January 17, 2018

Incentive Alert: Grow NJ Program changed to allow for easier transfer of tax credits

On Monday, New Jersey’s Governor signed a bill into law that will affect the ability of certain companies to monetize tax credits under the Grow New Jersey Assistance Program (Grow NJ)

Under the Grow NJ program, the tax credits earned can only be used to offset specific state tax liability, including the State’s Corporate Business Tax (CBT). Generally, only C corporations have CBT liability. Companies structured in other forms (e.g., LLC, LLP, etc.) are required to apply for a tax credit transfer certificate, and sell the tax credits, in order to monetize the incentive. The original Grow NJ legislation created a floor of 75 percent minimum value on the sale, assignment, or transfer of tax credits, and limited the time in which a transferee could use the tax credits to offset liability to three years. Prior to the signing of this law, there was also tax liability associated with the gain or income derived from the sale or assignment of the tax credits at both the federal and state level.

The new law (P.L.2017, c.313.) revises the tax credit transfer certificate provisions under the Grow NJ program, and revises the tax treatment of gains and income associated with the sale or assignment of the tax credit transfer certificates.

First, the new law extends the time period in which transferees can use the tax credits from three years to 20 years, making the time period for redemption identical to the period permitted for the original tax certificate holder.

In addition, the law exempts tax credit transfers to affiliates of the original tax credit holder from the 75 percent minimum value requirement related to the sale or assignment of tax credits.

Lastly, and most importantly, the law excludes the gain or income derived from the sale or assignment of tax credit transfer certificates from taxation at the State level.

If interested in learning more about Grow NJ or other economic development incentive programs, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or info@murphyllp.com.

Murphy Schiller & Wilkes LLP (MSW) is a boutique law firm servicing the commercial real estate and construction industries. Headquartered in Newark, New Jersey, the firm services the commercial real estate and construction industries. Through the development of comprehensive legal strategies, our team works tirelessly to create a blueprint for success and advance our clients’ interests in every matter.