New Jersey Economic Recovery Act of 2020 Creates/Modifies Various Incentive Programs

The Economic Recovery Act of 2020 (Act), signed into law by New Jersey’s governor on January 7, 2021, contains a host of new and amended initiatives designed to foster economic development and assist small businesses. The new legislation, which replaces the New Jersey Economic Opportunity Act of 2013 and addresses shortcomings in that law, contains 12 programs that target job creation/retention, real estate development, community partnerships, small and early stage businesses, state procurement, film production and the elimination of “food deserts” throughout the state. The Act provides for tax credits, grants, loans and loan guarantees to taxpayers that undertake qualifying projects.

The New Jersey Economic Development Authority—the agency charged with administering the Act—is developing regulations and the application process for each of the programs. It is expected the Act will be amended during a “clean-up” session sometime during January 2021.
This alert provides a high-level overview of the new and amended programs:

Emerge Program (Job Creation/Retention): To encourage employment throughout the state, the Emerge program (which replaces the Grow NJ Program) provides discretionary income tax credits to eligible companies for new job creation and, in cases where 500-1,000 existing jobs are at risk of leaving the state, for job retention projects. The credit amount varies depending on the physical location of the project site and other project specifics and can range from $500 to $8,000/job/year. The tax credits will be earned on an annual basis for up to seven years. Unused credits may be sold to Treasury at $.90/dollar.

Aspire Program (Redevelopment): Aspire provides transferrable tax credits to developers to address financing gaps in specific real estate development and redevelopment projects throughout the state. The tax credit amounts are based on and equal to the lesser of four calculations: the net benefit test, financing gap, maximum percentage of project costs and maximum amount per project. The Aspire program maintains an equity requirement equal to 20% of project costs, affordable housing requirements, community benefits and support, as well as other factors that should be considered throughout the implementation process.

A budget of $1.1 billion/year for seven years has been allocated for tax credits available via the Emerge and Aspire program(s), including $130 to certain counties in the northern part of the state and $70 million to certain southern communities. Additional credit opportunities via the Transformative Projects designation will also be available to businesses undergoing large-scale projects.

Transformative Projects: This program increases project award caps under Emerge and Aspire to 30% of eligible project costs. To qualify, the applicant must be completing a large-scale commercial project utilizing at least 500,000 square feet of space, or a residential project with at least 1,000 units. Only 10 transformative projects may be approved within a six-year period and no more than two in a single municipality. The total credits available under this program are capped at $2.5 billion.

Community-Anchor Institutions: Community-Anchor Institutions are designed to incentivize local institutions (universities, hospitals, etc.) for job creation within their respective targeted industries, while also achieving and exceeding institutional goals and objectives. Tax credits are capped at $200 million each year for a period of six years, including $130 to certain counties in the northern part of the state and $70 million to certain southern communities.

Innovation Evergreen Program: The Innovation Evergreen program establishes a venture capital fund to support innovative companies located in New Jersey. The fund is capped at $60 million annually for six years.

Food Desert Relief Program: This program provides tax credits to eligible supermarkets and/or grocery stores locating in a qualified food desert community. The program is capped at $40 million per year for six years.

Brownfields Redevelopment: This amended program targets the clean-up and redevelopment of environmentally contaminated sites and allows the offset of eligible development costs associated with the remediation of a brownfields site. Developers will be entitled to a tax credit equal to 40% of qualified project costs, capped at $50 million over six years.

Historic Property Reinvestment: This program aims to promote reinvestment in historic property. Persons undertaking the renovation of historic property will be eligible for a tax credit equal to 40% of the project costs not to exceed $4 million/project or $50 million/six years.

Mainstreet Recovery Finance Program: Grants, loans and guarantees will be made available to qualifying small businesses. This program is capped at a total of $50 million.

Film Tax Credit: The previous film tax credit incentive is amended to include an additional $200 million in transferrable income tax credits over a 13-year period.

Angel Investment Tax Credit: The previous program is amended to increase the annual cap to $35 million and adds certain provisions for venture funds. The Angel Investment Credit is an income tax credit (generally) equal to 20% of qualified investment made in a NJ emerging technology business, capped at $500,000.

New Jersey Ignite: This is a public-private partnership supporting local entrepreneurs by providing rent support grants to early stage technology and life science companies occupying New Jersey collaborative workspaces. The program is capped at $250,000.