On Jan. 7, 2021, New Jersey Gov. Phil Murphy signed Assembly Bill 4, a massive incentives package authorizing over $14 billion in various business tax credits and incentives. The law essentially replaces the state’s two main economic incentive programs, Grow New Jersey Assistance and Economic Redevelopment and Growth, which both expired in 2020, creates new programs and extends several older incentive programs.
Most notably, the law creates New Jersey Aspire which provides incentives for development and New Jersey Emerge which provides incentives to create and retain jobs. The New Jersey Aspire Program gives the New Jersey Economic Development Authority to grant incentives for redevelopment projects by reimbursing developers for certain project financing gap costs. To be eligible, the developer must demonstrate that without the incentives the project is not economically feasible, project financing gaps exist, the project is in a designated area, and the work has not commenced. Developers must also comply with certain environmental and wage requirements.
The New Jersey Emerge program provides tax credits to encourage economic development, job creation and the retention of significant numbers of jobs in imminent danger of leaving the state. To be eligible a business must make, acquire, or lease a capital investment at a qualified business facility, create or retain jobs at the facility, be located in a qualified incentive area, demonstrate that the tax credits will be a material factor in the decision to create or retain the jobs, and show that the award of tax credits, the capital investment resultant from the award of tax credits, and the creation and retention of new and retained full-time jobs will yield a net positive to the state.
Both the Aspire and Emerge programs require an application and awards are determined by the Economic Development Authority. The New Jersey Emerge and New Jersey Aspire programs are each capped at $1.1 billion annually. There is an overall cap $11.5 billion for these credits for six years. The law allows the programs to continue for a seventh year if the cap has not been met.
There are various additional incentive programs established or renewed by Assembly Bill 4. Highlighted programs are listed below.
- The Historic Property Reinvestment program provides tax credits for a portion of the cost of rehabilitating historic properties in New Jersey. Tax credits under this program are capped at $50 million annually for six years.
- The Brownfields Redevelopment Incentive program provides tax credits to compensate developers of redevelopment projects located on brownfield sites for remediation costs. Tax credits under this program are capped at $50 million annually for six years.
- The New Jersey Innovation Evergreen program allows the auctioning of tax credits for cash, which will be used to invest in innovation as a catalyst for economic growth and to advance the competitiveness of the state’s businesses in the global economy. Tax credits under this program are capped at $60 million annually for six years.
- The Food Desert Relief program provides tax credits in order to incentivize businesses to establish and retain new supermarkets and grocery stores in food desert communities. Tax credits under this program are capped at $40 million annually for six years.
- The New Jersey Community-Anchored Development program provides tax credits to anchor institutions to incentivize the expansion of targeted industries in the state and the continued development of certain areas of the state. Tax credits under this program are capped at $200 million annually for six years.
- Personal Protective Equipment. Assembly Bill 4 allows tax credits for hiring employees for the manufacture of personal protective equipment. Tax credits under these sections are capped at $10 million annually for three years. In addition, the law allows deferrals, adjustments and termination of incentive agreements for businesses affected by COVID-19.
- Film and Movie Incentives. The new law amends the existing film tax credit provisions to include provisions for New Jersey film partners and New Jersey film-lease partners, and to allow an additional $200 million of tax credits annually over 13 years.
The new law replaces the two primary tax credit programs and enhances several existing programs. The amount of tax credits available has greatly increased over previous years. All businesses operating in New Jersey should be aware of the new incentive programs. While there is more money available in the form of tax credits, businesses should also be aware that the law creates more accountability. It creates an inspector general and requires businesses and their authorized agents to certify under penalty of perjury that the information on their tax credit applications is accurate. Taxpayers with questions about the new and updated New Jersey incentives programs should consult with their state and local tax credit and incentive professional for more information.