February 8, 2021
As New Jersey works to rebuild an ailing economy negatively impacted by the pandemic, the New Jersey Economic Recovery Act of 2020 could ultimately prove to be an important element in facilitating that resurgence.
At its simplest level, the Economic Recovery Act of 2020 aims at delivering New Jersey business owners a variety of incentives and tax savings to boost economic investment. But it comes jampacked with complex programs and more stringent oversight from the Office of Economic Development Inspector General to ensure it’s properly implemented and fraud is mitigated.
Indeed, if you do business in New Jersey, there is a variety of ways you as a business owner can take advantage of the stimulus-focused Economic Recovery Act of 2020. But its complex nature means you’ll need to navigate carefully to ensure you don’t run afoul of its rules
Read on to learn more about the New Jersey Economic Recovery Act of 2020 and be sure to consult your Perlson LLP professional at 516-541-0022 to help you develop a strategy to positively impact your business.
Angel Investor Tax Credit
Although New Jersey already operates an Angel Investor Tax Credit program that allows angel investors to collectively receive a $25 million credit each year, the Economic Recovery Act increases that credit to $35 million.
The newly minted Aspire Program aims at providing gap financing to real estate developments and redevelopment opportunities that would otherwise fail — or never get off the ground — if not for the government aid.
The total tax credits under the Aspire Program may not exceed $50 million per redevelopment project on any project with a Municipal Revitalization Index distress score of at least 50. Any other redevelopment project is capped at a $32 million tax credit.
In order to qualify for the assistance, commercial and mixed-use projects must satisfy an eligibility period of 15 years, while residential projects qualify for a 10-year eligibility period. Developers must provide important details on the project, including an estimated completion date. They must also provide periodic updates on the effort to ensure the project stays on course
Additionally, five key metrics must be met:
Brownfields Redevelopment Incentive Program
Developers working on brownfield sites stand to benefit from $300 million in tax credits over a six-year period ($50 million per year). Each developer’s credit will be capped at the lesser of $4 million or 40% of their cost to remediate brownfield developments.
Be aware, however, that the program only applies on brownfield developments that have yet to start clean up and such activity would be economically unfeasible without the credits.
Economic Redevelopment and Growth Grant
The Economic Recovery Act has allocated an additional $220 million in tax credits to residential and mixed-use parking projects that qualify under the state’s Economic Redevelopment and Growth Grant program. The act also extends the deadline for accessing those credits to December 31, 2021.
The Emerge Program is designed to provide incentives to companies that save jobs that would have otherwise been lost to another state.
In order to qualify under the Emerge Program, companies will need to provide proof that the positions pay $15 or more per hour and operate in a high-growth industry. The credit, which again, is predicated on proof that the jobs would have been lost to another state, is based on the state’s calculation of the savings’ “net benefit” to New Jersey.
Film Tax Credit
To attract more production activity to New Jersey, the Economic Recovery Act has allocated an additional $200 million in tax credits to the film industry over the next 13 years.
Food Desert Community Investment
Over the next six years, New Jersey will provide $40 million per year to those companies that build a supermarket or grocery store in “food desert communities.” The provision affixes that designation to areas of the state where nutritious foods, including fresh fruits and vegetables, are not readily available.
Only companies that open a first or second market or operate their first or second market in the food desert communities can qualify.
Historic Property Investment
In a bid to boost historic property investments in New Jersey, the state will give developers a 40% tax credit to cover the costs of rehabilitating historic properties. But again, the credit is only allowed on projects that have been deemed economically unfeasible without the tax savings.
The program has been allocated $50 million in credits per year for the next six years.
Innovation Evergreen is an effort by New Jersey to use tax credits to boost economic investment in the state.
Through the program, New Jersey will sell $60 million in tax credits per year for a period of six years. Those credits will be made available at an auction to qualifying venture capital firms that will also promise to provide networking and mentoring support to startups that will receive investments via the auction proceeds. Startups operating in life sciences, technology, and other high-growth verticals will qualify for the proceeds.
Main Street Recovery
A new $50 million Main Street Recovery fund will make grants and loans available to eligible small businesses. A percentage of the amount will be set aside and used exclusively for minority and/or women-owned businesses.