Calling All Businesses: The New Jersey Economic Opportunity Act Is Signed into LawSeptember 2013 – Articles In the Zone
On September 18, 2013, Governor Christie signed the New Jersey Economic Opportunity Act into law after nearly nine months of consideration, wrangling and negotiation between both houses of the New Jersey legislature. With the passage of this bipartisan bill, the State of New Jersey has crystallized its existing array of economic development programs into two surviving programs: the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth Grant Program (ERGG). In contrast to their earlier versions, Grow NJ and ERGG have wider applicability and a lower cost to entry and should be considered by any business that is undertaking a capital investment in a real estate project located in New Jersey. This article provides a general overview of Grow NJ will be the first in a series of articles addressing the Economic Opportunity Act’s potential benefits to you and your business.
Grow NJ provides a tax credit to businesses (other than point-of-sale retail) that create or retain jobs in New Jersey and make a qualified capital investment at a qualified business facility. Grow NJ reflects the state’s smart growth policies by adjusting the amount of tax credits available to be awarded based on the geographic location of a project and by lowering the threshold of required capital investment for projects involving the redevelopment of an existing facility. Additionally, Grow NJ reflects New Jersey’s strong push to attract certain targeted industries by providing bonus tax credits for such businesses.
To qualify under the Grow NJ program, a business is required to make a capital investment in the following amounts:
- For the rehabilitation of an existing industrial project: $20 per square foot
- For the new construction of an industrial project: $60 per square foot
- For the rehabilitation of an office project: $40 per square foot
- For the new construction of a non-industrial project: $120 per square foot
The capital investment threshold can be met through expenses used for site acquisition (if purchased within 24 months of the application), site preparation and construction, repair, renovation, improvement, equipping and furnishing real property as well as the cost of obtaining and installing furnishings and machinery, apparatus and equipment.
A business is also required to either employ new employees or retain jobs that are at risk of leaving the state in the following minimum amounts:
- For technology startups or manufacturing businesses: 10 new or 25 retained
- For targeted industries including transportation, defense, energy, logistics, life sciences, technology, health and finance: 25 new or 35 retained
- For all other business and industries: 35 new or 50 retained
Minimum Environmental Standards and Net Benefits
Additionally, Grow NJ requires a business to construct a project in accordance with minimum environmental and sustainability standards and further establish that the award of the tax credits will result in a net positive benefit to the state.
Tax Credit Award
Upon meeting the threshold requirements, a business may be entitled to a tax credit applicable to New Jersey state corporate business tax, insurance company tax and franchise tax. In the event that a qualifying business does not have sufficient tax liability to make use of the credits, Grow NJ allows the business to sell the credits for an amount not less than 75 percent of the transferred credit amount pursuant to procedures established in the statute.
The tax credits are calculated on a per job/per year basis in the following base amounts based upon the geographic location of the qualifying business facility:
- Category 1: Urban Transit Hub Municipality or Garden State Growth Zone (Camden, Trenton, Passaic, Patterson, Newark, Elizabeth, East Orange, Hoboken, Jersey City and New Brunswick) - $5,000 per job/per year
- Category 2: Distressed Municipality (approximately 50 municipalities) - $4,000 per job/per year
- Category 3: Priority Area (including metropolitan and suburban areas) - $3,000 per job/per year
- Category 4: Other Eligible Areas - $500 per job/per year
Bonus tax credits may also be awarded for businesses that fall into the following categories:
- Businesses that result in job creation or retention of 250 or more jobs
- Businesses that pay average salaries that are 35 percent higher than the surrounding county average
- Business that are located near public transit are considered “Mega Projects”
- Businesses that develop workforce housing for employees located in the qualifying business facility
- Businesses that achieve a certain level of LEED certification
- Businesses that undertake environmental remediation in conjunction with the development or redevelopment of a qualifying business facility
Grow NJ also provides additional incentives and a lower jobs and capital investment threshold for businesses located in Camden, Trenton, Paterson and Passaic, and businesses located in the following eight Southern New Jersey Counties: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean and Salem.
If your business is considering a capital improvement project in the state of New Jersey, and you meet the requirements referenced in this article, we urge you to contact us.