The New Jersey Economic Development Authority’s board on May 12 approved interim rules for a $1.1 billion corporate tax break program meant to act as a cornerstone for the state’s post-COVID economy recovery.
Called NJ Emerge, the proposal is capped at $1.1 billion a year for six years, with a seventh potential year for any unused tax credits.
It’s part of the mammoth $14.5 billion economic incentive program Gov. Phil Murphy signed in early January, which he, business leaders and state lawmakers contend will shape the course of New Jersey’s economy amid its reopening.
The newly adopted rules “pave the way for us to begin accepting applications soon,” said NJEDA board chair Kevin Quinn during the Wednesday meeting where the guidelines were approved.
“This is an important step that will support the recovery in New Jersey, especially as we get residents back to work in the aftermath of the pandemic,” he continued.
Tim Sullivan, the NJEDA’s chief executive officer, said the rules will go into effect almost immediately, pending a handful of highly technical procedures. A final set of rules will be considered in the fall, he said.
“They’ll be a temporary but immediate force of law. We can launch the program” quickly, he said during the remotely-held May 12 meeting.
Sullivan previously indicated a desire to roll out the application process in May.
The program is the replacement for its predecessor, the Grow New Jersey corporate tax breaks, which have fallen under intense scrutiny by government activists and the Murphy administration for how the program was created and how companies were able to get tax break awards.
NJ Emerge contains more stringent job creation and oversight requirements, and the tax break agreements need to wield much larger benefits to the state economy.
Despite no overall award caps, the programs are designed so that awards in the hundreds of millions of dollars – as seen under Grow NJ – will be more difficult to procure under NJ Emerge. And, state officials contend the higher award-per-job requirements would serve as a buffer for massive tax breaks.
There are lower job creation requirements for “targeted industries” – like advanced manufacturing, finance, film and digital media, “food innovation,” clean energy and life sciences. Applicants have to shell out more money on new construction or the rehabilitation of existing buildings. Awards for projects valued over $10 million need to have a “community benefits agreement” in order to ensure that towns where businesses moved to in exchange for tax breaks can also benefit.
Now, lawmakers are hoping to rush through a clean-up bill before the break for summer recess on July 1.
Those rules deal with loosening requirements surrounding remote work, given the continued work-from-home trends during the pandemic, and the uncertainty with how large of a role telecommuting will play in the post-COVID economy.
And state lawmakers are looking to lower job retention requirements for companies currently in the state that are considering moving out of New Jersey. Businesses considering a move out of New Jersey need to retain 500 jobs in some of the state’s poorest cities, like Camden or Newark. Elsewhere in the state, they’d need to retain 1,000 jobs. In either case, business groups and lawmakers say the requirements can prove to be too cumbersome for employers that have nowhere near that number of workers, nor does their business model or financial capabilities call for that size of a workforce.
“This program does absolutely nothing if there’s a 90-person manufacturer that’s right in the Trenton area, and they want to go over the river to Pennsylvania. There’s not a lot that’ll help them,” said Chris Emigholz, vice president of government affairs at the New Jersey Business & Industry Association.