Bill To Establish the Grow NJ Assistance Program Passes in NJ Legislature’s Lame Duck Session and Advances to Governor’s Desk for Signature

December 2011Newsletters In the Zone

Since the onset of the Great Recession, the executive and legislative branches of the New Jersey state government have sought ways to change the business climate in New Jersey by encouraging development through tax credit legislation. The passage of S3033/A4306 (S3033) on December 15, 2011, proves that the current lame duck session of the New Jersey Legislature is no exception. As we discussed at our recent presentation on the Urban Transit Hub Tax Credit Program (UTHTC program), both branches have undertaken a bipartisan approach to develop new economic development legislation as well as make existing legislation and state incentive programs more workable. Thus, the UTHTC program has been amended substantively three times, with a fourth major revision in pending S3033 now awaiting the Governor’s signature. In addition to amending the UTHTC program, this bill establishes the Grow New Jersey Assistance Program (Grow New Jersey).

In brief, S3033 establishes a $200 million tax credit incentive program that encourages the growth of New Jersey companies through capital investment, creation of new jobs and retention of existing jobs. Eligibility requirements would include:

(1) A minimum investment of $20 million in a “qualified business facility” at which no less than 100 full-time existing employees would be retained or 100 new full-time jobs would be created and
(2) The determination by the New Jersey Economic Development Authority (EDA) that the applicant satisfies a “net positive benefit” test.

The cost of the program will be subsumed within the $1.5 billion cap established for the Hub Tax Credit Program and thus could divert some of the remaining credit availability from projects that may be eligible under that program. All applications under the Grow New Jersey program must be filed by July 1, 2014.

The program is open to property owners, tenants and affiliates but is subject to an annual tax credit cap of $4 million. Under the bill, the EDA would be required to establish standards for the construction and renovation of business facilities based on a green building manual prepared by the Department of Community Affairs. Eligible geographical areas would include those traditionally known as “smart growth” areas as well as “vacant commercial office, laboratory, or industrial properties having over 400,000 square feet for at least 1 year or more impacted by UTHTC Program Approval….”

Under the program, an eligible business would receive a base tax credit of $5,000 per job regardless of whether it is a retained or new job. There would be an annual compliance review, and under certain criteria a bonus award of $3,000 would be added to the base tax credit. The per-project benefit cannot exceed the project’s total capital investment. As in the UTHTC program, the tax credits would be transferrable through tax credit transfer certificates and subject to nonretroactive forfeiture in the event the business loses eligibility through job attrition.

Notably, the bill also expands the definition of an “urban transit hub” to include NJ Transit rail stations located at an international airport not owned by the Port Authority and, through Assembly Appropriations Committee amendments, expands the eligible areas to include:

(1) Property located within a one-mile radius of a rail station if an area is the subject of a Choice Neighborhoods Transformation plan funded by HUD of the federal government and
(2) The site of either an acute care medical facility or a closed hospital located within a one-mile radius of a rail station.

The bill also includes miscellaneous provisions that deal with federal contracts and the Business Retention and Relocations Assistance Grant Program. As of this writing, S3033 is on the Governor’s desk for signature. If not signed by the January 10, 2012, recess of the current Legislature, the bill would have to be reintroduced in the new legislative session.

For more information, please contact Daniel V. Madrid at 609.844.7413 or [email protected].

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