Month: April 2017

On April 10, 2017, New York Governor Andrew Cuomo signed into law the state budget for the 2018 fiscal year. Among many other things, the budget extends New York’s incentive program for the film industry for three years, to 2022. The program had been set to expire in 2019.

An important economic development tool, New York’s Film Production Tax Credit program (NYS Tax Law § 24) has been wildly successful in attracting film production to New York and creating film industry-related jobs throughout the State. The program provides certain tax incentives to companies that produce qualified feature films, television movies, and television series and pilots in New York State, and/or incur post-production costs in the State associated with the original creation of such productions. The 2018 budget continues to allocate $420 million per year for tax credits for the program (up to $25 million of which may be dedicated to encourage the growth of post-production industry in New York).

Under the Film Production Tax Credit program, film production companies may be eligible to receive a tax credit of 30% on qualified production and/or post-production costs incurred in New York State. An additional 10% tax credit is available on qualified labor expenses incurred in certain upstate counties, and a 5% increase in the tax credit is available for post-production costs incurred in upstate New York. To qualify for the production tax credit, a production company must film a substantial portion of the project in New York. The post-production tax credit is available where the project was filmed predominantly outside of New York, but the film production company contracts for the post-production work to be undertaken by a company in New York.

On the other side of the Hudson, New Jersey’s film production tax credit program remains in limbo—at least for now. Following the program’s expiration a year earlier, in 2016, Governor Christie vetoed the Garden State Film and Digital Media Jobs Act, which would have reinstated and enhanced the tax credits available in New Jersey for qualified film and digital media content production expenses, and revised and expanded film and digital media tax credit eligibility requirements. The legislation would have also required the New Jersey Economic Development Authority to study the prospect of developing a film production studio in North Jersey. The Garden State Film and Digital Media Jobs Act (S1053/A2562) had been reintroduced in the State Legislature, where it currently remains pending.

On Thursday, April 13, 2017, the New Jersey Economic Development Authority (NJEDA) will hold its monthly board meeting in Trenton. Among the actions to be taken, the Board will consider applications under the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth (ERG) Program. The Board will also consider the issuance of bonds, loans, and guarantees for multiple applicants.

• Grow New Jersey Assistance Program

The Board will consider three applications under the Grow NJ Program, totaling over $25,000,000 in tax credits. If approved, the three projects will bring jobs and capital investment to Paterson, Camden, and Piscataway Township.

Created under the Economic Opportunity Act of 2013, Grow NJ is the State’s main job creation and business retention incentive program. The purpose of the program is to “encourage economic development and job creation and to preserve jobs that currently exist in New Jersey but which are in danger of being relocated outside of the State.” N.J.S.A. 34:1B-244(a).

Determination of the size of an award is based on the project’s location, the corresponding capital investment, and the jobs created or retained at a qualified business location. Applicants must demonstrate that the project will yield a net positive benefit to the State and must indicate that the award of tax credits under the program is a material factor in the business decision to make a capital investment and locate in the State. N.J.S.A. 34:1B-244(b)(3).

The Grow NJ Program has been wildly popular and incredibly successful. Since its implementation, 228 projects have received awards, totaling over $4.3 billion in tax credits. Once certified, the 228 projects will drive over $3.8 billion in private capital investment, create over 28,000 new jobs, and retain over 27,000 jobs at risk of leaving the State.

• Economic Redevelopment and Growth (ERG) Program

The Board will also consider one application under the ERG Program. The development project, located in Atlantic City, is seeking a total of $38,400,000.

Under the ERG Program, the NJEDA and the State Treasurer “may enter into a redevelopment incentive grant agreement with a developer” for any “qualifying redevelopment project located in an economic redevelopment and growth grant incentive area.” N.J.A.C. 19:31-4.1(a).

If a project is located in a Garden State Growth Zone (GSGZ), which includes Atlantic City, the applicant can receive “up to an average of 85 percent of the project annual incremental revenues” that are “directly realized from businesses operating on the redevelopment project premises.” Id. These revenues are then “paid to the developer in the form of a grant derived from the realized revenues.” Id.

With limited exceptions, for projects located in GSGZs, the base amount of the combined reimbursements from State and local grants or tax credits cannot exceed 30 percent of the eligible cost of the project. Importantly, a “developer seeking an incentive grant is required to make an equity participation for at least 20 percent of the project’s eligible costs.” Id.

The ERG Program has also been incredibly successful. Under the commercial component of the program, the NJEDA has awarded grants to 11 applicants, totaling $305,508,906. The program has helped drive over $1.5 billion in private capital investment, and has led to thousands of construction jobs throughout the State.

MURPHY PARTNERS LLP

If interested in learning more about these and other programs available through the State of New Jersey, please do not hesitate to reach out to us by telephone at (973) 877-6984 or by email at info@murphyllp.com. In the meantime, please take some time to explore the website. We look forward to hearing from you soon.