SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

[Second Reprint]

ASSEMBLY, No. 4046

with committee amendments

STATE OF NEW JERSEY

DATED:  JUNE 26, 2024

      The Senate Budget and Appropriations Committee reports favorably and with committee amendments Assembly Bill No. 4046 (2R).

      As amended and reported, this bill provides certain accommodations to businesses participating in the Business Employment Incentive Program, the Business Retention and Relocation Assistance Grant Program, the Grow New Jersey Assistance Program, and the Urban Transit Hub Program, each of which is administered by the New Jersey Economic Development Authority (EDA).

      Under current law, a business that participates in any of these programs is awarded an economic development incentive in the form of tax credits after meeting certain program requirements.  Under each program, the business is required to create or retain a certain number of full-time jobs at a qualified business facility, with the number of jobs created or retained varying depending on the program and the location of the qualified business facility.  However, in order for a full-time job to be counted towards satisfying the requirements of each program, current law requires full-time employees to spend at least 60 percent of their time at the qualified business facility. 

      Current law allows a business participating in any of these programs to waive this requirement through March 31, 2024, provided that: (1) any full-time employee employed by the business spends at least 10 percent of the employee’s time at the qualified business facility for the 2023 tax period through March 31, 2024; and (2) the business makes a payment of an amount equal to five percent of the amount of the tax credit that the business receives for the 2022 tax period.

      The bill would extend this authorization for the tax period beginning on April 1, 2024, and for all subsequent tax periods, for any business located outside an enhanced area or government-restricted municipality that has entered into an incentive agreement, provided that: (1) for a qualified business facility located outside an enhanced area or government-restricted municipality, any full-time employee employed by the business spends at least 40 percent of the employee's time at the qualified business facility during the tax period; (2) the business extends by two years the term of its commitment period beyond the time set forth in the incentive agreement; and (3) the business makes a non-refundable payment to the EDA in an amount equal to 10 percent of the maximum amount of the tax credit that the business may receive for the tax period.  Under the bill, the EDA would be required to use these payments to provide loans, guarantees, equity investments, grants, or other forms of financing to support small business and downtown or commercial corridor activation activities within enhanced areas or government-restricted municipalities to be used within 12 months following the EDA’s receipt of those funds.  The EDA would further be required to issue a report each fiscal year detailing how the funds were distributed.

      The bill also provides that the credit amount received by a business may first be taken by the tax certificate holder for the tax period for which it was issued, for the tax period in which it was issued, or in any tax period during the time the business is required to maintain the project at a location in New Jersey set forth in the incentive agreement.  The bill permits the tax certificate holder to transfer the tax credit amount on or after the date of issuance for use by the transferee in the tax period for which it was issued, for the tax period in which it was issued, or in any of the next three successive tax periods.  The bill permits the tax credit holder or transferee to first use the credit against tax liabilities in the tax period in which it was issued or in a succeeding tax period, as authorized by the bill, without being required to amend the tax return for the tax period for which the credit was issued.  The bill provides that for certain programs no more than the amount of tax credits equal to the total credit amount, divided by the duration of the tax credit term, in years, may be taken in any tax period.

      Additionally, the bill permits a business that participates in the Grow New Jersey Assistance Program or the Urban Transit Hub Program, and which has elected to modify its obligations under an incentive agreement pursuant to P.L.2022, c.134, to request, before December 31, 2024, to reduce the number of Statewide employees specified in the incentive agreement.  However, the bill would require the business to certify that the business is requesting to reduce the number of new or retained full-time jobs specified in the incentive agreement commencing with the 2020 tax period and, at the discretion of the business, whether the reduction would continue for each subsequent tax period remaining in the eligibility period.

      As amended and reported by the committee, Assembly Bill No. 4046 (2R) is identical to Senate Bill No. 3303 (1R), which was also amended and reported by the committee on this date.

COMMITTEE AMENDMENTS:

      The committee amendments remove a provision of the bill that requires a business participating in the Grow New Jersey Assistance Program and Urban Transit Hub Program to certify that all Statewide employment specified in the incentive agreement is assigned to the qualified business facility when that business elects to modify its obligations under an incentive agreement in certain circumstances to reduce the number of Statewide employees specified in the incentive agreement.

FISCAL IMPACT:

      The Office of Legislative Services (OLS) concludes that the bill will result in an indeterminate increase in State expenditures and have an indeterminate net impact on State revenues over a multi-year period.  The OLS lacks the informational basis to project the magnitude and direction of the bill’s countervailing State revenue effects.

      The bill will result in a State revenue decrease to the extent that businesses participating in certain State economic development programs choose to waive the on-site requirement for full-time employees at qualified business facilities because the waiver will allow businesses to remain eligible for tax credits which they could not receive under current law.

      The bill will result in a State revenue decrease associated with payments made by businesses equal to 10 percent of maximum annual tax credit the business is eligible to receive for a tax period, depending on certain circumstances.  These revenues will be offset by increased State expenditures because the bill requires the Economic Development Authority to distribute these payments to support certain economic development activities.

      The bill’s one-year extension of the deadline by which business participating in the Grow New Jersey Assistance (GROW) Program and the Urban Transit Hub Tax Credit (HUB) Program can terminate incentive agreements may result in State revenue increases to the extent that these businesses would no longer receive tax credits for which they otherwise might have qualified.

      The modification of incentive agreements by businesses participating in the GROW and HUB programs will result in an increase in State revenues.  Lowering the number of new and retained full-time employees retained by these businesses will cause their tax credits to be reduced.

      The provisions of the bill allowing businesses to suspend their obligations under the GROW and HUB programs will result in an increase in State revenues.  The overall impact of these provisions on State revenues will be driven by taxpayer decisions to claim tax credits in future tax years.  The OLS cannot predict how individual taxpayer decisions will impact State finances in this regard.

      The provisions of the bill concerning the timing of tax credit utilization will have an indeterminate impact on State revenues.  The overall impact of this provision will be driven by taxpayer decisions to claim tax credits in future years.  The OLS cannot predict how individual taxpayer decisions will impact State finances in this regard.

      The requirement to utilize certain tax credits in equal installments will also have an indeterminate impact on State revenues.  While this requirement may limit State revenue losses in certain fiscal years, the bill may cause the State to experience revenue losses over a longer period of time than it otherwise would under current law.