Gov. Phil Murphy today signed into law a bill establishing the “Next New Jersey” tax credit incentive program for manufacturing businesses creating at least 20 new full-time jobs and making a capital investment of at least $10 million at a New Jersey facility. The award amount to an eligible business will be equal to the lesser of: (1) 0.1 percent of the eligible business’s total capital investment, multiplied by the number of new full-time jobs; (2) 25 percent of the eligible business’s total capital investment; or (3) $150 million, and the New Jersey Economic Development Authority (“EDA”) is authorized to also issue “bonus credit awards.”
As summarized by the Office of Legislative Services, “Under the program, the EDA would provide tax credits to eligible businesses, following approval of an application by the EDA, to eligible businesses. Eligible businesses would include a business that qualifies as a manufacturer or clean energy product manufacturer, and which meets the eligibility requirements set forth in the bill. The bill defines a “manufacturer” as a business engaged in the production or assembly of goods by transforming raw materials or sub-components into components or finished products through various industrial processes, including but not limited to fabrication, assembly, or chemical processes. Similarly, a “clean energy product manufacturer” is defined as a business engaged in the production or assembly of goods by transforming raw materials or sub-components into components for renewable energy, such as offshore wind, solar, geothermal, green hydrogen, nuclear energy, fuel cells, battery storage, or other clean energy manufacturing.
To qualify for tax credits under the program, an eligible business is required to: (1) make, acquire, or lease not less than $10 million in capital investments at a qualified business facility in the State; (2) create not less than 20 new full-time jobs in the State; (3) provide a median salary for the full-time jobs at the qualified business facility of not less than 120 percent of the median salary for manufacturing employees in the county in which the project is located; and (4) satisfy certain other requirements.
Following approval of an application under the program, the eligible business would be required to demonstrate to the EDA that the business has obtained site plan approval and has committed financing for, and established site control of, the qualified business facility. Thereafter, the eligible business would be required to enter into a project agreement with the EDA, which sets forth the terms and conditions under which the business may receive the tax credits authorized pursuant to the program. In the event that the business fails to meet certain requirements of the program, including the creation and retention of a minimum number of new full-time jobs, the project agreement would include provisions permitting the EDA to recapture or requiring the business to forfeit, as applicable, all or part of the authorized tax credits.
Under the bill, the amount of the tax credit allowed for a particular project would equal to the lesser of: (1) 0.1 percent of the eligible business’s total capital investment, multiplied by the number of new full-time jobs; (2) 25 percent of the eligible business’s total capital investment; or (3) $150 million. However, the bill also authorizes the EDA, in its discretion, to establish one or more bonus credit awards. Under the bill, the EDA is directed to adopt rules and regulations to establish criteria related to the eligibility for, and approval of, these bonus credits.
The bill authorizes an eligible business to apply for a tax credit transfer certificate in lieu of the eligible business being allowed any amount of the tax credit against its State tax liability. The eligible business may first take the credit amount for the tax period for which it was issued, for the tax period in which it was issued, or in any tax period during the time the business is required to maintain the project at a location in New Jersey, as set forth in the incentive agreement.
Upon receipt of the tax credit transfer certificate, the eligible business may sell or assign the credit, in an amount not less than $25,000, within three years of the tax period in which the eligible business receives the tax credit transfer certificate. The eligible business may transfer the tax credit amount on or after the date of issuance for use by the transferee in the tax period for which it was issued, for the tax period in which it was issued, or in any of the next three successive tax periods. An eligible business may not sell or assign the credit for consideration of less than 85 percent of the transferred credit amount before considering any further discounting to present value.
The bill authorizes an eligible business or transferee to first use the credit against tax liabilities in the tax period in which it was issued or in a succeeding tax period, as authorized in the bill, without the need for amending the tax return for the tax period for which the credit was issued, subject to the bill’s provisions. The eligible business or transferee may carry forward an unused credit resulting from the limitations contained within the bill, if necessary, for use in any of the next 10 successive tax periods, after which the credit expires.
The bill provides that up to $500 million in tax credits, originally allocated for the New Jersey Aspire Program and the Emerge Program, are to be made available to eligible businesses under the program. Of this total, the bill provides that $100 million in tax credits would be exclusively reserved, during the first two years of the program, for eligible businesses that are clean energy product manufacturers. However, if the EDA awards less than $100 million in tax credits to clean energy product manufacturers during this period, the uncommitted portion would be available to be awarded to any eligible business under the program beginning in the third year of the program.”
We will continue to monitor and post updates on the roll-out of this potentially powerful new incentive as EDA adopts rules and regulations to implement the program. In the meantime, please feel free to reach out to Ted Zangari (Telephone: 973-643-5781 or email: tzangari@sillscummis.com) or Cecilia Lassiter (Telephone: 973-643-5590 or email: classiter@sillscummis.com).
This blog post is for informational purposes only and is not intended as legal advice.