LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
ASSEMBLY, No. 5170
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JUNE 3, 2025
SUMMARY
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Synopsis: |
Requires State to purchase certain unused tax credits issued under New Jersey Economic Recovery Act of 2020. |
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Type of Impact: |
Multi-year increases in State costs and revenues. |
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Agencies Affected: |
Department of the Treasury. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
FY 2025 & Thereafter |
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State Expenditure Increase |
Indeterminate |
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State Revenue Increase |
Indeterminate |
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· The Office of Legislative Services (OLS) concludes that requiring the State to purchase certain tax credits would result in indeterminate increases in State expenditures and State revenues over a multi-year period. Absent an established history of State tax credit purchases, the direction and magnitude of the net fiscal impact cannot be reliably forecast because the net effect would depend on the specific circumstances of each individual State tax credit purchase.
· If all tax credits issued through the New Jersey Aspire Program and the Cultural Arts Incentives Program were unused and purchased by the State at the required 85 percent of face value, the State would incur additional expenditures of up to $6.7 billion. Several factors are likely to reduce total State tax credit purchases below this maximum.
· Whenever the State would acquire an unused tax credit at the required 85 percent of face value that otherwise would have been redeemed at 100 percent of face value, the State would realize a revenue gain equal to the full amount of the tax credit and a net financial gain equal to 15 percent thereof. However, requiring the State to buy a tax credit that would not have been used otherwise would cause a net loss to the State equal to 85 percent of the credit’s face value.
BILL DESCRIPTION
This bill would require the Division of Taxation in the Department of the Treasury to purchase unused tax credits issued under the New Jersey Aspire Program and the Cultural Arts Incentives Program at 85 percent of face value. Current law only permits tax credit purchases by the division.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that the bill would have two countervailing multi-year impacts on State finances: expenditure increases from tax credit purchases and revenue increases from the avoided redemption of tax credits. The OLS, however, lacks the informational basis to determine the direction and magnitude of the bill’s net fiscal impact as it would depend on the specific, presently unknown, circumstances of each individual’s tax credit purchase.
Based on current law and information available through the New Jersey Economic Development Authority, the OLS estimates that the State may be required to purchase up to $7.9 billion in unused tax credits if the bill is enacted into law. Since the bill requires the State to pay 85 percent of the credit amount, the State would incur a maximum of $6.7 billion in additional costs over a period of several fiscal years.
Several factors would reduce State tax credit purchases relative to the $6.7 billion maximum. The State may not award all remaining tax credits available through the Aspire Program and the Cultural Arts Incentives Program. A portion of the tax credits that may currently be awarded through the Aspire Program may be transferred to support the film and digital media tax credit program. Final tax credits issued after project completion may be less than initially awarded by the authority if a completed project is consistent with initial project plans. Finally, some of the tax credits will be redeemed by taxpayers.
Current law allows taxpayers to sell or transfer tax credits awarded through other economic development programs. In response to an FY 2026 OLS Discussion Point, the authority noted that in FY 2024 and FY 2025, the average sales price of tax credits awarded to taxpayers through the Economic Redevelopment and Growth Grant Program, Film and Digital Media Tax Credit Program, Grow New Jersey Assistance Program, and Urban Transit Hub Tax Credit Program ranged from 88 cents per dollar to 93 cents per dollar. The OLS notes that these sale prices reflect current market conditions.
The purchase of unused tax credits would have an indeterminate net impact on State finances, as the net impact would depend on the circumstances of each individual purchase. In principle, every tax credit purchase will increase short-term State expenditures and may potentially decrease long-term State revenue losses.
Under current law, the Division of Taxation already has the authority to purchase certain unused tax credits. To date, the division has chosen not to exercise this authority. For purposes of this estimate, the OLS assumes that the division will continue not to acquire tax credits under current law. Therefore, for purposes of illustration, if the State were to purchase an unused $1 million tax credit at 85 percent of face value, the State would expend $850,000 and would avoid the $1 million tax revenue loss that would have occurred if the tax credit had been redeemed at the full amount, either by the initial awardee of the tax credit or a third-party purchaser. The result would be a $150,000 net long-term gain to the State.
However, if the holder were unable to use the tax credit, then the State would only incur the $850,000 expenditure increase, resulting in an $850,000 net loss to the State. Consequently, by requiring the State to purchase these unused tax credits, the bill would result in net losses to the State whenever the State purchases a tax credit that its holder could not otherwise use.
New Jersey Aspire Program Impact
The OLS concludes that the purchase of unused tax credits awarded under the New Jersey Aspire Program would increase State expenditures by up to $5.7 billion over several years.
The authority awards Aspire tax credits to the developers of certain redevelopment projects. As of May 16, 2025, the authority has approved $2.7 billion in Aspire tax credits, including for transformative projects, and some $4.0 billion in tax credits remain available for award.
If the remaining $4.0 billion in tax credits were awarded and remain unused by taxpayers, then the State would be required to purchase up to $6.7 billion in total unused Aspire tax credits. At a required purchase price of 85 percent of the tax credit amount, the bill would cause the State to incur additional costs of up to $5.7 billion for these purchases.
Cultural Arts Incentives Program Impact
The OLS concludes that the purchase of unused tax credits awarded under the Cultural Arts Incentives Program would increase State expenditures by $340 million to $1.0 billion.
The Cultural Arts Incentives Program (recently renamed the Cultural Arts Facilities Expansion Program by the authority) incentivizes the development of cultural arts projects by cultural arts institutions, either independently or in collaboration with governmental entities. The program shares a $1.2 billion tax credit authorization with the New Jersey Community-Anchored Development Program, the totality of which remains available to date. Current law sets aside at least $400 million in tax credits for the Cultural Arts Incentives Program.
Consequently, the actual amount allocated to the tax credit program may range from $400 million to $1.2 billion. Accordingly, at 85 percent of face value, the State would expend an additional $340 million to $1.0 billion to purchase these tax credits if the initial recipients were to sell them to the State.
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Section: |
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Analyst: |
Staff Fiscal and Budget Analyst |
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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.).