New Jersey Enacts New Tax Credit Act

February 8, 2012

On January 6th, Governor Chris Christie signed the Grow New Jersey Assistance Act. The purpose of the Grow NJ Act, which takes effect immediately, is to encourage economic growth, job creation, and to help retain jobs which may be in danger of being relocated out of the state.

The act provides annual tax credits to businesses that make a capital investment of at least $20 million dollars in a business facility in a qualified redevelopment zone, at which it will employ at least 100 full-time employees or create at least 100 new full-time jobs in an industry identified as desirable for New Jersey to maintain or attract; (2) the capital investment and resulting retention and creation of jobs will yield a net benefit to New Jersey; and (3) the award of tax credits is a material factor in the business's decision to create or retain the requisite number of full-time jobs for eligibility under the program.

The New Jersey Economic Development Authority (EDA) will be administering the program and determining which businesses are awarded tax credits. Businesses may be awarded tax credits of $5,000-$8,000 for each new or retained full-time job. The credits will be awarded annually for a period of ten years and can be applied against corporation business tax or insurance premium tax.   The amount of such tax credits that may be used by the business annually may not exceed the lesser of one tenth of the capital investment certified by the EDA or $4,000,000.

Businesses may satisfy the capital investment requirement covered by the act by leasing a facility where a capital investment will be made. In addition, affiliates of a business may contribute to meeting the capital investment or full-time employee requirements. If a business does not have sufficient tax liability against which to offset the tax credit, the business may carry any unused balance forward for 20 years or sell it to another taxpayer. The tax credit may be reduced or revoked if the business fails to meet its New Jersey full-time employment target as set forth in its tax credit agreement with the EDA.

Applications must be submitted by July 1, 2014. Documentation proving that a business has met the capital investment and job creation or retention requirements must be submitted no later than July 28, 2017. A business that receives an award of tax credits under the act may apply to the New Jersey Division of Taxation and the EDA for a tax credit transfer certificate, which may be sold or assigned in whole or in part by the business. It is important to note that businesses awarded tax credits under the Grow NJ Act will not be eligible for certain other tax credits and incentives designated by the act.

For more information, please contact your Perelson Weiner partner.

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