Recent NJ Legislative Activity on Real Estate Tax Credits

June 2012Articles In the Zone

The legislative process in New Jersey becomes very interesting in the month of June when all legislative and executive eyes focus on the budget proposal and deals may be struck on other pieces of legislation to build support for the budget. This month should prove to be no exception. While we will not discuss the budget process as it affects N.J. tax credits, the negotiations over the budget could have a direct impact on some key programs. This article will focus on updates to bills related to programs that we have previously discussed in earlier volumes of In the Zone.

We previously reported on legislation that would raise the maximum allowable tax credits under the Urban Transit Hub Tax Credit Act and under the Grow New Jersey Assistance Act. These bills, A2242 and S1562, seek to increase the UTHTC Credits from 1.5 billion dollars to 2.5 billion dollars and tax credits under the Grow New Jersey Assistance Act from 200 million dollars to 400 million dollars. The Assembly bill, A2442, has not received any attention since its introduction in February of this year. On the other hand, the Senate version, S1562, sailed through two committees and was reported favorably by the second committee in early March of this year. Until the end of last month, that bill sat, but on May 31, it was passed unanimously by the Senate 35 to 0. Earlier this month, the Senate bill was received by the Assembly and referred to the Assembly Commerce and Economic Development Committee.

It is anticipated that A2442 will receive favorable attention by the Assembly Committee. The UTHTC program has been highly successful and the tax credits it has generated have been a significant component of capitals stacks in numerous projects in several of the eligible municipalities. However, the program has been a victim of its success as the eligible credits have been gobbled up and presumably worthy projects may be at risk for lack of credits.

We expect favorable action by the Assembly. If that happens then, a bill will arrive at the governor’s desk accompanied by vigorous lobbying behind the scenes to urge the governor to sign the bill. While there are other pending bills that seek to either tweak or radically change this tax credit program, they seem to be garnering little attention at this time. One significant oversight is the disparity in distribution of urban transit hub tax credits to the eligible municipalities. Whether that N.J. legislature will address the historic disparity remains an open question. For more information on these tax credit laws, please see our previous article.

A1450 and S141, the New Jersey Historic Property Reinvestment Act, has not progressed in either house, a curious result. Last year, the identical legislation made it to the governor’s desk only to be vetoed. As the bill presently stands it seeks to aid many without consideration of economic need. Perhaps with a more surgical approach -- for example, permitting tax credits in urban cities in need of redevelopment -- it will draw favorable action. For more information on this proposal, please consult our previous article.

In view of our readership, two pieces of legislation proposing tax incentives to “distressed shopping centers” deserve a quick note. These bills are proposing tax incentives to encourage revitalization of partially or completely vacant shopping centers. A204 and S1002 propose a tax credit of $15,000 up to 50 percent of the corporate business tax liability while the other, A434, proposes an array of tax incentives including tax credits, rebates, reimbursements, exemption and skill training to tenants of eligible shopping centers. In the case of all of this legislation, there are prerequisites to eligibility. We will follow their progress and, if warranted, report more thoroughly on them in the next issue of In the Zone.

Please feel free to contact us if you have questions or comments about this article or for more information about this program or other Federal or State tax credit programs.