As of today, January 7, 2020, Governor Murphy has signed into law the NJ Economic Recovery Act of 2020 (the “NJERA”), a bill that creates a 7-year, $14 Billion Dollar package of tax incentives to attract and retain NJ based businesses and real estate development projects.
The 249-page NJEDA outlines new tax incentives to replace the expired NJ GROW and ERG programs and expands or creates new subsidies for film and television production, revitalizing brownfields and assisting so-called food deserts, among other areas, all while creating financial caps and oversight for the programs and the state agency that manages them.
Under the NJERA, most of the new tax credit programs are subject to a collective $11.5 Billion Dollar cap over 6 years, while allowing for a 7th year of allocations under those programs for uncommitted credits. The NJERA also provides for $2.6 Billion in tax credits over 13 years for projects related to film and television production.
A new office, the Office of Economic Development Inspector General will be created along with a chief compliance officer to manage a Division of Portfolio Management and Compliance to oversee the awards.
Under the new Emerge program, tax credits are available to encourage economic development, job creation and the retention of significant numbers of jobs in imminent danger of leaving the state.
Eligibility is subject to various provisions, including a requirement that the award of tax credits, the resulting capital investment and the resulting job creation or retention will yield a “net positive benefit” to NJ ranging from at least 200 to 400% of the award, depending on the location. Emerge also has minimum requirements and adjustments for the necessary capital investment based on the type of project, the size of the business, the types of jobs at stake and other factors.
Tax credits under both Emerge and a separate program, Aspire, are subject to a combined $1.1 Billion annual cap for 6 years. The NJERA also calls for the $1.1 Billion annual cap to be split so that up to $715 million of tax credits will be for projects located in 14 northern counties and $385 million for projects in 7 southern counties.
Aspire, the successor to the Economic Redevelopment & Growth program, or ERG, will provide gap financing to development projects that are intended to serve a public policy goal but which would otherwise generate a below-market rate of return. Additionally, the proposal outlines different provisions for commercial and residential projects, providing bonuses for those that serve distressed or targeted communities, along with transit-oriented development and affordable housing.
The NJERA would also allow the Economic Development Authority, which oversees tax incentives, to review each project’s performance and reduce the amount of the subsidy if it determines that the financing gap is smaller than determined at board approval. If there is no project financing gap, then the developer would forfeit the incentive award.
• Historic property reinvestment — providing tax credits for part of the cost of rehabilitating historic properties in the state, with a cap of $50 million annually for 6 years;
• Film tax credits — amending existing programs to include provisions for so-called New Jersey film partners and New Jersey film-lease partners and allowing an additional $200 million of tax credits annually over 13 years;
• Brownfields redevelopment — providing tax credits to compensate developers of redevelopment projects located on polluted sites for remediation costs, with a cap of $50 million annually for 6 years;
• Food desert relief — providing tax credits in order to incentivize businesses to establish and retain new supermarkets and grocery stores in underserved communities, with a cap of $40 million annually for 6 years;
• The New Jersey Innovation Evergreen program — auctioning tax credits for cash, which will be used to invest in startups and other innovation-focused businesses, with a cap of $60 million annually for 6 years;
• Community-anchored development — providing tax credits to anchor institutions to incentivize the expansion of targeted industries in and the continued development of certain areas of the state, with a cap of $200 million annually for 6 years; and
• Main Street recovery — providing grants, loans and loan guarantees to small businesses, with an appropriation of $50 million under the bill.
Duane Morris has an active team of lawyers who engage in the public-private partnership space where State based incentives are often critical to the success of a project. If you have any questions or thoughts, please contact Brad A. Molotsky, Mike Barz, Paul Josephson, Sheila Slocum Hollis, or any of the Duane Morris lawyers you regularly engage with.
Be well and stay safe.
