On Jan. 7, 2021, Gov. Phil Murphy signed into law the New Jersey Economic Recovery Act of 2020, designating $14 billion to fund a variety of recovery programs, including the Emerge Program that is designed to encourage job creation in the state.1 On May 12, 2021, the New Jersey Economic Development Authority (NJEDA) Board approved temporary rules to implement the Emerge Program.2 Under Emerge, the NJEDA has discretion to award income tax credits of up to $8,000 per employee position created or retained in the state. Eligible businesses must apply by March 1, 2027 to receive funding under Emerge.
Generally, businesses will need to invest either $120 per square foot of gross leasable area in new construction, or $40 per square foot of gross leasable area in property improvements. However, businesses investing in industrial, warehouse, logistics or research and development facilities will only need to invest one-half of these amounts.5
Under the second prong, businesses are eligible for Emerge incentives if they either create 35 full-time jobs or retain the greater of 1,000 full-time jobs or existing full-time jobs at the time of application. However, the requirements are less stringent for businesses creating new jobs in innovative industries, such as information and advance manufacturing, and for small businesses, which are only required to create 25 full-time jobs. On the same note, businesses located in either qualified incentive tracts or government-restricted municipalities are only required to retain the greater of 500 full-time jobs or existing full-time jobs at the time of application. Qualified incentive tracts and government restricted municipalities are generally impoverished areas with high distress and poverty rates. Full-time jobs will only be counted if they are held by an employee who works at least 35 hours a week, at least 80% of which is in New Jersey.6
The rules list several different ways in which a location can qualify, including qualified incentive tracts or government restricted municipalities discussed above. Generally, qualified incentive areas are those with struggling economies, a majority of which are in southwest and northeast New Jersey.7
Businesses must demonstrate that the tax credits are a material factor to their decision to either create or retain jobs in the area.8
Generally, businesses must create a net positive economic benefit of 400% of their requested tax credit. Businesses located in certain government-restricted municipalities or distressed areas may only need to create a net positive economic benefit of 200% or 300%.9
A qualified business facility also must: (i) meet environmental and sustainability requirements; (ii) comply with affirmative action requirements; and (iii) maintain prevailing wages.10 To meet the wage requirement, business will need to pay employees the prevailing wage of workers in their craft or trade as determined by the Commissioner of Labor and Workforce Development.11
If a business is eligible, management should consider applying to the NJEDA. Generally, businesses will be eligible for a credit of $500 per job per year but may receive an additional $2,500 in bonus credits per job per year. Bonuses are only available to businesses paying the greater of $15 an hour or 120% of the minimum wage in the area.12
There are a number of different ways a business may qualify for bonus credits under Emerge, including job development. For example, a business will be awarded a $500 bonus credit per job per year if between 251 and 400 jobs are created, with an additional $250 bonus for each 250 new jobs created, up to $1,500 for more than 1,000 new jobs created.13 Businesses paying their employees’ wages exceeding the county’s minimum salary are also eligible for bonus credits of $250 per job per year for each 35% increase above the minimum, up to $1,500.14 Also, businesses providing annual training for at least 10% of their employees are eligible for a bonus credit of up to $1,000 per employee per year.15 Eligible small businesses may receive a bonus credit of $500 per employee per year.16 Finally, businesses located in low-income areas will be awarded larger credits, with a maximum credit of $8,000 per job per year for a mega project or a project in a government-restricted municipality.17
As an example of how a business can obtain several bonus credits depending upon the specific facts and circumstances of a project, a business will receive a $7,000 credit per employee per year if it is:
- Located in a government restricted municipality or which is a mega project (minimum credit of $4,000);18
- Engaged in advanced manufacturing (targeted industry bonus of $500);19
- Creating 251-400 new jobs ($500 bonus);20
- Providing annual training within 10 miles of the qualified business facility to 10% of employees ($1,000 bonus);21 and
- Providing a childcare reimbursement to employees ($1,000 bonus).22
The business can use the credit to offset its corporate business or insurance premium tax liability and any excess credit may be carried forward for up to seven years. Instead of applying the credit, the business may choose to surrender the certificate of credit to the Division of Taxation in exchange for a cash payment equal to 90% of the credit awarded.23 The NJEDA has the discretion to set the award period for up to seven years. A business must commit to maintain the level of jobs created for 1.5 times the award period.24 If the business does not meet its commitment, a portion of the credit awarded will be subject to recapture.25
Gov. Murphy announced Emerge is part of the state’s process to “begin our recovery after the economic devastation of the COVID-19 pandemic.”26 Emerge is expected to incentivize large- to mid-size companies to remain or relocate to the state by offering significant income tax incentives, with a 90% cash refund. Emerge is particularly enticing for businesses that qualify for bonuses under the Act, with the opportunity to increase their eligible credit by a maximum of 600% depending upon the specific characteristics of the project being undertaken. Businesses eligible for Emerge benefits should consider applying soon, as funding is capped. According to the NJEDA, the application is expected to be available in early June 2021.
1 Ch. 156 (A.B. 4), Laws 2021. The Emerge Program Act was enacted by Ch. 156, §§ 68-81 and is codified as N.J. REV. STAT. §§ 34:1B-336–34:1B-348. For further information on the program from the NJEDA, see Emerge Program.
2 N.J. ADMIN. CODE §§ 19:31-22.1–19:31-22.16. NJEDA Board Approves Rules for Emerge Job Creation Tax Credit Program, New Jersey Economic Development Authority, May 12, 2021. The new rules are effective upon acceptance for filing by the New Jersey Office of Administrative Law. The rules are effective for up to 180 days from filing, but the rules are being concurrently proposed for permanent adoption under the normal rulemaking requirements of the New Jersey Administrative Procedure Act. This process is authorized by N.J. REV. STAT. § 34:1B-348.
3 N.J. REV. STAT. § 34:1B-339; N.J. ADMIN. CODE § 19:31-22.3.
4 N.J. ADMIN. CODE § 19:31-22.3(b).
5 N.J. ADMIN. CODE § 19:31-22.3(c).
6 N.J. ADMIN. CODE §§ 19:31-22.1; 19:31-22.3(d).
7 N.J. ADMIN. CODE § 19:31-22.1.
8 N.J. ADMIN. CODE § 19:31-22.3(b)4.
9 N.J. ADMIN. CODE § 19:31-22.3(b)5.
10 N.J. ADMIN. CODE § 19:31-22.3(b)6-8.
11 N.J. ADMIN. CODE § 19:31-22.3(b)8.
12 N.J. ADMIN. CODE § 19:31-22.8(c), (d).
13 N.J. ADMIN. CODE § 19:31-22.8(d)3.
14 N.J. ADMIN. CODE § 19:31-22.8(d)6.
15 N.J. ADMIN. CODE § 19:31-22.8(d)4.
16 N.J. ADMIN. CODE § 19:31-22.8(d)5.
17 N.J. ADMIN. CODE § 19:31-22.8(e). A “mega project” is a project of special economic importance, at which 500 or more full-time jobs are created, having capital investment of at least $50 million in a targeted industry and which provides opportunities to leverage leadership in a high-priority targeted industry. N.J. ADMIN. CODE § 19:31-22.2.
18 N.J. ADMIN. CODE § 19:31-22.8(c)1.
19 N.J. ADMIN. CODE § 19:31-22.8(d)8.
20 N.J. ADMIN. CODE § 19:31-22.8(d)3.
21 N.J. ADMIN. CODE § 19:31-22.8(d)4.
22 N.J. ADMIN. CODE § 19:31-22.8(d)11.
23 N.J. ADMIN. CODE § 19:31-22.11(f).
24 N.J. ADMIN. CODE § 19:31-22.9(b)5. The commitment period is 1.5 times the eligibility period specified in the project agreement. N.J. ADMIN. CODE § 19:31-22.2.
25 N.J. ADMIN. CODE § 19:31-22.14(f).
26 Chelsey Johnstone, NJEDA Approves Rules for Emerge Job Creation Tax Credit Program, TRENTON DAILY, May 17, 2021.
Michael Eickhoff has 10 years of experience assisting clients in identifying, negotiating and implementing business incentives. He has held senior positions in government, industry, public accounting and financial advisory firms.
- Technology and telecommunications
- Retail and consumer products
Jamie C. Yesnowitz
Jamie Yesnowitz, principal serving as the State and Local Tax (SALT) leader within Grant Thornton's Washington National Tax Office, is a national technical resource for Grant Thornton's SALT practice. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms.
Washington DC, Washington DC
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