New Jersey has been without a much-needed tax incentive program for nearly 18 months.
That’s a year-and-a-half of our state relying mostly on its disappointing business climate to attract businesses which create jobs and provide tax revenue.
So NJBIA was pleased to see Gov. Phil Murphy and legislative leadership reach an agreement on the framework of a six-year, $11.5 billion economic incentive program this week.
And while some may contend that passing legislation before the end of the year for this framework is a rushed process, it’s just as easy to establish that it’s long overdue.
As we announced on Wednesday, and said in committee testimony yesterday, NJBIA is generally supportive of the proposed framework. But here are some finer points on the Economic Recovery Act of 2020 as it goes to quick vote on Monday:
- NJBIA has voiced concerns about caps being included in any new tax incentive program. Why would we want to cap our own success, we have asked? And the new incentive program does include caps – a top priority for Gov. Murphy. However, this is a multiyear cumulative cap with flexibility for rollovers or borrowing. We’re hopeful that those conditions will not restrict the program and the overall benefit for New Jersey. There are also billions of dollars set aside as a separate cap for transformative projects.
- Innovation, workforce development and manufacturing are hallmark missions for NJBIA and they are prioritized in this bill. We believe growth in all three of these areas are the foundations of economic development in the state.
- Regarding the innovation-focused parts of the bill, we are pleased that the expansion of the Angel Investor and Net Operating Loss (NOL) programs are being considered. We are also happy to see the Evergreen Fund (which dedicates $500 million annually to venture capital) and the Ignite program included in the bill, but it would be helpful for the innovation parts of this program to be better integrated with the existing Commission on Science and Technology.
- The framework includes a $50 million direct appropriation to support Main Street businesses through grants, loans and technical assistance, with a focus on minority- and women-owned firms. This should provide much needed help to small business as we emerge from the devastating impacts of the coronavirus. However, the damage done has been deep. Ultimately, this dedication, while appreciated, will not be enough.
- NJBIA is seeking that the “Advanced Manufacturing” section of the bill be amended to either just say “Manufacturing” or to clarify exactly what qualifies as “Advanced Manufacturing.” We want to ensure a deserving manufacturer does not get left out of the program based on an interpretation of language or a loose definition.
- NJBIA would like to see community benefit agreements be a bonus, not a requirement. It is also important to not allow a local government unilateral control over the agreements. We contend there should be some state oversight to ensure that the demands are not unreasonable, ruining potential economic growth opportunities in towns that need them.
- NJBIA also believes the prevailing wage requirement for building service workers is not practical and should be eliminated. As an example, this requirement could discourage the use of good tax incentives to fill a floor in an existing office park. Attracting a new tenant with an incentive will lead to higher costs for every other tenant because that office park would be required to increase the existing services costs for everyone, including those that did not use tax incentives.
- There is some tax withholding language in the Emerge program that could be problematic. Specifically, we believe it could discriminate against western New Jersey counties, as there are significant New Jersey businesses that have more than 20% of their employees from Pennsylvania. Under the current language, those businesses would be ineligible for Emerge due to New Jersey’s reciprocal income tax agreement with Pennsylvania.
- The brownfields section of the bill should be more environmentally friendly. Currently, the legislation places strict limits on brownfields remediation before the application to the program. Quicker remediation only helps the environment, while also limiting costs. We also feel there should be a look-back period where a tax incentive could serve as a reimbursement for already completed cleanup work.