NJ Tax Credit Opportunities: The New Jobs Investment Tax Credit

New Jersey provides multiple incentives for businesses to invest and reinvest in growth through capital and people in the state. One of these incentives is the “New Jobs Investment Tax Credit,” which allows corporations a credit for a portion of their corporate tax liability that is attributable to qualified investments and the new jobs created related to these investments. Qualified investments include leasing or direct ownership in buildings, building components, equipment and capitalized start-up costs.

How is the credit calculated?

The credit is calculated as the qualified investment multiplied by the new jobs factor. The business’ qualified investment is dependent on the depreciable life of the asset and ranges from 35% to 100% of the total cost of the asset. The new jobs factor is based on the number of jobs created that are directly attributable to the qualified investment.

What is considered a New Job?

For the new jobs created, the employee must be a New Jersey resident employed either full-time or part-time on a permanent basis. There is a median compensation requirement that is adjusted for inflation on an annual basis. Additionally, the new jobs factor, mentioned above, is determined based on two factors – whether the entity is a small to mid-size business or a non-small to mid-size business and the number of additional new jobs as described in this section.

How much is the credit?

The allowable credit must be taken over a five-year period and may not reduce the business’ corporate tax liability attributable to the increased investment below 50% of the tax or the fixed dollar amount. Additionally, businesses are entitled to a refund for the portion of the credit not utilized in a given year. The refund is limited to 50% of the property tax liability resulting from the qualified investment.

As growth continues throughout New Jersey, the New Jobs Investment Tax Credit and other state incentives are available. To learn more about how Withum can help strategically assist you with these opportunities, please contact Shawn Henderson, Tax Services.

Author: Shawn Henderson, CPA | [email protected]

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