ASSEMBLY, No. 3756

STATE OF NEW JERSEY

214th LEGISLATURE

 

INTRODUCED JANUARY 24, 2011

 


 

Sponsored by:

Assemblywoman  PAMELA R. LAMPITT

District 6 (Camden)

 

 

 

 

SYNOPSIS

     Provides tax credits to certain businesses for certain capital investment in qualified business facilities and qualified residential projects located in vicinity of designated transit villages.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act providing tax credits to certain businesses for certain capital investment in qualified business facilities and qualified residential projects located in the vicinity of designated transit villages, supplementing Title 34 of the Revised Statutes.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

1.      As used in this act:

     “Affiliate” means an entity that directly or indirectly controls, is under common control with, or is controlled by a business.  Control exists in all cases in which the entity is a member of a controlled group of corporations as defined by section 1563 of the Internal Revenue Code of 1986 (26 U.S.C. s.1563) or the entity is an organization in a group of organizations under common control as defined by subsection (b) or (c) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. s.414).  A taxpayer may establish, in the form and manner as may be determined by the director, that control exists in situations involving lesser percentages of ownership than required by those statutes.

     "Authority" means the New Jersey Economic Development Authority established pursuant to section 4 of P.L.1974, c.80 (C.34:1B-4).

     "Business" means a corporation that is subject to the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5); a corporation that is subject to the tax imposed pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5; or is a partnership.  A business shall include an affiliate of the business if that business applies for a tax credit based upon any capital investment made by, or full-time employees of, an affiliate.

     "Capital investment" in a qualified business facility means expenses incurred after, but before the end of the tenth year after, the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) for: a. the site preparation and construction, repair, renovation, improvement, equipping, or furnishing of a building, structure, facility, or improvement to real property; and b. obtaining and installing furnishings and machinery, apparatus, or equipment for the operation of a business in a building, structure, facility, or improvement to real property.  “Capital investment” shall not include soft costs incurred by a business.

     “Designated transit village” means a community with a bus, train, light rail, or ferry station that has developed a plan to achieve its economic development and revitalization goals, and that (1) has been designated as a transit village by the Commissioner of the Department of Transportation on or before the effective date of P.L.    , c.    (C.       ) (pending before the Legislature as this bill) or (2) is designated as a transit village and is reviewed and approved as a designated transit village for purposes of P.L.    , c.   (pending before the Legislature as this bill) by the Commissioner of the Department of Transportation and by the authority, respectively, after the effective date of P.L.    , c.    (pending before the Legislature as this bill).

     “Director” means the Director of the Division of Taxation in the Department of the Treasury.

     “Executive director” means the executive director of the authority.

     "Full-time employee" means a person employed by the business for consideration for at least 35 hours a week, or who renders any other standard of service generally accepted by custom or practice as full-time employment, or a person who is employed by a professional employer organization pursuant to an employee leasing agreement between the business and the professional employer organization, in accordance with P.L.2001, c.260 (C.34:8-67 et seq.) for at least 35 hours a week, or who renders any other standard of service generally accepted by custom or practice as full-time employment, and whose wages are subject to withholding as provided by the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. or an employee who is a resident of another State but whose income is not subject to the tax imposed pursuant to "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. or who is a partner of a business who works for the partnership for at least 35 hours a week, or who renders any other standard of service generally accepted by custom or practice as full-time employment, and whose distributive share of income, gain, loss, or deduction, or whose guaranteed payments, or any combination thereof, is subject to the payment of estimated taxes, as provided by the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.  "Full-time employee" shall not include a person who works as an independent contractor or who works on a consulting basis for a business.

     “Mixed use project” means a project comprising both a qualified business facility and a qualified residential project. 

     “New full-time position” means a position created by the business at the qualified business facility that did not previously exist in this State.

     "Partnership" means an entity classified as a partnership for federal income tax purposes.

     "Professional employer organization" means an employee leasing company registered with the Department of Labor and Workforce Development pursuant to P.L.2001, c.260 (C.34:8-67 et seq.).

     "Qualified business facility" means any building, complex of buildings or structural components of buildings, and all machinery and equipment located within the vicinity of a designated transit village, used in connection with the operation of a business.

     "Qualified residential project" means any building, complex of buildings or structural components of buildings, including a mixed use project, consisting predominantly of residential units, located within the vicinity of a designated transit village.

     "Residential unit" means a residential dwelling unit such as a rental apartment, a condominium or cooperative unit, a hotel room, or a dormitory room.

     “Soft costs” means costs associated with financing, design, engineering, legal services, real estate commissions, or furniture or office equipment with a useful life, as determined pursuant to section 168 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.168), of less than five years.

     “Vicinity of a designated transit village” means:

     a.     property which is located within a 1/2 mile radius surrounding the mid point of any property located entirely within the radius of a designated transit village;

     b.    property which is located entirely within a municipality that contains a designated transit village and which is directly adjacent, or connected by rail spur, to a freight rail line, if the business utilizes that freight rail line for loading and unloading freight cars on trains;

     which property shall have been specifically delineated by the authority pursuant to subsection c. of section 6 of P.L.    , c.  (C.     ) (pending before the Legislature as this bill).

     A property which is partially located within the vicinity of a designated transit village shall only be considered within the vicinity of a village if more than 50 percent of its total land area falls within the vicinity of a designated transit village.

 

     2.    a. (1) A business, upon application to and approval from the authority, shall be allowed a credit in an amount equal to 50 percent of its capital investment, made after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) but prior to its submission of documentation in accordance with subsection c. of this section, in a qualified business facility located within the vicinity of a designated transit village, pursuant to the restrictions and requirements of this section.

     (2)   A business, other than a business that is a tenant eligible for a credit pursuant to paragraph (3) of this subsection, shall make or acquire a capital investment totaling not less than $10,000,000 in a qualified business facility, at which facility the business shall employ not fewer than 50 full-time employees in new full-time positions to be eligible for a credit under this section.  A business that acquires a qualified business facility shall be deemed to have acquired the capital investment made or acquired by the seller.

     (3)   A business that is a tenant in a qualified business facility, the owner of which facility has made or acquired capital investments in the facility totaling not less than $10,000,000, shall occupy a leased area of the qualified business facility that represents at least $3,000,000 of the capital investment in the facility at which the tenant business and up to four other tenants in the qualified business facility shall employ, in the aggregate, not fewer than 50 full-time employees in new full-time positions to be eligible for a credit under this section.  The amount of capital investment in a facility that a leased area represents shall be equal to that percentage of the owner’s total capital investment in the facility that the percentage of net leasable area leased by the tenant is of the total net leasable area of the qualified business facility.  Capital investments made by a tenant shall be deemed to be included in the calculation of the capital investment made or acquired by the owner, but only to the extent necessary to meet the owner’s minimum capital investment of $10,000,000.  Capital investments made by a tenant and not allocated to meet the owner’s minimum capital investment of $10,000,000 shall be added to the amount of capital investment represented by the tenant’s leased area in the qualified business facility.

     (4)   An affiliate of a business may contribute to meeting either the capital investment or full-time employee requirements of a business that applies for a credit under this section.

     (5)   A business shall not be allowed a tax credit under this section if the business participates in a business employment incentive grant relating to the same capital and employees that qualify the business for this credit, or if the business receives assistance pursuant to P.L.1996, c.25 (C.34:1B-112 et seq.). A business that is allowed a tax credit under this section shall not be eligible for incentives authorized pursuant to P.L.2002, c.43 (C.52:27BBB-1 et al.).

     (6)   Full-time employment for a tax accounting or privilege period shall be determined as the average of the monthly full-time employment for the period.

     (7)   The capital investment of the owner of a qualified business facility is that percentage of the capital investment made or acquired by the owner of the building that the percentage of net leasable area of the qualified business facility not leased to tenants is of the total net leasable area of the qualified business facility.

     b.    A business shall apply for the credit within five years after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill), and shall submit its documentation for approval of its credit amount within 10 years after the effective date of P.L.    , c.   (pending before the Legislature as this bill).

     c.     (1) (i) The amount of credit allowed shall, except as otherwise provided, be equal to the capital investment made by the business, or the capital investment represented by the business’ leased area, or area owned by the business as a condominium, and shall be taken over a 10-year period, at the rate of one-tenth of the total amount of the business’ credit for each tax accounting or privilege period of the business, beginning with the tax period in which the business is first approved by the authority as having met the capital investment and employment qualifications, subject to any reduction or disqualification as provided by subsection d. of this section as determined by annual review by the authority.  In conducting its annual review, the authority may require a business to submit any information determined by the authority to be necessary and relevant to its review.

     (ii)   The credit amount for any tax period ending after the date 10 years after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) during which the documentation of a business' credit amount remains unapproved shall be forfeited, although credit amounts for the remainder of the years of the 10-year credit period shall remain available to it.

     (iii)   The amount of credit allowed for a tax period to a business that is a tenant in a qualified business facility shall not exceed the business' total lease payments for occupancy of the qualified business facility for the tax period.

     (2)   A business that is a partnership shall not be allowed a credit under this section directly, but the amount of credit of an owner of a business shall be determined by allocating to each owner of the partnership that proportion of the credit of the business that is equal to the owner of the partnership's share, whether or not distributed, of the total distributive income or gain of the partnership for its tax period ending within or with the owner's tax period, or that proportion that is allocated by an agreement, if any, among the owners of the partnership that has been provided to the director by such time and accompanied by such additional information as the director may require.

     (3)   The amount of credit allowed pursuant to this section may be applied against the tax liability otherwise due pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), pursuant to section 1 of P.L.1950, c.231 (C.17:32-15), pursuant to N.J.S.17B:23-5, or pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq.

     d.    (1) If, in any tax period, the number of full-time employees employed by the business in new full-time positions at the qualified business facility is fewer than 50, the business shall forfeit its credit amount for that tax period and each subsequent tax period, until the first tax period for which documentation demonstrating the restoration of the number of full-time employees employed by the business in new full-time positions at the qualified business facility to 50 has been reviewed and approved by the authority, for which tax period and each subsequent tax period the full amount of the credit shall be allowed.

     (2)   (i) If the qualified business facility is sold, in whole or in part, during the 10-year eligibility period the new owner of the qualified business facility shall not acquire the capital investment of the seller and the seller shall forfeit all credits for the tax period in which the sale occurs and all subsequent tax periods; provided however, that any credits of tenants shall remain unaffected.

     (ii)   If a tenant subleases its tenancy in whole or in part during the 10-year eligibility period the new tenant shall not acquire the credit of the sublessor, and the sublessor tenant shall forfeit all credits for the tax period of its sublease and all subsequent tax periods.

 

     3.    a. (1) A business, upon application to and approval from the authority, shall be allowed a credit in an amount equal to 20 percent of its capital investment, made after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) but prior to its submission of documentation in accordance with subsection c. of this section, in a qualified residential project located within the vicinity of a designated transit village, pursuant to the restrictions and requirement of this section.

     (2)   A business shall make or acquire a capital investment totaling not less than $10,000,000 in a qualified residential project to be eligible for a credit under this section.

     (3)   An affiliate of a business may contribute to meeting the capital investment requirements of a business that applies for a credit under this section.

     b.    A business shall apply for the credit within five years after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill), and shall submit its documentation for approval of its credit amount within 10 years after the effective date of P.L.    , c.   (pending before the Legislature as this bill).

     c.     (1) (i) The amount of credit allowed shall, except as otherwise provided, be equal to the capital investment made by the business, and shall be taken over a 10-year period, at the rate of one-tenth of the total amount of the business’ credit for each tax accounting or privilege period of the business, beginning with the tax period in which the business is first approved by the authority as having met the capital investment, subject to any reduction or disqualification as provided by subsection d. of this section as determined by annual review by the authority.  In conducting its annual review, the authority may require a business to submit any information determined by the authority to be necessary and relevant to its review.

     (ii)   The credit amount for any tax period ending after the date 10 years after the effective date of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) during which the documentation of a business' credit amount remains unapproved shall be forfeited, although credit amounts for the remainder of the years of the 10-year credit period shall remain available to it.

     (2)   A business that is a partnership shall not be allowed a credit under this section directly, but the amount of credit of an owner of a business shall be determined by allocating to each owner of the partnership that proportion of the credit of the business that is equal to the owner of the partnership's share, whether or not distributed, of the total distributive income or gain of the partnership for its tax period ending within or with the owner's tax period, or that proportion that is allocated by an agreement, if any, among the owners of the partnership that has been provided to the director by such time and accompanied by such additional information as the director may require.

     (3)   The amount of credit allowed pursuant to this section may be applied against the tax liability otherwise due pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), pursuant to section 1 of P.L.1950, c.231 (C.17:32-15), pursuant to N.J.S.17B:23-5, or pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq.

     d.    If the qualified residential project is sold, in whole or in part, during the 10-year eligibility period the new owner of the qualified residential project shall not acquire the capital investment of the seller and the seller shall forfeit all credits for the tax period in which the sale occurs and all subsequent tax periods.

 

     4.    a. A business may elect to make and file an application with the director for a tax credit transfer certificate, covering one or more tax accounting or privilege periods, in lieu of the business being allowed to claim a credit, approved by the authority pursuant to section 2 or 3 of P.L.    , c.   (C.       ) (pending before the Legislature as this bill), against the tax liability of the business. The director may consult with the executive director in consideration of an application for approval of a tax credit transfer certificate made by a business under this section.

     b.    The tax credit transfer certificate, upon receipt thereof by the business from the director, may be sold or assigned, in full or in part, to any other person who may have a tax liability pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), pursuant to section 1 of P.L.1950, c.231 (C.17:32-15), pursuant to N.J.S.17B:23-5, or pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in exchange for private financial assistance to be provided by the purchaser or assignee to the business that has applied for and been granted the credit.  The tax credit transfer certificate provided to the business by the director shall include a statement waiving the business’ right to claim that amount of the credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), pursuant to section 1 of P.L.1950, c.231 (C.17:32-15), pursuant to N.J.S.17B:23-5, or pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., that the business has elected to sell or assign.

     c.     The sale or assignment of any amount of a tax credit transfer certificate allowed by this section shall not be exchanged for consideration received by the business of less than 75 percent of the transferred tax credit amount.  Any amount of a tax credit transfer certificate used by a purchaser or assignee against a tax liability pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), pursuant to sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), pursuant to section 1 of P.L.1950, c.231 (C.17:32-15), pursuant to N.J.S.17B:23-5, or pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., shall be subject to the same limitations and conditions that apply to the use of the credit by the business that applied for and was allowed the credit.

 

     5.    The value of tax credits, including tax credits allowed through the granting of tax credit transfer certificates, approved by the authority or the director pursuant to section 2 or 3 or section 4 of P.L.    , c.   (C.       ) (pending before the Legislature as this bill) shall not exceed a cumulative total of $1,500,000,000 over the life of the tax credit program.

 

     6.    The executive director, in consultation with the director, shall adopt rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) as are necessary to effectuate the provisions of P.L.   , c.  (C.   ) (pending before the Legislature as this bill), including but not limited to: a. rules and regulations regarding the determination of a capital investment; b. rules and regulations regarding the review and approval of communities designated as transit villages by the Commissioner of the Department of Transportation after the effective date of P.L.    , c.    (pending before the Legislature as this bill); c. rules and regulations regarding the delineation of properties within the vicinity of designated transit villages; d. rules and regulations regarding the determination of the limits, if any, on the expense or type of furnishings that constitute a capital improvement; e. rules and regulations regarding the procedures and the content of forms necessary to apply for a credit or a tax credit transfer certificate; and f. rules and regulations regarding provisions for credit applicants and for tax credit transfer certificate applicants to be charged an initial application fee and ongoing service fees to offset administrative costs, if any, related to the credit and the tax credit transfer certificate.

 

     7.    This act shall take effect immediately.


STATEMENT

 

     This bill establishes a tax credit program for capital investment and increased employment in the vicinity of one or more of the Department of Transportation’s (DOT) transit villages in an effort to stimulate growth and development in those designated areas throughout the State.

     Under the bill, the program is administered by the New Jersey Economic Development Authority (EDA), and is comprised of two separate yet related tax credits.  The first provides certain businesses with a tax credit in an amount equal to 50 percent of a business’ capital investment in a qualified business facility.  The second provides a credit in an amount equal to 20 percent of a business’ capital investment in a qualified residential project.

     The bill provides that in order to be eligible to claim either credit a business must make or acquire a minimum capital investment of at least $10 million in the qualified business facility ($3 million for tenants in qualified business facilities) or the qualified residential project, and that the business facility or residential project must be located within the vicinity of a DOT-designated transit village.  For purposes of the bill, the vicinity of a designated transit village is defined as (1) any property which is located within a one-half mile radius surrounding the mid point of any property located entirely within the radius of a designated transit village, and (2) any property which is located entirely within a municipality that contains a designated transit village and which is directly adjacent, or connected by rail spur, to a freight rail line, if the business utilizes that freight rail line for loading and unloading freight cars on trains.

     The bill provides certain employment-related requirements which must be met by a business to claim a credit for capital investment in a qualified business facility.  Specifically, the bill provides that a business that is eligible to claim a credit for a capital investment in a qualified business facility must employ not fewer than 50 full-time employees in new full-time positions at the qualified business facility.  If the business is a tenant in a qualified business facility, the requirements may be shared by the business and up to four other tenants located within the same facility.

     The bill stipulates that the total amount of any credits approved by the EDA as a result of a capital investment in a qualified business facility or a qualified residential project may be applied against the business’ corporation business tax, insurance premiums tax, or gross income tax liability, and that the total amount of the credit must be taken by the business over a ten-year period in ten equal parts, beginning with the tax period in which the credit is first approved.  Under the bill, businesses may elect to file an application with the Director of the Division of Taxation in the Department of the Treasury for a tax credit transfer certificate, covering one or more accounting or privilege periods, in lieu of being allowed to claim a credit.  However, the sale or assignment of that certificate may not be exchanged for private financial assistance of less than 75 percent of the transferred credit amount.

     The bill prohibits certain businesses from receiving tax credits and permits the State to invalidate previously approved credits if a business fails to meet certain conditions.  In particular, the bill prohibits businesses from receiving a credit if the business receives a grant under the Business Employment Incentive Program or financial assistance under the Business Retention and Relocation Assistance Grant Program, and disqualifies businesses from receiving incentives authorized under the Municipal Rehabilitation and Economic Recovery Act if the business is eligible for a credit under the program.  The bill provides that the EDA may invalidate a business’ tax credit if the business receiving a credit for a capital investment in a qualified business facility employs fewer than 50 full-time employees in new full-time positions, and provides that the EDA may invalidate a business’ tax credit if the business sells the facility or project during the eligibility period.

     Additionally, the bill limits the total value of credits that may be approved over the life of the program.  The total value of tax credits, including tax credits allowed through the granting of tax credit transfer certificates, may not exceed $1.5 billion.