LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

ASSEMBLY, No. 5378

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: MAY 27, 2025

 

 

SUMMARY

 

Synopsis:

Modifies provisions of Cultural Arts Incentives Program; eliminates Community-Anchored Development Program.

Type of Impact:

Indeterminate impact on State costs.

Indeterminate impact on State revenues.

Agencies Affected:

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2025 & Thereafter

 

State Expenditure Impact

Indeterminate

 

State Revenue Impact

Indeterminate

 

 

 

 

 

·       The Office of Legislative Services (OLS) concludes that the bill would result in an indeterminate State fiscal impact.  Specifically, the bill expands eligibility under the Cultural Arts Incentives Program administered by the New Jersey Economic Development Authority and eliminates the allowance for additional tax credits to be awarded under the Cultural Arts Incentives Program to support the operating reserves of certain non-profit institutions.  The bill also eliminates the New Jersey Community-Anchored Development Program.

·       The OLS is unable to determine the fiscal impact of the bill on State revenues as it depends on several factors, including the number of newly eligible applicants under the expanded eligibility criteria for the Cultural Arts Incentives Program, the offsetting effect of eliminating the operating reserve tax credit provision for nonprofits, and the overall utilization of the Cultural Arts Incentives Program.

BILL DESCRIPTION

 

      The bill modifies the Cultural Arts Incentives Program and eliminates the Community-Anchored Development Program.  The bill modifies the definition of “cultural arts institution” to include entities whose mission addresses cultural, educational, or artistic enrichment, rather than having it be their primary mission.  The bill also expands eligibility to include the National Park Service and developers that have a partnership agreement with any qualified cultural arts institution.  Additionally, the bill expands the scope of eligible cultural arts institution facilities to include national historical parks and related facilities.

      The bill eliminates a provision of current law that allows the authority to award additional tax credits under the Cultural Arts Incentives Program to certain non-profit cultural arts institutions in an amount up to 100 percent of the institution’s operating reserve.

      The bill also modifies the application process for the Cultural Arts Incentives Program by requiring the authority to conduct a review of applications on a rolling basis, rather than through a competitive application process, unless the authority determines that demand is likely to exceed available tax credits.  Finally, the bill eliminates the Community-Anchored Development Program, which has not yet begun accepting applications.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS concludes that the bill would result in an indeterminate State fiscal impact.  The OLS is unable to determine the magnitude or direction of the bill’s fiscal impact as it depends on several factors, including the number of newly eligible applicants under the expanded eligibility criteria for the Cultural Arts Incentives Program, the offsetting effect of eliminating the operating reserve tax credit provision for nonprofits, and the overall utilization of the Cultural Arts Incentives Program.

      Specifically, the bill expands eligibility under the Cultural Arts Incentives Program administered by the authority and eliminates the allowance for additional tax credits to be awarded under the Cultural Arts Incentives Program to support the operating reserves of certain non-profit institutions.  The bill also eliminates the New Jersey Community-Anchored Development Program.

      The expanded eligibility for the Cultural Arts Incentives Program would include entities whose mission addresses cultural, educational, or artistic enrichment rather than requiring it to be their primary mission.  The National Park Service and developers with partnership agreements with qualifying cultural arts institutions would also become eligible.  Additionally, national historical parks and related facilities would be included in the scope of eligible cultural arts institution facilities.  These changes may increase State revenue losses through the issuance of tax credits for projects that would not qualify under current law. 

      The bill also eliminates the provision allowing the authority to award additional tax credits to non-profit cultural arts institutions based on their operating reserves.  Under current law, these institutions can receive tax credits up to 100 percent of their operating reserve, defined as an unrestricted fund balance set aside to stabilize finances against unexpected events, income losses, or unbudgeted expenses.  Eliminating this provision is expected to reduce the maximum value of tax credits awarded to certain institutions, potentially increasing long-term State revenues.

      The elimination of the Community-Anchored Development Program may result in long-term State revenue increases due to the potential reduction in the issuance of otherwise authorized tax credits.  Currently, a total of $1.2 billion in tax credits may be awarded under both programs, though the Community-Anchored Development Program is not scheduled to begin accepting applications until 2026.  Under the bill, the entire $1.2 billion allocation would be available for the Cultural Arts Incentives Program alone.  If this program does not fully utilize the allocation, the State could realize higher revenues than it otherwise would if the tax credits were fully utilized.  However, this potential long-term benefit cannot be quantified with certainty as it depends on future program utilization rates.

      The bill is also unable to determine the magnitude or direction of the bill’s impact on State expenditures.  By expanding eligibility for the Cultural Arts Incentives Program, the bill is expected to increase State administrative costs associated with the processing of additional program applications.  However, the bill is also expected to reduce State administrative costs by eliminating the Community-Anchored Development Program.  The OLS is unable to determine the net effect of these countervailing impacts.

 

 

Section:

Revenue, Finance and Appropriations

Analyst:

Patrick Walsh

Associate Fiscal 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.).