New Jersey maxed out last year on an economic incentive program meant to entice investors to back start-ups across the state, during a period where cash-strapped businesses and financiers scramble for money to stay afloat during the COVID-19 pandemic.
According to the New Jersey Economic Development Authority, there were more than 700 applicants last year for this incentive program, known as the Angel Investor Tax Credit. That included 72 applications in the last three months of 2020.
The program was capped at $25 million last year but was expanded to $35 million this year under a $14.5 billion landmark economic incentive package Gov. Phil Murphy approved in early January.
The program offers a refundable tax credit against New Jersey corporation business or gross income tax for qualified investments in an emerging technology or life sciences business with a physical presence in New Jersey that conducts research, manufacturing, or technology commercialization in the state.
Those tax credits come out to 20% of the investment, with a 5% bonus for investments made in a business located in a qualified opportunity zone, low-income community, or a business that is certified by the State as minority- or women-owned.
All told, the investments brought into the state last year from the program totaled at $35.8 million, the state agency said in a Thursday announcement, up from $33.1 million in 2019.
Proponents argue the program will help investors recoup some of the financial loss they might incur while contributing to technology startups.
“The combination of increased funding allocation and program enhancements, including adding a bonus to encourage investment in women- and minority-owned businesses, has a double benefit to the entire ecosystem,” NJEDA Chief Executive Officer Tim Sullivan said in a Thursday statement.
“These tools help emerging companies attract capital, which will fuel their growth, and encourage new businesses to establish themselves in our state.”
Tax credit applications submitted after Nov. 1, when the program hit the $25 million cap, are being considered for the 2021 slate of applications when the program was expanded by $10 million.
Last April, the NJEDA rolled out a COVID-19 relief program called the Entrepreneur Support Program. Under this scheme, the agency is setting aside $5 million to provide loan guarantees – or collateral – for investments made as of March 9 when Murphy declared the state’s public health emergency.
“What the EDA has done is said ‘we’ll provide a backstop on your risk because we know times are shaky … we’ll guarantee an investment up to a certain amount’ and on the flip side they’re saying ‘we’ll award you, by giving you a tax credit so you can have an additional rate on your return,” Aaron Price, president and chief executive officer of TechUnitedNJ, formerly the NJ Tech Council, said in a July interview. “They’re trying to de-risk on the downside and provide greater incentives on the upside.”
