United States: New Jersey Legislative Update - January 2015

Toward the end of its session last year, the New Jersey Legislature passed legislation critically important for the state's real estate industry. The New Jersey Permit Extension Act (PEA) was given an extended life as A3815/S2551 was passed and then signed into law by Governor Chris Christie. Earlier, the New Jersey Economic Opportunity Act of 2013 was amended providing for a number of changes, both substantive and technical.

As initially crafted, the PEA was designed to deal with a variety of land use approvals and permits that had been approved or were expiring after January 1, 2007. Prior to the passage of the bill, the PEA's provisions were due to lapse at the end of last year. The bill moved the bar and now the approvals and permits covered by the initial legislation have been given new life through December 31, 2015; however, no local approval will be extended beyond June 30, 2016. (However, extended for a full year will be permits granted by state, regional, county and municipal agencies).

When the PEA was first passed into law, New Jersey and the nation were experiencing difficult economic times set off by the collapse of financial institutions and the sharp decline of the stock market. As lenders were faced with increased capitalization requirements, sources of capital dried up. Further, the economy contracted and the confluence of these factors forced developers to suspend development projects. By extending approvals and permits that would otherwise lapse, the PEA kept alive these projects without the need for developers to expend substantial soft costs in seeking renewed approvals. It is important to note that the PEA's provisions do not extend to every permit or approval.

Placed into the bill hopper early last year as the Economic Opportunity Act of 2014, Part 3, the Economic Opportunity Act of 2014 was finally signed into law in late October of last year. The bill sent to the governor for signature in October was a much revised version of A3213/S1551 after a number or wrinkles were smoothed out through the committee process in both the General Assembly and the Senate and the governor weighed in with a conditional veto. Not unlike its predecessor, the legislation targeted some areas and industries for more favored treatment. In early September, Governor Christie vetoed the bill, conditionally, recommending a number of changes. These changes were accepted by the General Assembly in late September and by the Senate in mid-October. The amended legislation was approved and became law on October 24, 2014, as P.L. 2014, c.63.

The New Jersey Economic Opportunity Act of 2013 had folded a number of existing tax credit programs into the Grow New Jersey Program while also creating an infrastructure grant program called "The Economic Redevelopment and Growth (ERG) Program designed to fuel economic development and job growth. While it broadened eligibility requirements, the legislature and the governor felt the need to refine the 2013 act to broaden its applicability and enhance opportunities.

Thus, a number of changes were made to the Grow New Jersey program including:

  • The minimum amount of tax credits that can be sold was reduced from $100,000 to $25,000.
  • Atlantic City was added as a Garden State Growth Zone (GSGZ) (qualified projects in a now five growth zone cities are eligible for enhanced benefits).
  • Developers of projects in GSGZ cities can now include development costs as a qualified capital investment. Further, nonprofits in GSGZ cities can now submit a consolidated application for tax credits with a number of otherwise non-qualifying businesses. Similarly, a consolidated application can be filed for a project bringing a large-scale supermarket to Atlantic City or Camden.
  • The 50 percent tax credit for retained jobs calculation is now 50 percent of the base amount any bonuses that apply or 1/10th of the capital investment divided by the number of retained and new jobs over 10 years, whichever is less.
  • The minimum required capital investment for rehab or improvement of warehousing, logistics, or research and development properties was reduced from $40 to $20 per square foot. Similarly, new construction was reduced from $120 to $60 per square foot of gross leasable feet.
  • Projects with at least $20 million in capital investment that create or retain at least 150 full time jobs located in certain southern counties can now be designated a Mega Project. This designation provides for enhanced tax credits.
  • Requirements for a qualified incubator facility were significantly lowered. For example, the facility size was cut in half to 50,000 square feet and the space requirement for exclusive use by a technology startup to 50 percent.
  • For vacant commercial buildings in excess of 100,000 square feet of office or laboratory vacant in excess of one year are potentially eligible for a bonus $1,000 per job tax credit.
  • Atlantic City and Camden received favorable treatment. As an example, if the number of full time employees actually exceeds the number specified in the incentive agreement, additional tax credits may be awarded on an annual basis.

Under the ERG program, deadlines have been extended. The deadline for filing an application for a residential project has been extended to July 1, 2016. Significantly, the deadline for procuring a temporary certificate of occupancy has been extended three years to July 28,2018. Finally, a tax credit program was created for redevelopers that donate $5,000,000 or more of public infrastructure or open space valued at $1,000,000 or more. The test for these credits provides for a look back period of no earlier than January 1, 2013, and eligibility for projects that have not received a GROW tax credit or an ERG grant. Credits under this program are capped at $25,000,000.

The passage of the 2014 act and the antecedent attention from different legislators and the governor's office underscores the powerful effect the tax credit and grant program rationalized by the 2013 act. A number of economic and political objectives have driven the latest effort to drive growth in New Jersey not the least of which is the governor's focus on Atlantic City and its woes. Time will tell whether these latest changes bear fruit as envisioned by the many contributors to the latest of economic incentive laws to emerge from Trenton.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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