For the first time ever New Jersey maxed out 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.
Known as the Angel Investor Tax Credit Program, the program was launched in 2013 to encourage investors to invest in emerging New Jersey companies.
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.
They come out to 20% by a program expansion Gov. Phil Murphy signed into law last year, up from 10%. They also include a 5% additional 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.
Sullivan – EDWIN J. TORRES/GOVERNOR’S OFFICE
Tim Sullivan, head of the New Jersey Economic Development Authority – which runs the program – said at a Friday board meeting that the program saw a “record-breaking” number of at least 640 applicants, which represents investments of just under $180 million.
Most of the program expansions which Murphy signed into law last year went into effect in 2020, said Rachel Goemaat, a spokesperson for the NJEDA. The expansion of the tax credit from 10% to 20% this year was a particularly attractive prospect for investors, Goemaat said.
“The Angel Investor Tax Credit Program typically receives a large number of applications as the annual deadline to apply for tax credits through the program approaches,” she continued.
Applications submitted after Oct. 30, when the NJEDA maxed out on the allocated $25 million, will be the first ones considered in 2021.
In 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 Gov. Phil Murphy declared the state’s public health emergency.
As of Sept. 21, the NJEDA approved guarantees for dozens of investors that supported 12 separate businesses: SunRay Scientific, Ricovr Healthcare, 3D Custom Foods Corp, iSport360, MAPay, InquisitHealth, Hope Portal Services, Reti360, POM Partners, Tripod Technologies, Acuitive Technologies and Sweetberry Holdings.
“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 flipside 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.”
A litany of restrictions on what businesses can stay open has meant that for months, gyms, restaurants, salons, casinos, malls and retail all had to shutter their doors, only to open at a reduced capacity over the summer.
With daily cases reaching new record-highs and COVID-19 hospitalizations mounting, the governor limited when indoor dining can stay open and prohibited bar seating. Last week, he granted local governments the authority to further ramp up curfews for non-essential businesses.
To cope with the financial hit from state-mandated closures and reduced capacity, the NJEDA rolled out a grant program and low-interest loan program for businesses, both of which use federal COVID-19 relief aid.
That includes $60 million of new grants, after 13,000 applicants were closed out of a prior round of funding last month.
As of Nov. 5, the state approved $10.2 million in relief loans to 148 businesses, while $80.7 million of grants were awarded to 23,414 small businesses.
Editor’s Note: This article was updated on Nov. 17, 2020 at 9:48 a.m. EST to clarify what the Angel Investor Tax Credit Program is.
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