Legislation creating the proposed "Grow New Jersey" business incentive program unanimously passed the Senate Economic Growth Committee (with amendments) on Monday and the Senate Budget Committee (with amendments) earlier today.  A copy of the bill, as amended, is now available online at: http://www.njleg.state.nj.us/2010/Bills/S3500/3033_R1.HTM

Here is a summary of the proposed program:

* The "business facility" can be located anywhere in Planning Areas 1 and 2, areas of the Meadowlands, Highlands and Pinelands that are "targeted for development," closed military bases, and vacant commercial buildings over 400,000sf located anywhere in the State.

* Dollar Value of Grow NJ Incentive Program: Up to $50,000 per new or retained full-time job, with a possible bonus award of up to $30,000 per job, for a total stipend of up to $80,000 per job.

Details: The financial incentive, in the form of a transferrable tax credit, is $5,000 per full-time employee (new or existing) per year for up to 10 years; the business must commit to keeping that number of jobs in NJ for a period equal to 1.5 times the number of years it elects to receive the stipend. In other words, a business may obtain a maximum pay-out of $50,000 per employee by committing to maintain those job levels in NJ for at least 15 years (10x1.5). The stipend can be boosted to $8,000 per full-time employee (new or existing) per year for up to 10 years if the EDA grants a "bonus award." A bonus award will be given to the business if the business is in an industry identified by the EDA as "desirable" for the State to maintain, or if the business is relocating to a location adjacent to or within walking distance of or shuttle service to a public transit facility, or if the business creates jobs whose salaries are greater than the "average full-time salary" in NJ.

* Eligibility Requirements: To qualify for the Grow NJ program, the business must:

  1. make at least $20MM in capital investment at the business facility, which may include site preparation, machinery and equipment, and furnishings as well as any "acquired" capital investment made by the former owner (if the facility is purchased) or by the landlord (if the facility is leased); and
  2. employ at least 100 new or retained (i.e., existing in NJ) full-time employees at the business facility.

* The number of new full-time employees at the business facility for which the business receives Grow NJ tax credits cannot exceed the number of retained full-time jobs for which the business receives Grow NJ tax credits.

* The amount of the tax credit award cannot exceed the amount of the capital investment at the business facility, nor can the annual 1/10th amount of tax credits exceed 1/10th of the capital investment.

* A "net benefits test" will be applied to this program, presumably the same test being utilized in other EDA programs (i.e., 110% yield in new state, county and local revenues over a 20-year period).

* The CEO of the company must certify that the existing NJ jobs are "at-risk" of leaving NJ; if the certification is found to be "willfully false," the tax credit may be revoked and civil or criminal penalties may be applied.

* The Grow NJ program will be funded with $200,000,000 of tax credits to be taken out of the Urban Transit Hub Tax Credit program, so there will be a first-come, first-served element to the program (although the EDA will be empowered to draw more UTHTC funds for this program in its discretion).

* The deadline for applying for the program is July 1, 2014.

* The deadline for submitting all paperwork (i.e., proof that the business has expended at least $20MM in cap. expenses and has at least 100 new and retained full-time employees at the business facility) is July 28, 2017.

* If the business is a tenant of the business facility, the annual tax credit award (for each of the 10 years) cannot exceed the rent payable in that year.

* The tax credits can be sold (transferred) to third parties, or the business may choose to instead carry-forward tax credits for up to 20 years.

* If, during the jobs commitment period, the business reduces its Statewide total number of full-time employees in NJ by more than 20% from the total number of full-time NJ employees existing as of the time of the incentive award, then the business will forfeit its tax credit amount for that year and all subsequent years until the Statewide workforce again exceeds the minimum.

* If, during the jobs commitment period, the number of full-time jobs at the business facility falls below 100, then the business will forfeit its tax credit amount for that year and all subsequent years until the number of full-time jobs at the business facility again exceeds 100.

* The business facility must be constructed and/or renovated in accordance with the State's new "green building manual." Construction/renovation work must also utilize prevailing wage labor.

Please feel free to return to this blog for updates as this legislation proceeds through the Senate and Assembly in the coming weeks.

NOTE: This is a summary of complex proposed legislation. Precise answers to questions posed in this summary may depend on business-specific or site-specific facts, or may ultimately depend on NJEDA regulation or interpretation. You should consult an attorney and tax advisor for the proposed legislation’s particular application to your circumstances.