To revitalize a state suffering from the economic and personal hardships wrought by the COVID pandemic, New Jersey Governor Murphy signed into law on Jan. 7, 2021, the New Jersey Economic Recovery Act of 2020. The Act adopts a series of incentives to both encourage businesses to settle in New Jersey and prevent Garden State businesses from fleeing to greener pastures elsewhere. Many of these programs will be administered by the New Jersey Economic Development Authority (“Authority”).
The new Emerge Program provides tax credits to encourage economic development, job creation and the retention of significant numbers of jobs in imminent danger of leaving the state. The program will target businesses that build, acquire or lease space in the state with plans to create or retain full-time jobs.
Eligibility is subject to a requirement that the award of tax credits, the resulting capital investment and the resulting job creation or retention will yield a net positive benefit to the state ranging from at least 200 to 400 percent, depending on the location of the requested credit amount. The Emerge Program has minimum requirements for the necessary capital investment based on the type of project, the size of the business and the types of jobs at stake.
For start-ups, the New Jersey Innovation Evergreen Fund is created to combine state funds with private capital to support innovative new businesses. The Fund will be capitalized by auctioning up to $300 million in tax credits. The cash will be invested in qualified venture firms for the purposes of investing in qualified businesses in New Jersey. A qualified venture firm must invest in an early-stage or emerging growth company in exchange for an equity stake in the business. The Authority will certify whether a firm meets such criteria and require the firm to make a matching contribution from its own funds to invest in a qualified company.
The Fund may generally invest no more than $5 million in an initial investment in a qualified venture firm that will invest in a qualified company. A qualified company must have its principal business operations in New Jersey and intend to maintain its principal business operations in the state after receiving the investment. The company must be in a targeted industry (such as high-tech companies) and employ fewer than 250 people at the time of the investment.
The Main Street Recovery Finance Program will provide a direct $50 million appropriation for grants, loans, loan guarantees, and technical assistance to small and micro businesses.
New Jersey also adopted its first historic property tax credit, which acts as a subsidy to cover part of the cost of rehabilitating historic properties. These properties must be listed in the New Jersey Register of Historic Places. Many of these properties are in New Jersey’s oldest and most distressed neighborhoods. The new Brownfields Redevelopment Incentive Program provides tax credits to compensate developers of projects located on brownfield sites for remediation costs, which are also often in economically distressed communities.
The innovative Food Desert Relief Act provides tax credits (and in some cases, grants or loans) to incentivize businesses to establish and retain supermarkets and grocery stores in communities lacking adequate services, which are referred to as food deserts. Bodegas, corner stores, and mid-sized retailers will be given a chance to stay afloat and expand into healthier food options.
There are numerous additional incentives in the more than 200-page Act covering a diverse set of areas (e.g., tax credits for films and offshore wind facilities). The procedures for applying for and obtaining benefits under all these new incentives needs to be adopted by the Authority. While these procedures may be complex to ensure the intended benefits achieve their goal, the good news is the Act will create a massive infusion of state funds to assist business and communities in a time when other sources of funding may be limited.