ASSEMBLY APPROPRIATIONS COMMITTEE

STATEMENT TO

ASSEMBLY, No. 5378

with committee amendments

STATE OF NEW JERSEY

DATED:  MAY 15, 2025

      The Assembly Appropriations Committee reports favorably and with committee amendments Assembly Bill No. 5378.

      As amended and reported, this bill expands eligibility under the Cultural Arts Incentives Program (program), authorizes the New Jersey Economic Development Authority (authority) to accept applications on a rolling basis, and revises certain provisions concerning tax credits awarded under the program.

Applicant Eligibility

     Under current law, certain entities that qualify as a “cultural arts institution” may apply for tax credits to finance the development or rehabilitation of a cultural arts institution facility under the program.  Among other requirements to be eligible for tax credits, a cultural arts institution is required to: (1) have the primary mission and specific policy goal of cultural, educational, or artistic enrichment of the people of this State; (2) operate and maintain the cultural arts institution facility; and (3) own or lease space in the cultural arts institution facility.

     This bill amends current law to provide an exception to the requirement that a cultural arts institution have the primary mission and specific policy goal of cultural, educational, or artistic enrichment of the people of this State.  Under the bill, an entity may qualify as a cultural arts institution so long as any part of the entity’s mission and specific policy goals addresses the cultural, educational, or artistic enrichment of the people of this State.  The bill also expands the scope of cultural arts institutions to include the National Park Service, as well as any developer that has a partnership agreement with an entity that qualifies as a cultural arts institution.

     The bill also amends current law to provide an exception to the requirements that a cultural arts institution operate and maintain, and either own or lease space in, the cultural arts institution facility.  Under the bill, these requirements do not apply if the cultural arts institution facility is to be operated by the National Park Service or a developer that has a partnership agreement with the cultural arts institution.

     Additionally, the bill amends the definition of “cultural arts institution facility” under current law to include, without limitation, an aquarium, botanical society, historical society, library, museum, gallery, performing arts center, national historical park, or any related facility that is principally for the support and benefit of any of the foregoing.

Operating Reserve

     This bill removes a provision of current law that authorizes the authority to award to certain cultural arts institutions, in addition to the tax credit award otherwise provided for under the program, a tax credit valued at up to 100 percent of an operating reserve, as determined by the authority.  Current law defines an “operating reserve” to mean an unrestricted fund balance set aside to stabilize a nonprofit’s finances to mitigate against unexpected events, losses of income, and large unbudgeted expenses.

Construction Prior to Application Date

     Under current law, an applicant is required to demonstrate that construction has not commenced at the site of the cultural arts project prior to submitting an application, unless the authority determines that the cultural arts project would not be completed without an award of tax credits under the program.

     This bill amends this requirement to permit some construction prior to the submission of an application, provided that the construction activities are limited to general maintenance, necessary repairs, demolition, environmental assessment, environmental investigation, and environmental remediation.  The bill also amends the definition of “project cost” to exclude costs incurred for construction activities prior to the date of a cultural arts institution’s application under the program.

Application Process

     Current law requires the authority to implement a competitive application process for the program.  Instead, this bill requires the authority to conduct a review of applications on a rolling basis, unless the authority determines that demand is likely to exceed available tax credits, at which time the authority may instead implement a competitive application process whereby the authority is required to evaluate all applications submitted by a date certain as if all were submitted on that date.

Use of Transferred Tax Credits

     Under current law, the transferee to whom a tax credit certificate is transferred under the program may carry forward all or part of the tax credit amount in any of the next five successive tax periods.

     This bill amends this provision to permit a transferee to use the credit in the tax period for which it was issued, in the tax period in which it was issued, or in any of the next three successive tax periods.  Under the bill, the transferee may first use the credit against tax liabilities in the tax period in which it was issued or in a succeeding tax period, as authorized in the bill, without the need to amend the tax return for the tax period for which the credit was issued, subject to the provisions of this section.  The transferee may carry forward an unused credit for use in any of the next five successive tax periods, and the unused credit expires thereafter.

Repeal of New Jersey Community-Anchored Development Act

     Under current law, a total of $1.2 billion tax credits may be awarded under the program and the New Jersey Community-Anchored Development Program.  The authority is scheduled to begin accepting applications under the New Jersey Community-Anchored Development Program in 2026.

     This bill repeals the New Jersey Community-Anchored Development Act that established the New Jersey Community-Anchored Development Program.

COMMITTEE AMENDMENTS:

      The committee amendments provide technical changes to the bill to update the underlying statute in light of a recent enactment of law.

FISCAL IMPACT:

      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.

      On balance, 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.