Is Locating a COVER STORY Business in New Jersey A Winning Play - PDF document

Is Locating a COVER STORY Business in New Jersey A Winning Play or a Fumble? The New Jersey Economic Opportunity Act of 2013 is a game-changer for New Jersey’s regional competitiveness. Pictured: Giants wide receiver Victor Cruz heading for the end zone. Photo by Al Bello, Getty Images COMMERCE • www.commercemagnj.com 50

After being awarded $27.1 million in tax incentives, Steve Forbes B Y P AUL J. S T . O NGE , E SQ ., AND signed a 10-year, 92,720-square- D AVID A. F ILIPPELLI , E SQ . foot lease for Forbes Media to occu- G IBBONS P.C. py the entire ninth and 10th floors of a Newport office tower in Jersey T City. More of these deals are possi- HE CEO OF A KENTUCKY -BASED ble, thanks to the New Jersey technology company plans to ex- Paul J. St. Onge Economic Opportunity Act of 2013. pand operations in the Northeast to access the region’s educational and to keep and attract businesses. New York’s recently research facilities. Where is this CEO announced “START-UP NY, ” for example, creates tax-free going to make this investment and create zones on land owned or affiliated with the State jobs? Thanks to some sweeping policy University of New York (SUNY) campuses. Businesses changes enacted recently in Trenton, can operate in these zones virtually tax-free for 10 years, the answer may well now be the State of and employees receive income tax benefits. Pennsylva- David A. Filippelli New Jersey. nia offers “Keystone Opportunity Zones” and now has Last Fall, Governor Christie signed into law the Eco- the “Single Application”—one comprehensive form nomic Opportunity Act of 2013 (the Act). This com- completed by a business to be matched with Pennsylva- prehensive reform to the state’s business incentive pro- nia’s best economic incentive programs. gram portfolio is designed to spur significant new investment and job creation. For business owners and The New Jersey Plan developers looking to access and secure incentives, it is The Economic Opportunity Act is New Jersey’s vital to understand the Act’s nexus to New Jersey’s response. It is the answer to the streamlined tools used economy and how to qualify under this new initiative. by our neighboring states to attract jobs and new devel- opment. The Act combines the elements of five suc- Regional, State-Based Incentives cessful economic development programs into two: Since the early 1990s, the northeastern states have the Grow NJ Assistance Program (GrowNJ) and the seen the impacts of a turbulent economy, a decline in Economic Redevelopment and Growth Program (ERG). manufacturing and out-migration of jobs to the southern GrowNJ becomes the primary new vehicle to spur job and western parts of the United States. In the tri-state creation and retention, while ERG increases the state’s region of New Jersey, New York and Pennsylvania, each capability to foster new development projects. The Act state has adopted laws and revised incentive programs also creates enhanced incentives for the newly designat- continued on page 52 June 2014 • COMMERCE 51

COVER STORY continued from page 51 ed “Garden State Growth Zones” in the cities of Camden, cation amount; and certify the award is a “material fac- Trenton, Paterson and Passaic. tor” in the decision to create or retain the jobs. The definition of “capital investment” is critical; it is site Incentives for Capital Investment acquisition (if purchased within 24 months of the appli- and Creating or Retaining Jobs cation date); site preparation and construction; The GrowNJ program encourages “economic develop- and repair, renovation, improvement, equipping or fur- ment and job creation and to preserve jobs that current- nishing of a building. If a business acquires or leases ly exist in New Jersey, but which are in danger of being a qualified business facility, “the capital investment made relocated outside the state. To implement this purpose, by the seller or owner…shall be considered a capital the program may provide tax credits to eligible busi- investment by the business” and, if the building is leased, nesses for an eligibility period not to exceed 10 years. ” the capital investment is allocated to the premises. ” To initially qualify, GrowNJ requires a business to The program has lower capital investment, job cre- make a qualified capital investment at the business facil- ation or retention, and net benefit thresholds if the busi- ity, ranging from $20 per square foot for an industrial ness is locating in a Garden State Growth Zone or other business to $120 per square foot for eligible areas. a commercial entity engaging in Base and Bonus Credits. Assuming these initial quali- new construction; create or fiers are met, the base tax credit amount is determined retain a minimum number by the location of the business. One of the objectives of of jobs depending upon the Act is to encourage businesses to relocate to the the type of business, state’s urban centers and other areas in need of develop- ranging from 10 new ment. Therefore, the highest tax credit levels occur in jobs to 50 retained the “Garden State Growth Zones, ” the “urban transit hub jobs; provide a “net municipalities,” and other “distressed municipalities.” benefit” to the state The base tax credits can be as high as $5,000 per year equal to 110 percent for each job created or retained to a low of $500 per of the tax credit allo- year. Moreover, businesses can achieve bonus tax credits to increase the base tax award; in fact, there are 16 such The New Jersey Economic bonus awards ranging from an additional $250 per year Opportunity Act of 2013 is to $5,000 per year. designed to attract investment, Calculating the Potential Maximum Tax Incentive create employment, and be a Credits. To calculate a maximum incentive award, the highly effective economic develop- ment tool for the Garden State. business’s base and bonus credits are totaled, giving a The New Jersey Economic Opportunity Act of 2013 combines the elements of five successful economic development programs into two: the Grow NJ Assistance Program (GrowNJ) and the Economic Redevelopment and Growth Program (ERG). continued on page 54 COMMERCE • www.commercemagnj.com 52