LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 3577

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: NOVEMBER 27, 2024

 

 

SUMMARY

 

Synopsis:

Provides CBT credit for development of anaerobic digestion facilities that process food waste.

Type of Impact:

Multi-year State revenue loss.

Agencies Affected:

Department of Environmental Protection.

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2025 through FY 2038 

 

State Revenue Loss

Maximum of $15 million

 

 

 

 

 

·         The Office of Legislative Services (OLS) notes that providing corporation business tax credits for the development and construction of an anaerobic digestion facility that processes food waste will result in a maximum State revenue loss of $15 million.  This revenue loss may be incurred over a period beginning in FY 2025 and ending in FY 2038.

 

BILL DESCRIPTION

 

      The bill provides eligible taxpayers with a credit against their corporation business tax liabilities for costs incurred during the development and construction of an anaerobic digestion facility.  The bill defines an “anaerobic digester” as a device that promotes the decomposition of organic material into simple organics and gaseous biogas products, in the absence of elemental oxygen, by means of controlling temperature and volume, and that includes a methane recovery system.

      The tax credit would be available for a total of seven privilege periods.  The bill limits the amount of the tax credit to the lesser of: (1) 50 percent of the costs incurred to develop and construct the anaerobic digestion facility, or (2) $250,000.  The bill limits the cumulative total of tax credits that may be awarded to $15 million.  The bill allows a taxpayer to carry forward any amount of unused tax credits for up to seven privilege periods following the privilege period for which the tax credit was allowed.

      In order to receive a tax credit, the bill requires a taxpayer to submit an application to the Department of Environmental Protection that provides: (1) the anaerobic digestion facility developed by the taxpayer is eligible for the tax credit; and (2) the amount of the tax credit.  The application must include a receipt demonstrating the cost of the development and construction of the anaerobic digestion facility, a certification that the anaerobic digestion facility will be used to process food waste, and any other information determined relevant by the department.

      Finally, the bill requires the Department of Environmental Protection to prepare and submit to the Governor, the State Treasurer, and the State Legislature a report that, at a minimum, summarizes the effectiveness of the tax credit in incentivizing the development and construction of anaerobic digestion facilities that process food waste in the State.  The report must be submitted not later than six years following the effective date of the bill.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS concludes that the provision of corporation business tax credits for costs incurred during the development and construction of an anaerobic digestion facility will result in a loss of State revenues not to exceed $15 million.  The cost of an anaerobic digestion facility will vary depending on its size, design, and features.

      If the bill is enacted in calendar year 2024, credits may be awarded in tax years 2025 through 2031.  However, the bill also allows unused tax credits to be carried forward for up to seven privilege periods following the privilege period for which the tax credit was first allowed.  In this scenario, a tax credit first allowed in tax year 2031 may be carried forward through tax year 2038.  In all, any revenue losses resulting from the bill may be incurred over a period of 14 tax years.

      In April 2023, the Environmental Protection Agency published a survey of anaerobic digestion facilities processing food waste in the United States.  The survey noted that there are three types of food digesters: (1) stand-alone digesters primarily built to process food waste; (2) on-farm digesters that co-digest food waste; and (3) digesters at water resource recovery facilities that co-digest food waste.

      Based on the Environmental Protection Agency survey reports and OLS research, there are four operating food digesters located in New Jersey.  The reports indicate that there is one stand-alone digester (located in the City of Newark) and two co-digesters located at water resource recovery facilities (one operated by the Landis Sewerage Authority and one operated by the Rahway Valley Sewerage Authority).  OLS research indicates there is a dedicated food waste anaerobic digestion facility located on Duck Island in the City of Trenton.  Construction on an organic waste anaerobic digester located in the City of Linden, operated by Linden Renewable Energy, LLC, started in January 2024 and is expected to be completed in the fourth quarter of calendar year 2025

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Scott A. Brodsky

Staff Fiscal and Budget Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).