Posted on June 17, 2021 by David B. Farer
The New Jersey Economic Recovery Act of 2020 (ERA), signed into law by Governor Phil Murphy on January 7, 2021 (Senate Bill 3295), is comprised of an array of programs that include a broadening of New Jersey’s incentives for developers to clean up Brownfields.
New Jersey has had a Brownfield redevelopment incentives program since 1997, under which qualifying developers have been able to enter into agreements with the NJ Economic Development Authority (EDA) allowing for reimbursement of up to 75% of their remediation costs as particular tax revenues are generated following cleanup and redevelopment of qualified sites. That program, in which reimbursements have primarily been based on retail sales taxes, remains in place. A developer in the existing program is not eligible for new incentives for the same project.
While we will have to await EDA’s implementing regulations to analyze the full extent of benefits and conditions, here is a preview of key points from the legislation:
- This is a seven-year program with a competitive application process for qualifying developers who will have to go through an extensive set of submissions to both EDA and the New Jersey Department of Environmental Protection (DEP), and who will have to pay the costs of any third party analyses that EDA or DEP deem necessary.
- If selected, the developer will have to enter a redevelopment agreement with EDA committing to a remediation deadline, projected remediation costs and submission of semi-annual progress reports.
- The maximum tax credits available for all program applicants combined in any given year will be $50 million, subject to additional limitations on the total amount of tax credits under all of the different tax credit programs introduced by ERA.
- The maximum tax credit available for a qualifying project will be 40% of remediation costs incurred or $4 million, whichever is lower.
- The tax credit is applicable against New Jersey Franchise Tax (the state’s corporate business tax) but not to other taxes such as retail sales taxes that are eligible under the pre-existing 1997 program, with exceptions noted below where a developer seeks to transfer a tax credit.
- Among the elements that developers must establish are the necessity of the credit to make the project economically feasible, project funding gaps, support of the project by the local governmental authorities and the like, and other criteria to be developed by EDA in consultation with DEP, such as benefit to the community, enhancement of job creation and economic development, environmental justice considerations and diversity in the developer’s organization.
- Qualifying developers will have to commit to complying with State green building standards, affirmative action requirements and prevailing wage rates.
- EDA will not be able to enter a redevelopment agreement involving a retail business employing more than 10 employees, or a distribution facility employing more than 20 employees, unless the retail or distribution business enters a labor harmony agreement with a labor organization that represents retail or distribution center employees in NJ.
- For projects that then proceed under the required redevelopment agreement, developers will have to seek DEP certification of project completion in compliance with DEP requirements, and of remediation costs reasonably incurred.
- Upon DEP certification, EDA will have to confirm whether the developer’s obligations under the redevelopment agreement have been met, and if so, is then to award the tax credit
- There are certain conditions and limitations pursuant to which a developer may apply to EDA to transfer the tax credit, and if the transfer is authorized, the tax credit may be transferred to an entity with a corporate business tax liability or insurance premium tax liability. Thus, while non-corporate developers are not by definition precluded from applying for and receiving the tax incentives, it would appear that in order to monetize the incentive, a developer entity such as an LLC or partnership would have to be able to transfer it.
Thanks here to my colleague Daniel Flynn of Greenbaum Rowe, who assisted on the analysis and summary of these latest developments in the New Jersey Brownfield Program.