The New Jersey Economic Development Authority said Feb. 10 it is temporarily loosening some of its rules for how businesses comply with their tax break agreements during the COVID-19 pandemic, which has devastated tens of thousands of employers across the state.
Wednesday’s decision marks one of the first regulatory moves by the NJEDA as the state agency implements the New Jersey Economic Recovery Act of 2020, a massive $14.5 billion economic incentive package that Gov. Phil Murphy signed in January as part of a statewide effort to kickstart the state’s post-COVID recession recovery.
Tim Sullivan, the NJEDA’s chief executive officer, said during a Feb. 10 remotely-held board meeting that the goal of these four new rules is to provide a degree of relief to companies who have been following the tax break agreements but have seen their finances crater because of the pandemic.
The rulemaking process for the entire $14.5 billion incentive package and many individual programs would likely take up the majority of the year, Sullivan previously told NJBIZ. And he reiterated that point during the Wednesday meeting.
To that end, the NJEDA announced senior staffer Bruce Ciallela as the chief compliance officer, a newly created position to act as a government watchdog for how billions of dollars of tax break dollars are awarded to businesses.
There are hundreds of businesses taking part in the incentive program, known as the Grow New Jersey corporate tax breaks. Those expired on July 1, 2019 amid intense political scrutiny over how the program was put together and how businesses received incentives.
Between the program’s formation in 2013 and its expiration in 2019, the state awarded $4.3 billion to 226 separate employers. And while the state is technically on the hook for paying out those incentives, many employers are now simply struggling to stay afloat.
Sullivan said that he expects a sizable chunk of these program participants to take part in some aspect of the looser requirements.
Perhaps one of the biggest changes will allow employers hit by the pandemic – through changes in business models or their office footprint, or job cuts to stay afloat – to terminate their tax break agreement without having to return any of the Grow NJ tax credits they’ve received thus far.
Grow NJ credits are centered around the creation or retention of jobs in New Jersey, yet many employers who entered tax break awards ultimately had to lay off or furlough employees in order to stay afloat.
Companies have until the end of 2022 to request this termination, where they’d have to indicate that the “termination is due to the public health emergency and describing the impact of the public health emergency on the business,” and it has to be approved by the board, according to the board agenda laid out in Wednesday’s meeting.
Companies will be able to keep the current tax credits but will forgo the remainder of state subsidies. And those who had not yet received their tax break awards will no longer be bound to the compliance agreements.
“I hope and expect there will be very few of those, but you never know,” Sullivan said.
Businesses can defer their compliance requirements in 2020 when the majority of the COVID-19 pandemic transpired, and they could do the same in 2021 depending on the remaining length of the pandemic.
“A business may elect to suspend its obligations for the 2020 tax period and, if the public health emergency or state of emergency… extends past March 2021, the 2021 tax period,” the agenda adds.
The state agency “would expect no compliance reporting for this year, and we would expect them to pick up a year 11” in their 10-year tax break agreements, said Susan Greitz, an NJEDA staff member.
Sullivan said he expects employers to take advantage of that provision “reasonably frequently over the next several months – businesses ringing us up and saying they had a 2020 problem.”
State officials will let businesses get a waiver for having 80% of their staff at the physical location of the office, with many people working from home in order to follow public health guidelines during the pandemic.
