On January 7, 2021, Gov. Phil Murphy signed into law the New Jersey Economic Recovery Act of 2020 passed by the New Jersey Legislature on December 21, 2020. This sweeping act, worth $14 billion, provides programs and policies related to New Jersey’s four strategic priorities of investing in talent, building communities, supporting innovation and increasing the state’s competitiveness and business climate.
Of particular interest is the much-anticipated return of economic incentive programs, which have been largely absent from the state since the sunset of the state’s key discretionary incentive programs in June 2019.
The new legislation, as it relates to economic incentives, is different from prior programs as it places caps on the various incentives, while maintaining flexibility to provide benefits to truly transformative projects. The new procedures and requirements attempt to ensure maximum transparency with taxpayers.
The legislation authorizes up to $11.5 billion in tax credits over seven years for new and extended incentive programs including:
The legislation also includes creative programs to assist small businesses and start-ups. For example, the Main Street Recovery Finance program provides grants, loans and loan guarantees to new businesses. New Jersey Ignite provides start-up rent grants to collaborative workspaces.
Other existing programs that were modified or extended include:
As shown above, the bill contains an abundance of new programs and changes to existing laws. The Emerge Program is especially relevant to our clients considering the Garden State for future projects.
The Emerge Program appears to be the successor to the popular Grow NJ Assistance Program as a tax-credit based tool for general economic development projects. This economic incentive program is created to encourage economic development, job creation and job retention of positions in imminent danger of leaving the state. The incentive program will do this through the issuance of nonrefundable tax credits.
Other program considerations
One major economic incentive program change Site Selection Group expects to see more frequently is the consideration of remote employees, and it appears Emerge is trying to address this issue.
The past Grow NJ legislation qualified a full-time position that worked a minimum of 35 hours per week at the qualified business facility. The Emerge legislation allows employees that are in flexible work environments to qualify by allowing a company to demonstrate that its real estate requirement can fulfill 50% capacity and that 80% of eligible employees are subject to New Jersey Gross Income Tax.
Not only does this make the program more viable in the current COVID-19 environment, but it also expands the program to be more attainable for service industries that have employees located in the field or at client sites.
While the rebirth of economic incentives in New Jersey is a welcome sight, the eligibility requirements, application process and compliance procedures are perhaps more burdensome than under the prior programs.
We will continue to routinely monitor news surrounding this bill and will provide updates as they become available. If you are considering a project in New Jersey, please contact us for additional information.
For additional information about these updates, please contact me at firstname.lastname@example.org with any questions.
Blog contributions by Rachel Rohn and Cody Gibbs.