technical requirements of NJEDA-approved, agreed-upon procedure engagements and the documentation standards necessary to support CAFE compliance.

We have a direct line of communication with the NJEDA, and liaise between them and clients to:

• Interpret NJEDA AUP reporting requirements
• Perform AUP engagements aligned with regulatory expectations
• Identify and resolve potential compliance issues proactively
• Meet tight filing deadlines

As new regulations take effect, planning and proactive communication will be essential. EisnerAmper helps CAFE recipients meet each reporting requirement and protect the value of their tax credit awards. Contact our team below to find out how we can assist.