The New Jersey Economic Recovery Act of 2020 Explained
On December 21, 2020, both houses of the New Jersey Legislature approved and sent to Governor Murphy a comprehensive economic reform bill entitled the New Jersey Economic Recovery Act of 2020 (the "Act"). Generally, it is described by the legislature as providing for the “administration of programs and policies related to jobs, property development, food deserts, community partnerships, small and early stage businesses, State procurement, wind energy, and film production.” It appropriates over $55.5 million and provides in excess of $14.3 billion in potential tax credits.
Based upon my years of experience in public sector leadership roles throughout the State, I see the opportunity created by this Act for elected and appointed officials to join with business leaders to create innovative public-private partnerships. The Act puts financial resources where they will have the most impact, and sends the clear message that the government and private sector can work together to provide growth and opportunity statewide. The chasm between public and private sectors has been bridged.
This new legislation is a product of legislative and executive compromises that draws from new ideas and proposed bills that were previously considered by the legislature. As a result, the Act is a virtual smorgasbord of financial incentives that covers areas of historic concern across the entire State. The interests of both northern and southern New Jersey counties and cities are addressed and, in some instances, the Act specifically divides programmatic tax credits that are available between the north and south.
In many respects, the Act is more than just a piece of legislation and represents the healing of long-standing disputes while providing an economic engine that will jumpstart areas of the New Jersey economy that have been historically dormant or devastated by the COVID-19 pandemic. It runs the gambit of interests from governmental, not-for-profit, commercial, community, business and redevelopment interests. Consequently, the New Jersey Economic Development Authority has been significantly enhanced throughout the Act but it is required to adopt rules necessitating that not less than the prevailing wage be paid to workers on projects associated with its incentive programs.
Accordingly, the following Acts within the New Jersey Economic Recovery Act of 2020 have been created:
Economic Development Authority Integrity and Protection Act. To help monitor the decisions on approvals, dispensation and use of funds, the Act creates this new legislative and administrative instrument. It requires the appointment of a compliance officer, but more importantly creates the Office of Inspector General. The Inspector General will be appointed by the Governor and confirmed by the Senate, and will be vested with independent extensive powers to detect, monitor and investigate fraud and abuse. The Inspector General’s oversight includes not only applicants and recipients, but also State and local government officials. This position has the authority to reach into other departments as a part of its investigative and compliance power. Also note that the Act authorizes the Division of Taxation to disgorge tax data to the NJEDA.
New Jersey Aspire Program Act & Emerge Program Act. Each of these programs are designed to foster development by financing various gap costs and stimulating economic development for job growth and retention. Northern and southern New Jersey counties divide tax credits capped at $1.1 billion from both the Aspire and Emerge programs, with $715 million in credits allocated to northern counties and $385 million to southern counties. Note that transformative projects defined in the Act (in part) as a redevelopment project of not less than $100,000,000 with a project financing gap are not subject to the above cap. However, the cap is set at $2.5 billion divided between northern and southern New Jersey counties over six years.
New Jersey Community-Anchored Development Act. This legislation acknowledges the inter-connection between not-for-profits, government, large-scale development projects, and anchor institutions regarding the economic impact on the community in general. Specifically, anchor institutions in the areas of education, health care, culture, community development and economic development are being incentivized to act as investors. As a result, anchor institutions will be eligible for tax credits up to $200 million annually to aid and promote targeted development. There will be a north/south division of $200 million, with $130 million allocated to the northern counties and $70 million to the southern counties.
Food Desert Relief Act. This piece of the legislation attacks the inaccessibility of nutritious foods found in certain communities resulting in food deserts. Tax credits to the tune of $40 million annually for six years are made available to those supermarkets and grocery stores that are created and maintained in those areas.
Brownfields Redevelopment Incentive Program Act. Approximately $50 million in annual tax credits over a six-year period are allocated to developers on Brownfield sites to cover remediation costs.
Main Street Recovery Finance Program Act. $50 million is allocated to assist eligible small businesses through the Main Street Recovery Program. This allocation encompasses grants, loans and loan guarantees. Funds from the Main Street Recovery fund which are subject to annual appropriation and availability of funds require that a percentage be set aside for microbusinesses certified by the State as minority and/or women-owned businesses.
New Jersey Innovation Evergreen Act. This Act provides for the sale of tax credits through a competitive auction process. Its intent is to spark economic growth by investing in innovation thereby making New Jersey businesses more competitive. A weighted criterion must be established for the public sale of the State tax credits and disclosed prior to the auction. Likewise, tax credits under the program are capped and are authorized up to $60 million annually for six years.
New Jersey Ignite Act. As defined, its purpose is to foster “early stage innovation economy businesses” and strip away barriers that block commercial success. Early stage innovation economy businesses must utilize or rent collaborative workspace. The program is geared as a public private partnership in which start up rents are covered by the Economic Development Authority. The associated appropriation is $250,000.
Historic Property Investment Act. Pursuant to this Act, a portion of the charge associated with the restoration of historic properties will be eligible for tax credits. The tax credits are capped and are not to exceed $50 million annually over a six-year period.
Note that pursuant to the Act, the Director of the Division of Taxation is authorized to buy tax credits that have not been utilized in the above sections.
Additionally, the Act provides substantive amendments or supplements to existing statutes as follows:
The Act provides for the creation of entrepreneur zones statewide. However, the Economic Development Authority must convene a Working Group to determine whether the establishment of entrepreneur zones is the most effective way to create jobs statewide. The Working Group will make additional recommendations including the identification of census tracts suitable for the designation. Entrepreneur zones are areas in which the State provides tax incentives, regulation relief and financial support.
Bidder preferences are granted to New Jersey businesses seeking State contracts for personal protective equipment. Likewise, tax credits are granted up to $10 million annually for three years for the employment of qualifying new hires concerning the manufacture of personal protective equipment.
The Offshore Wind Economic Development Act is amended impacting key criteria including eligibility, disbursements and deadlines.
Film tax credit provisions are expanded to provide an additional $200 million in tax credits over 13 years.
The New Jersey Angel Investor Tax Credit Act received amendments adding a “diverse entrepreneur” classification for minority and women-owned businesses, venture funds provisions and expanding the tax credit annual cap to $35 million.
The Economic Redevelopment and Growth Grant Program is expanded, adding $220 million in tax credits.
Expands the annual allocation of transferable tax benefits the NJEDA may approve pursuant to the New Jersey Emerging Technology and Biotechnology Financial Assistance Program.
The above highlights the key provisions of the New Jersey Economic Recovery Act of 2020. There are many opportunities for new growth, development and expansion in the Act. Of course, the associated Administrative regulations have yet to be written, but will be subsequent to Governor Murphy signing the bill.
For more information, please contact your CSG attorney or the author listed below.