Incentive Alert: Rutgers University Report Recommends Changes to New Jersey’s Business Incentive Programs

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On Wednesday, the New Jersey Economic Development Authority (NJEDA) submitted a report to Governor Phil Murphy, conducted by Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, which (among other things) recommended changes to the State’s business incentive programs, including the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth Grant Program (ERG).

The report (which can be found here) found the following:   

  • There has been a significant volume of project approvals under Grow NJ, which are associated with significant volumes of retained and created jobs, but which will also generate a substantial offset to the Corporate Business Tax and Insurance Premium Tax in the years ahead;

  • Commercial ERG projects leverage a considerable amount of private investment.

  • Given the long lead time associated with Grow NJ and ERG projects, it is too soon to fully evaluate the impact of these programs on the State’s economy;

  • Projects approved under Grow NJ are generally concentrated in the northern, more populous counties of the State. A significant percentage of project funding in the eight southern counties has been concentrated in Camden;

  • Redundancies in the Grow NJ base and bonus award structure are potentially providing more generous incentives than intended by the statute;

  • Because certain bonuses have been underutilized, it is not clear that the program has advanced certain policy goals intended by the legislation such as clean energy investment and the creation of incubators;

  • There is an opportunity to improve EDA’s analysis of proposed incentive projects.

The report suggested the following to improve the programs:

  • A deeper analysis of the types and quality of jobs created or retained, and whether some or all of the related economic activity would have happened with lower or no incentives.

  • A review of the overall impact of the reduction in Corporate Business Tax revenues (which would be made up for by higher Gross Income Tax from created or retained jobs), given the constitutional requirement that the Gross Income Tax fund property tax relief while the Corporate Business Tax and Insurance Premium Tax are the primary resources for the General Fund.

  • Given the Grow NJ program’s goals of job creation and retention, the report recommends that the alternative approach used in calculating certain awards in the city of Camden (the “Camden alternatives”) be revised to tie awards more closely to the employment created by these firms.

  • NJEDA should consider eliminating or revising the bonus for Transit Oriented Development in Urban Transit Hubs and Garden State Growth Zones. This bonus may be redundant in most cases in these jurisdictions, where it accounts for about 21 percent, or about $250 million of the total award value for projects qualifying for the bonus.

The programs are currently set to expire in July 2019. With the sunset of the programs only a year away, legislators will soon start to discuss potential changes to the programs. While change may be on the horizon, one thing is clear--incentives will continue to be part of New Jersey’s economic development toolkit.

If interested in learning more about state and local incentives, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or info@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

Incentive Alert: New Jersey Legislature Passes ERG Bond Financing Act

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The New Jersey Senate and Assembly have both passed legislation (S-1849 / A-2041), known as the Economic Redevelopment and Growth Grant Bond Financing Act, which will create a mechanism to finance projects under the Economic Redevelopment and Growth (ERG) grant program.

Created under the Economic Opportunity Act of 2013, the ERG program is the State’s primary incentive for developers. Pursuant to the program rules, a developer that can demonstrate that its redevelopment project requires a subsidy to close a project financing gap may apply for a grant equaling no more than 20% of the total cost of a project (30% in a Garden State Growth Zone), of which the developer must make a 20% equity investment.

In accordance with a redevelopment incentive grant agreement, beginning upon the receipt of occupancy permits for any portion of the redevelopment project, the developer will receive incremental State revenues directly realized from businesses operating on or at the site of the redevelopment project. The developer may apply for an incentive grant in the amount up to 75% of the annual incremental tax revenues generated by the project over a 20 year period. If the redevelopment project is located within a Garden State Growth Zone, 85% of the projected annual incremental revenues may be pledged toward the award.

Currently, developers receiving awards under the ERG program are required to seek financing for up-front costs associated with the project, as the ERG payments are unavailable until the project has been fully completed and certified. The ERG Bond Financing Act seeks to assist developers with up-front project costs by allowing the municipality in which a project is located to (either directly or through an application to the New Jersey Economic Development Authority or similar public instrumentality of the State) issue bonds for projects that receive ERG grants. The bonds would be secured by a pledge of the ERG grant payments, and further secured by municipal liens and/or special assessments on the property benefiting from the improvements.

The bill is currently awaiting the signature of Governor Murphy.

If interested in learning more about state and local development incentives, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or info@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

Incentive Alert: New Jersey Legislature Advances PILOT Bill

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On Monday, the Senate Budget and Appropriations Committee unanimously voted to advance legislation (S-1701) that would add additional requirements for the approval of PILOT (payment in lieu of taxes) agreements between municipalities and developers.

Among other things, the bill would require developers seeking a PILOT to include a cost-benefit analysis as part of their application. In addition, municipal officials would be required to submit an independent analysis of the proposed redevelopment project, including the impact on local revenue collections, the local school district and county government.

The New Jersey League of Municipalities opposes the bill, and argues that it will increase costs and limit local decision-making authority.

NAIOP New Jersey issued a statement highlighting its concern with an amendment to the bill that would require the annual service charge to be distributed in proportion to the amount of revenue received by the county, municipality, and school district from the property tax. The organization argues that the amendment will greatly limit the usefulness of PILOT agreements.

While an identical bill has been introduced in the Assembly and referred to the State and Local Government Committee, it has yet to receive a vote.  

If interested in learning more about state and local development incentives, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or info@murphyllp.com.  

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

New Jersey Incentive Update - June 2018

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On Tuesday, June 12, 2018, the New Jersey Economic Development Authority (NJEDA) will hold its monthly board meeting. Among the actions to be taken, the Board will consider two applications under the Grow New Jersey Assistance Program (Grow NJ). If approved, the two applicants could receive over $60,000,000 in tax credits (over 10 years).

Created under the Economic Opportunity Act of 2013, the Grow New Jersey Assistance Program (Grow NJ) is the State’s main job creation and retention incentive program. Under the Grow NJ program, businesses creating or retaining jobs in the State may be eligible for tax credits ranging from $500 to $5,000 per job, per year; with bonus credits ranging from $250 to $3,000 per job, per year (awards vary based on applicable criteria).

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 252 projects have received awards, totaling over $4.7 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements. Once certified, the 252 projects will drive over $4.5 billion in private capital investment, create over 30,000 new jobs, and retain over 36,000 jobs at risk of leaving the State.

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 PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

New Jersey Incentive Update - April 2018

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On Tuesday, April 10, 2018, 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 seven applications under the Grow New Jersey Assistance Program (Grow NJ). If approved, the seven applicants could receive over $51,000,000 in tax credits (over 10 years).

Created under the Economic Opportunity Act of 2013, the Grow New Jersey Assistance Program (Grow NJ) is the State’s main job creation and retention incentive program. Under the Grow NJ program, businesses creating or retaining jobs in the State may be eligible for tax credits ranging from $500 to $5,000 per job, per year; with bonus credits ranging from $250 to $3,000 per job, per year (awards vary based on applicable criteria).

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 247 projects have received awards, totaling over $4.7 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements. Once certified, the 247 projects will drive over $4.5 billion in private capital investment, create over 30,000 new jobs, and retain over 35,000 jobs at risk of leaving the State.

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 PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

Greater Newark Enterprises Corporation (GNEC) Elects Chris J. Murphy to Board of Directors

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Murphy Partners LLP is proud to announce that Chris J. Murphy has been named to the board of directors of the Greater Newark Enterprises Corporation (GNEC).

GNEC is a non-profit organization and Community Development Financing Institution (CDFI) committed to business growth and job creation. GNEC accomplishes this mission by connecting entrepreneurs to business and capital resources.

“I have no doubt that Chris’ deep understanding of the intersection of law, business, and government will be a value asset to GNEC. As a firm, we are proud of his continued dedication to serving our community,” says Kellen F. Murphy, managing partner at Murphy Partners LLP.

For more information on GNEC, please visit www.gnecorp.org.

Incentive Alert: Film Tax Credit Legislation Advances in New Jersey Senate

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Last week, the Senate Budget and Appropriations Committee voted 11-1 to advance the “Garden State Film and Digital Media Jobs Act.” As amended, the bill provides a credit against the corporation business tax (CBT) and the gross income tax (GIT) for certain expenses incurred for the production of certain films and digital media content in the State.

Under the bill (S122), applications approved by the New Jersey Economic Development Authority (NJEDA) and the Director of the Division of Taxation in the Department of the Treasury, may entitle a taxpayer to claim a credit against CBT or GIT liability in an amount equal to 30 percent (35 percent in limited cases) of the qualified film production expenses or 20 percent (25 percent in limited cases) of the qualified digital media content production expenses.

Historically, New Jersey has utilized tax credits to incentivize film and media production projects. Following the prior program’s expiration a year earlier, in 2016, Governor Christie vetoed a bill that would have created a film and media tax credit program.

On the other side of the river, 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.  

While it is certainly too early to tell if the Garden State Film and Digital Media Jobs Act will become law, this is definitely a step in the right direction.

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

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

 

Roosevelt J. Donat Appointed as Trustee of the IOLTA Fund

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Murphy Partners LLP is proud to announce that Roosevelt J. Donat, special counsel, has been appointed as a Trustee of the IOLTA Fund.

The IOLTA Fund of the Bar of New Jersey was established by the NJ Supreme Court and provides funding for legal assistance to the disadvantaged in civil matters. Since 1989, the IOLTA Fund has awarded grants of over 415 million to Legal Services of New Jersey, the New Jersey State Bar Foundation and 136 other non-profit, 501(c) 3 organizations. The grants provide funding for free legal services to low-income people with civil legal problems, improvement in the administration of justice and education about the law.

For more information on the IOLTA Fund, please visit www.ioltanj.org.

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

 

New Jersey Incentive Update - March 2018

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On Tuesday, March 13, 2018, 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 four applications under the Grow New Jersey Assistance Program (Grow NJ). If approved, the four applicants could receive over $23,000,000 in tax credits (over 10 years).

Created under the Economic Opportunity Act of 2013, the Grow New Jersey Assistance Program (Grow NJ) is the State’s main job creation and retention incentive program. Under the Grow NJ program, businesses creating or retaining jobs in the State may be eligible for tax credits ranging from $500 to $5,000 per job, per year; with bonus credits ranging from $250 to $3,000 per job, per year (awards vary based on applicable criteria).

The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 247 projects have received awards, totaling over $4.7 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements. Once certified, the 247 projects will drive over $4.5 billion in private capital investment, create over 30,000 new jobs, and retain over 35,000 jobs at risk of leaving the State.

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 PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.

Incentive Alert: Federal Tax Law Creates Incentives for Investment in “Opportunity Zones”

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While corporate and individual tax relief took center stage in the debate over the passage of the new federal tax reform legislation, a less-discussed section of the new law may have a significant impact in driving investment into distressed areas throughout the country.

The new law establishes the Opportunity Zone Program, which creates preferential tax treatment for unrealized capital gains that are reinvested in to-be-determine qualified opportunity zones. The new law instructs governors in each state (and the Mayor of Washington, D.C.) to identify eligible census tracts from a pool of low-income, high-poverty census tracts (each state is limited to selecting up to 25% of the state’s census tracts that meet the eligibility requirements).

Importantly, the new law will allow corporations and partnerships to establish Opportunity Funds, created for the purpose of investing in qualified opportunity zone property (which includes any opportunity zone business stock, any opportunity zone partnership interest, and any opportunity zone business property).

As recently outlined by the Economic Innovation Group (www.eig.org), investments made in a qualified Opportunity Fund will receive preferential tax treatment, including:

  1. A temporary deferral of inclusion in taxable income for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026.

  2. A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation.

  3. A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.

To take advantage of the special tax treatment created under this program, taxpayers must roll over non-opportunity zone gains before Dec. 31, 2026.

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

MURPHY PARTNERS LLP

Murphy Partners LLP is a boutique law firm specializing in real estate and economic incentive advisory. Headquartered in Newark, New Jersey, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. 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.