Notwithstanding recent headlines about attempts to “kill” off the New Jersey Economic Development Authority (NJEDA), reports of the NJEDA’s death are greatly exaggerated. On November 20, 2017, the NJEDA proposed for readoption with amendments the administrative rules for its assistance programs. This includes changes to the Grow NJ Assistance Program (the “Grow NJ Program”) that implement the recently enacted law creating incentive areas around colleges and universities; modifications to the submission dates for the Economic Redevelopment and Growth Program (the “ERG Program”); and revisions to the Angel Investor Tax Credit Program (the “Angel Investor Program”). Interested parties may submit written comments by January 19, 2018.
The NJEDA is an independent State agency that finances small and mid-sized businesses, administers tax incentives to retain and grow jobs, revitalizes communities through redevelopment initiatives and supports entrepreneurial development by providing access to training and mentoring programs. We have previously written about some of the NJEDA’s programs, and the most important proposed changes to the NJEDA’s program rules are listed below.
Grow NJ encourages economic development and job creation by offering tax credits to businesses looking to relocate to the State, or that are currently located in New Jersey but are in danger of leaving. The NJEDA’s proposed changes to the Grow NJ program rules would:
- Implement new incentive areas around eligible colleges and universities. A three-mile radius around the State’s doctoral universities (designated as such by the Carnegie Classification System on August 7, 2017) will become “Garden State Create Zones.” Businesses that locate in these Zones and enter into collaborative research relationships with the university may be eligible to receive a base credit of $5,000 per newly created job ($2,500 per retained job), a maximum annual tax credit per newly created job of $12,000 ($6,000 per retained job), and an overall annual tax credit award of $10 million.
- Businesses that locate within three miles of non-doctoral universities (such as the State’s public and independent colleges and universities, and the county colleges) and enter into collaborative research relationships with those institutions may be eligible to receive a bonus credit of $1,000 per newly created job ($500 per retained job).
- Expand the eligible incentive areas to include certain rural development areas zoned for industrial use in the Pinelands region.
ERG is an incentive program for commercial and residential developers who have gaps in their existing financing, such as insufficient revenues to support the project or projects with a below market development margin or rate of return. The NJEDA’s proposed changes to the ERG program include:
- Extending the date that a “qualified residential project” must submit its temporary certificate of occupancy from July 28, 2018 to July 28, 2019.
- Expanding the eligible incentive areas to include certain rural development areas zoned for industrial use in the Pinelands region.
Angel Investor Program
The Angel Investor Program allows for the issuance of tax credits against corporation business taxes (CBT) and gross income taxes (GIT) for qualified investments in a New Jersey emerging technology businesses. The NJEDA’s proposed changes to the Angel Investor Program include, among other items:
- Expanding the definition of “eligible technology” to include “carbon footprint reduction technology.”
- Allowing “qualified investments” to be made in a “New Jersey emerging technology businesses” or a “New Jersey emerging technology business holding company.”
- Clarification that the taxpayer shall be allowed a credit against the tax imposed under the CBT or GIT in an amount equal to 10 percent of the “qualified investment” made by the taxpayer.
- A provision that the credit for New Jersey S-corporations may be applied by the shareholders of the S-corporation against the tax liability otherwise due under the GIT, so long as the credit is allocated to each shareholder in the proportion that is equal to the shareholder’s proportional share of the S-corporation, whether distributed or not, of the total distributive income or gain of the S-corporation for its tax period ending with or within the shareholder’s tax period, and that the credit may be applied by the shareholders against the tax liability otherwise due.
If enacted, the proposed amendments to the administrative rules for the Grow NJ Program, the ERG Program, and the Angel Investor Program are designed to have a positive impact. The programs are the State’s major tools to compete in the marketplace for attracting and retaining businesses, and the changes should further stimulate economic growth, investment, and job creation.