New Jersey Enacts New Corporate Income Tax Credits
Governor Chris Christie has signed legislation that creates the “GrowNJ” Assistance program. This program provides tax credits to companies moving to or growing in New Jersey.
The new law (S3033) establishes the Grow New Jersey Assistance Program (“GrowNJ”), a $200 million tax credit incentive program administered by the New Jersey Economic Development Authority (“EDA”) that encourages the growth of New Jersey companies through capital investment, new job creation and existing job retention. Under GrowNJ, an eligible business will receive an annual tax credit of $5,000 for 10 years for each full-time job created or retained.
To be eligible for the GrowNJ program, a business must demonstrate the following:
- The business will make, acquire or lease a capital investment of at least $20 million at a facility located in a “qualified incentive area;”
- At the qualified business facility, the business must: (i) employ at least 100 full-time employees in retained full-time jobs, or (ii) create at least 100 new full-time jobs in an industry identified by the authority as desirable for the State to maintain or attract;
- The capital investment resultant from the award of tax credits will yield a net positive benefit to the state; and
- The award of tax credits will be a material factor in the business’s decision to create or retain the minimum number of full-time jobs for eligibility under the program.
“Qualified incentive areas” include any urban, regional or town-designated center under the State Development and Redevelopment Plan, the Hackensack Meadowlands District, any Pinelands Regional Growth area or village, any area designated for economic growth within the Highlands Region, or any property consisting of a vacant commercial building having over 400,000 square feet of office, laboratory or industrial space available for occupancy for a period of over one year which is negatively impacted by the approval of a “qualified business facility” under the Urban Transit Hub Tax Credit program.
Qualifying businesses will be required to enter into an agreement prior to the issuance of tax credits, which will include: (i) a description of the proposed project with employment data; (ii) the term of the tax credits; (iii) the required time period during which the business must meet the full-time employee requirement; and (iv) provisions for recapture of the tax credits if the business fails to meet its covenants.
A potential bonus tax credit of $3,000 per year per retained job may be awarded at the EDA’s discretion. (The EDA will take into account such factors as types of industry; locations adjacent to public transit; average salaries; locations at project sites that have been negatively impacted by the approval of a “qualified business facility” under the Urban Transit Hub Tax Credit Program.)
The credit may be applied against a taxpayer's tax liability under the corporation business tax and the insurance premium tax. The annual tax credit that may be taken by a business is limited to the lesser of: (i) 1/10th of the required capital investment, or (ii) $4 million. Credits that exceed liabilities of the business for the tax period may be carried forward up to 20 tax periods, provided that the program cap has not been reached. The program caps the amount of credits available to $150 million a year. The program is additionally subject to the $1.5 billion tax credit ceiling allocated to the Urban Transit Hub Tax Credit program. A partnership shall not be allowed a credit directly, but the amount of the credit will be allocated to each owner of the partnership by the profit and loss sharing ratio or by special allocation that has been provided to the Division of Taxation. Credits may also be transferred to a buyer for consideration of at least 75% of the value of the credit and may be used against the above-mentioned tax liabilities, subject to certain transfer procedures.
Note that a business will not be allowed to take an Urban Transit Hub Credit or a credit under the Business Employment Incentive Program Act for the same capital and employees that qualify the business for GrowNJ tax credits. Further, a business that is allowed a tax credit under the GrowNJ program will not be eligible for incentives authorized under the Municipal Rehabilitation and Economic Recovery Act.
Those applying for the credit must do so prior to July 1, 2014, and must submit its documentation indicating that they have met the capital investment and employment specified in the project agreement for certification of their credit amount no later than July 28, 2017.
Finally, the law also makes changes to eligibility requirements for the Urban Transit Hub Tax Credit. Specifically, the program's use in retaining and attracting jobs to New Jersey has been expanded. This is done by including the addition of medical facility sites, vacant hospital sites, and federally designated CHOICE neighborhoods within one mile of a rail station in an Urban Transit Hub Tax Credit city.