As the saying goes, “All good things must come to an end.” On June 30, 2019, the increasingly popular Grow New Jersey Program is set to expire. The program has improved the New Jersey economic landscape through job creation and retention and delivered tax incentives to qualified eligible businesses through a credit for a period of up to ten years.
The program is designed to make New Jersey attractive and more competitive in comparison to surrounding states and, although sunsetting in the near future, there is still time for businesses in the decision stage of occupancy to take advantage of the program. To be eligible for the program, businesses must demonstrate that award of the tax credit is a “material factor” in the company’s decision to occupy, retain or relocate employees to the state. Therefore, the analysis for eligibility of the credit should be completed before businesses sign or renew leases, or sign contracts to acquire real property. Additionally, applicants must show that operation in the state is more costly than other options.
The credits are received at the end of each year depending on new or retained full-time jobs, subject to annual certification by the New Jersey Economic Development Authority. Additionally, there are bonus incentives for factors such as occupancy in identified underdeveloped locations, paying excess median salaries, and significant increases in new and retained jobs. The new or retained full-time job definition includes annual retention measurements, minimum wage requirements, and compliance with affirmative action.
The other primary eligibility requirement of the program is a minimum investment requirement, which varies by project type and includes rehabilitations and new projects. The investment is measured by project type on a dollar per square foot basis. All projects must meet the Green Building requirements, as well as demonstrate that the investment and resulting job creation will result in a defined net positive benefit to the State.
The standard credit ranges from $500 to $5,000 per new or retained full-time job per year with bonus credits ranging from $250 to $3,000 per new or retained full-time job per year. The credit can be used to offset corporate income tax, as well as, flow through to the owners of pass-through entities. In the case that the credits cannot be used, they will carryforward for 20 years, or alternatively, can be sold to a third party for no less than 75% of the value of the credit.
To learn more about how Withum can help strategically partner with you regarding this and other NJEDA initiatives, please contact your Withum Tax Advisor.