Category: Economic Development

Governor Murphy Signs New Economic Incentive Legislation

Governor Murphy signed into law the New Jersey Economic Recovery Act of 2020 (NJERA), opening a new chapter in the Murphy Administration’s efforts to incentivize businesses to invest in New Jersey and to assist the State in recovering from the economic downturn caused by COVID-19. NJERA’s enabling legislation, almost 250 pages long, creates new economic development programs, amends existing programs, and makes operational changes to the New Jersey Economic Development Authority (EDA). New Incentive Programs NJERA 2020 creates nine new incentive programs: The Historic Property Reinvestment Program provides tax credits for part of the cost of rehabilitating historic properties in this State. Tax credits under this program are capped at $50 million annually for six years. Qualified historic properties potentially eligible for tax credits include those designated on the National Register of Historic Places or the New Jersey Register of Historic Places, by the Pinelands Commission, or by municipalities under certain criteria approved by the State Historic Preservation Officer. The Brownfields Redevelopment Incentive Program provides tax credits to compensate developers for remediation costs of redevelopment projects located on brownfield sites. Tax credits under this program are capped at $50 million annually for six years. Brownfield sites include any former or current commercial or industrial site that is currently vacant or underutilized and on which there...

Update: U.S. Treasury Approves New Jersey’s Opportunity Zones

As we had previously written, the Murphy Administration recently recommended 169 census tracts within 75 New Jersey towns to the U.S. Department of Treasury for inclusion in the newly-created federal Opportunity Zones Program. The Treasury Department has now approved Governor Murphy’s recommendations. A list of the Opportunity Zones and an interactive map showing the Zones can be found through the New Jersey Department of Community Affairs. Championed by Senators Cory Booker (D-NJ) and Tim Scott (R-SC), the 2017 tax reform law incorporated the Opportunity Zones Program to provide federal community development tax incentives and encourage long-term investment in eligible census tracts. The Program allows investors to temporarily defer payment of federal income tax on realized gains if the gains are invested in a qualified Opportunity Fund within 180 days of the date of the particular taxable sale or exchange. In addition, when a taxpayer disposes of an investment in a qualified Opportunity Zone held by the taxpayer for at least 10 years, the taxpayer can elect to exclude from gross income the capital gain on the investment in the Opportunity Zone Fund. A qualified Opportunity Fund is an investment vehicle that is organized as a partnership or a corporation for the purpose of investing in Opportunity Zone Property. Eligible Opportunity Zone Property generally includes (i)...

New Jersey Picks Its Opportunity Zones

The Murphy Administration announced it has recommended census tracts within 75 New Jersey towns to the U.S. Department of Treasury for inclusion in the newly-created federal Opportunity Zones Program. Championed by Senators Cory Booker (D-NJ) and Tim Scott (R-SC), the 2017 tax reform law incorporated the Opportunity Zones Program to provide federal community development tax incentives and encourage long-term investment in eligible census tracts. The Program allows investors to temporarily defer payment of federal income tax on realized gains if the gains are invested in a qualified Opportunity Fund within 180 days of the date of the particular taxable sale or exchange. In addition, when a taxpayer disposes of an investment in a qualified Opportunity Zone held by the taxpayer for at least 10 years, the taxpayer can elect to exclude from gross income the capital gain on the investment in the Opportunity Zone Fund. A qualified Opportunity Fund is an investment vehicle that is organized as a partnership or a corporation for the purpose of investing in Opportunity Zone Property. Eligible Opportunity Zone Property generally includes (i) stock in a domestic corporation; (ii) any capital or profits interest in a domestic partnership; and (iii) tangible property used in a trade or business of the Opportunity Fund that substantially improves the property. The Program is designed...

N.J.’s Proposed Changes to Low Income Housing Tax Credit Qualified Allocation Plan Limit Projects per Developer and Encourage Development in Smart Growth Areas

The N.J. Housing and Mortgage Finance Agency (“HMFA”) recently proposed changes to the Low Income Housing Tax Credit (“LIHTC”) Qualified Allocation Plan (“QAP”). State housing credit agencies, like HMFA, are required to create plans which outline the selection criteria for awarding tax credits for the development of low- and moderate-income housing. The proposed amendments update the QAP to reflect procedural changes to the way in which affordable housing is constructed, but also include some substantive changes to both the allocation of tax credits among developers and the scoring system for awarding tax credits.

Are New Jersey’s Business Loan, Incentive, and Grant Programs Right for You?

Ronald Reagan famously said that the nine most terrifying words in the English language are, “I’m from the government and I’m here to help.” But for businesses starting up, expanding, or relocating into New Jersey, state government can be helpful, if you know where to start. We regularly counsel clients on government incentives, loans, and business assistance offered through the nationally-recognized New Jersey Economic Development Authority (NJEDA) and other State agencies. The NJEDA’s programs assist businesses of all sizes access loans/loan guarantees, as well as business and tax incentives. A few of the many programs offered are listed below. Loan Programs The NJEDA offers several loan programs that support small and mid-sized companies acquiring fixed assets, obtaining working capital, and refinancing debt: The Premier Lender Program provides loan and line of credit participations/guarantees in varying amounts. The NJEDA has a group of preferred lenders, and rates are generally at or below traditional loans. In return for the NJEDA’s assistance, the business has to agree to add one new full-time employee for every $65,000 of NJEDA exposure. The Small Business Fund provides up to $500,000 for small businesses, minority or woman owned businesses, and nonprofits that have been in business for at least one to three years. The Direct Loan Program provides up to $2 million...

Innovation Brewing in the New Jersey Legislature

Every summer, New Jersey legislators travel to the annual conferences of the National Conference of State Legislators (“NCSL”), the Council of State Governments (“CSG”), and the American Legislative Exchange Council (“ALEC”) to educate themselves about policy innovations occurring throughout the United States. While we wait to learn about their experiences, right now is a good opportunity to focus on innovative legislation currently before the New Jersey Legislature. As of August 15, 2016, 7,068 bills have been introduced in the New Jersey Legislature, 4,379 in the Assembly and 2,689 in the Senate, and only 87 have been signed into law. The following list of bills currently in committee represent examples by legislators looking to encourage innovation in New Jersey: S158 (Madden)/A3631 (Quijano) would promote investment in New Jersey by broadening the types of New Jersey emerging technology businesses that are eligible to receive investments under the New Jersey Angel Investor Tax Credit Act; A3187 (Munoz)/ S948 (Singer) would create a program within the New Jersey Economic Development Authority that would create a pathway to the commercial market for technology developed at a New Jersey college or university. Under this legislation, New Jersey would stimulate the economy while recapturing the state’s investment in higher education; and S348 (Kean) would utilize funds from the Workforce Development Partnership Fund,...

Privately Financing the Public Good: Using Public-Private Partnerships to Inject Private Financing into Public Projects in New Jersey

New Jersey has a higher inventory of worthy infrastructure projects than it has money to fund sorely needed improvements. Although New Jersey has the seventh highest revenue of any state, the pressures of being a densely populated commuter state often impose significant liabilities on those revenues such that the State is often faced with having to choose between worthy projects because available financing is limited. One common sense solution gaining significant traction is the injection of private financing into public projects in order to relieve some of the State’s financing burdens. Often referred to as public-private partnerships or P3s, these agreements trade a limited, future revenue stream over time to a private corporation in exchange for a fiscal commitment allowing a project to put shovels in the ground. These projects can take various forms: construction of state college dormitories in exchange for rents, maintenance of highways in exchange for availability payments, or construction of a bridge in exchange for toll rights, to name a few. The State entity receives an influx of capital to address infrastructure needs and the private entity receives a long term profit from rents, tolls, availability payments, or maintenance agreements. The elegance of this type of solution is that design, procurement, and initial construction can all overlap because they are being...

With the Budget Done, Line Item Veto Shapes the FY17 Budget

On June 27, 2016, the New Jersey Legislature sent S17, the FY 2017 budget bill, to Governor Christie. S17 makes various language changes and adds $275 million to the Governor’s proposed budget. Usually, the Governor is limited to three options when reviewing passed legislation. He can accept the bill as it is written, veto the bill in its entirety or suggest changes, or send it back to the Legislature. The budget bill is different. The New Jersey Constitution gives the Governor the ability to enact laws, that appropriate money, while reducing or removing specific line items. Article V, Section I, paragraph 15 provides that “If any bill presented to the Governor shall contain one or more items of appropriation of money, he may object in whole or in part to any such item or items while approving the other portions of the bill. In such case he shall append to the bill, at the time of signing it, a statement of each item or part thereof to which he objects, and each item or part so objected to shall not take effect.” That same section also grants the Legislature the ability to override the Governor’s line item veto by a two-thirds vote of all members of the State Senate and General Assembly. Ibid. This is...