The state Senate is postponing a vote planned for June 24 on a massive 213-page bill overhauling many parts of the state’s $14.5 billion incentive programs.
Should those changes go into effect, they would loosen requirements across the board for businesses to obtain tax breaks, and allow for businesses to get much more lucrative awards.
According to the bill’s sponsor, Sen. Teresa Ruzi, D-29th District, the vote is being put off until June 30, which is the last day before all 120 members of the state Legislature break for summer recess.
It was approved in a 65-9 vote with one abstention by the state Assembly and no discussion by lawmakers. The Assembly Budget Committee approved the bill before it was even publicly available.
“Legislators wanted more time to read the bill,” said former state Sen. Raymond Lesniak, who helped broker last year’s agreement to finally push forward the tax incentive agreement. “It’s understandable. It’s a bill we’ve been negotiating for months … we can certainly take the time to vote on it Wednesday.”
Lawmakers crafted the clean-up as a means to account for the widespread shift to telecommuting born out of the COVID-19 pandemic, as business executives gauge how prevalent that will be in the post-pandemic economy. But requirements are loosened across the board–lower job retention requirements and other lower standards that businesses have to meet.
“I just think that by loosening up the eligibility … it’s all watered down when you keep allowing more and more businesses that may not necessarily need tax credits to do their thing,” said Sheila Reynertson, a policy analyst with the progressive think tank New Jersey Policy Perspective.
There are two main incentive programs under the New Jersey Economic Recovery Act.
The first is called NJ Emerge, which is capped at $1.1 billion a year for six years, with a seventh potential year for any unused tax credits. It’s meant to incentivize employers to remain in the state. Applications opened nearly a month ago. An accompanying program is being finalized by the New Jersey Economic Development Authority called NJ Aspire, also capped at $1.1 billion a year and geared toward real estate and community development.
For most of the tax breaks, the proposed Assembly Bill 5939 loosens requirements for how often workers need to physically remain in the office for which the state incentives are being awarded – from 80% “of their time” under the current law enacted in January down to 60%.
The clean-up bill eases requirements that applicants have to follow for either program and calls for more generous awards. For example, it increases awards that could go to a “transformative project,” or large-scale project, so that the project could get as much as $350 million in tax breaks.
current requirements call for businesses eyeing a move out of the state to retain 1,000 full-time jobs, or 500 in some of the state’s poorest communities. That would be lowered to as few as 150 full-time jobs at a minimum, or up to 500 jobs depending on the community’s poverty level.
Under the clean-up bill, the state is taking a combined $350 million of unused tax breaks from NJ Aspire and NJ Emerge to put toward tax credits for offshore wind projects.
Tax break awards under the historic preservation and redevelopment incentive program are doubled, from a maximum of $4 million to $8 million, to rehabilitate historic properties across the state.
State subsidies would also be at least doubled from a maximum of $4 million to $8 million for the Brownfields tax credits, which are meant to cover the costs for developers to flip polluted and environmentally contaminated properties.
Under the state’s Food Desert Relief Program, the state would expand the definition of “small-food retailer” to include mobile vendors, farmer’s markets and food co-ops.
The definition of “microbusiness” is expanded under the Main Street Recovery grant and loan program, expanding it to a business making up to $1.5 million a year, rather than $1 million.
And the bill leverages more independence for the state’s tax break watchdog, the Economic Development Inspector General, so that they would be “in but not of” the New Jersey Treasury Department – a parent body for the NJEDA.
Lawmakers and the governor approved of the office’s creation in order to root out abuse of the tax break program by unscrupulous actors. The clean-up bill would allow the NJEDA to “recapture any economic development incentive in the case of substantial noncompliance, fraud, or abuse by the recipient.”
The bill expands how much a film or television production could be compensated by the state – from 30% of production expenses to 35%. It adds on $350 million of annual tax breaks for film studios starting in 2024, on top of the $100 million already available.