The New Jersey Economic Development Authority board Wednesday approved the creation of the Emerge program, a new jobs-based tax credit program created under the Economic Recovery Act of 2020 that is intended to drive economic development by making tax credits available to projects that invest private capital into the state and create good-paying jobs.
If that sounds familiar, there’s a reason.
Emerge is a new program, but it is based on many of the aspect of the Grow New Jersey program that existed under former Gov. Chris Christie.
Officials within Gov. Phil Murphy’s administration, most specifically NJEDA head Tim Sullivan, said Emerge is a better fit for the state. They feel it will deliver better benefits at less cost.
The board approved rules that will be effective immediately for a short-term duration, enabling the NJEDA to start accepting Emerge program applications in the coming weeks. Concurrently, the board also approved publishing the rules for public comment prior to adopting longer-term final rules.
The complete rules for the Emerge program, including eligibility, award sizes and other information, are available here.
Here is a quick overview of what was approved:
Eligibility
Small and large businesses, as well as nonprofits, can apply for tax credits to support projects that meet minimum capital investment and minimum job creation or retention requirements. Most projects will receive tax credits over a seven-year eligibility period, starting after the EDA confirms the applicant has completed its investment and hired workers.
Potential awards
Base tax credits will range from $500 to $4,000 per job, per year, depending on location and other aspects of the project. Bonuses are also available based on project location, industry and alignment with other policy objectives. These bonuses can increase annual per-job credits to a maximum of $8,000 per job.
Projects with significant numbers of retained jobs (either 500 or 1,000 jobs, depending on the project’s location) can receive tax credits for retained jobs; however, the ERA sets the amount of tax credits for each retained job at half the amount that would be awarded for equivalent new jobs. Jobs that are covered by a labor harmony agreement are eligible for an additional $1,000 bonus over the capped amounts.
Eligibility rules
To be eligible for tax credits, projects must create at least 35 new, full-time jobs. This job creation requirement is lower if a business is primarily engaged in a targeted industry or if a business meets the definition of a “small business” in the program rules.
Additionally, at least 80% of incented employees’ work time must be spent in New Jersey, and the business must commit to stay in the incented location for at least 1.5 times the duration of the tax credit period. Projects may make an equivalent donation to a local Recovery Infrastructure Fund in place of investing in their project’s facility. Some requirements are relaxed for small businesses.
Other requirements
All projects that receive tax credits under the Emerge program must meet minimum environmental standards, meet prevailing wage obligations for all construction workers and building service workers, and provide health care for employees. Projects that have a total cost of $10 million or more are also required to enter into a Community Benefits Agreement with the EDA and the municipality or county in which the project is located. These agreements will create a Community Advisory Committee to monitor compliance with the respective agreement.
Net benefits test
Projects that receive tax credits under the Emerge program must yield a minimum net positive economic benefit to the state of 200-400%, depending on project location. Awards will be limited to the amount the EDA determines is necessary to induce the project to locate in New Jersey. The EDA will also review detailed financial information about the project to verify the award of tax credits is a “material factor” in the decision to create or retain jobs in New Jersey.
The cap
The Emerge program is capped with the Aspire program — a separate ERA program designed to catalyze community redevelopment — at $1.1 billion over six years. Any remaining tax credits left after those six years will be available in a seventh year. To ensure the benefits of the program are distributed equitably throughout the state, the Emerge and Aspire program cap is split between northern and southern counties for the first three years of the program.
Murphy saluted the goals of the program.
“Creating good jobs for New Jerseyans is central to my administration’s efforts to build a stronger, fairer New Jersey,” he said. “It is even more important as we begin our recovery from the economic devastation of the COVID-19 pandemic.
“The Emerge program is a well-crafted, targeted tax incentive program that will drive job creation and equitable economic growth throughout New Jersey.”
Sullivan agreed.
“Supporting projects that bring good jobs to New Jersey is crucial to recovering from the COVID-19 pandemic and achieving Gov. Murphy’s vision for a stronger, fairer New Jersey,” he said. “The Emerge program rules approved today will open the door to exciting new economic development projects that will drive growth in communities across New Jersey, while also remaining true to our commitments to equity, transparency and accountability.
“This is an important step forward that will set New Jersey on the path to long-term, sustainable and fair economic success.”
