ASSEMBLY APPROPRIATIONS COMMITTEE
STATEMENT TO
ASSEMBLY, No. 5795
STATE OF NEW JERSEY
DATED: JUNE 19, 2025
The Assembly Appropriations Committee reports favorably Assembly Bill No. 5795.
As reported, this bill modifies certain provisions governing the “New Jersey Innovation Evergreen Program” (program), through which the State invests in innovation by using proceeds from the auctioning of tax credits to fund qualified investments.
Definition of Principal Business Operations
The bill amends the definition of the term “principal business operations,” which term is used, in part, to determine eligibility for qualified businesses under the program. Under current law, for the purposes of the program, “principal business operations” means any of the following: (1) at least 50 percent of the business's employees not primarily engaged in retail sales reside in the State; (2) at least 50 percent of the business's payroll for employees not primarily engaged in retail sales is paid to individuals living in the State; (3) at least 50 percent of the business's full-time employees not primarily engaged in retail sales are filling a position in the State; or (4) at least 50 percent of the business's payroll for employees not primarily engaged in retail sales is paid to full-time employees filling a position in the State. The bill expands the scope of this definition to also include any instance in which: the business’s headquarters is located in the State; and of all states, the largest percentage of the business’s full-time employees, who based in the United States and are not primarily engaged in retail sales, are located in New Jersey.
Determination of Qualified Investments
Under the program, the New Jersey Economic Development Authority is authorized to allocate monies, generated from the proceeds of tax credit auctions, to one or more qualified venture firms based on the amount of qualified investments made by each firm to qualified businesses.
Under current law, the term “qualified investment” means the direct investment of money by the fund in a qualified business for the purchase of shares of stock, with an option to make an additional investment in an option or warrant or a follow-on investment, in the discretion of the authority, all of which is matched by an investment by a qualified venture firm. Current law also provides that the amount of each qualified investment may not exceed $5 million in initial investment, exclusive of follow-on investments, provided certain exceptions. Namely, a maximum qualified investment of $6.25 million may be earned for initial investments made to any qualified business that meets one of the following criteria: (1) utilizes intellectual property that is core to its business model and was developed at a New Jersey-based college or university; (2) is considered a university spin-off business as determined by the authority; or (c) is certified by the State as a minority business or a women’s business.
This bill amends current law to require that a qualified investment either: (1) match a qualified venture firm’s initial investment in a qualified business for the purchase of shares of stock; or (2) in instances where the venture firm has a prior investment in the qualified business, occur at a higher valuation compared to the venture firm’s prior investments into the qualified business, as established by an independent third-party valuation or through participation by a third-party investor at the same valuation as the qualified venture firm.
The bill increases the maximum amount of the qualified investment that may be earned for initial investments in qualified businesses. Under the bill, the maximum qualified investment that may be earned for an initial investment is $10 million, provided certain exceptions. Additionally, the bill increases to $12.5 million the maximum qualified investment that may be earned for initial investments in any qualified business that: (1) utilizes intellectual property that is core to the its business model and was developed at a New Jersey-based college or university; (2) is considered a university spin-off business as determined by the authority; or (3) is certified by the State as a minority business or a women’s business.
Availability of Funds for Investment
Current law prohibits the authority from undertaking a tax credit auction if, exclusive of reserves, more than $15 million is available to the authority from moneys received from any prior auction of tax credits pursuant to the program. The bill amends this provision to prohibit the authority from undertaking an auction if more than $50 million is available from these moneys.
Reporting Requirements
A qualified venture firm is required to annually report certain information to the authority under the program. Current law requires that the report include a statement prepared by a certified public accountant, certifying that the accountant has reviewed the report and that the information and representations contained in the report are accurate. Specifically, a qualified venture firm is required to include such statements for the following: (1) the amount of the qualified investment, if any, uninvested at the end of the preceding calendar year; (2) all qualified investments made during the preceding calendar year, including the number and wages of employees of each qualified business at the time the venture firm made the qualified investment and as of December 31 of that year; (3) for any qualified investment in which the qualified venture firm no longer has a position as of the end of the calendar year, the number of employees of the business as of the date the investment was terminated; and (4) financials, audited by a certified public accountant, of the qualified venture firm and the special purpose vehicle that include a consolidated summary of the performance of the qualified venture firm.
The bill amends current law to provide that a qualified venture firm is only required to include a certified public accountant’s statement to review and accuracy for financials, audited by a certified public accountant, of the qualified venture firm and the special purpose vehicle that includes a consolidated summary of the performance of the qualified venture firm.
FISCAL IMPACT:
The Office of Legislative Services (OLS) concludes that the bill will have an indeterminate net impact on State finances. The bill increases the maximum initial qualified investment amounts permitted through the New Jersey Innovation Evergreen Program and may allow the New Jersey Economic Development Authority to conduct additional tax credit auctions through the program.
The provision of the bill expanding the definition of principal business operations will increase State costs to the extent that it allows additional businesses to qualify for investments under the program.
Increasing the New Jersey Innovation Evergreen Fund balance threshold from $15 million to $50 million may allow the authority to conduct additional tax credit auctions. In the short term, the State will realize additional revenues from payments received from tax credit purchasers. Over the long term, the State would experience a loss of revenues resulting from the utilization of tax credits purchased through the program.
The provisions of the bill increasing the maximum initial qualified investment that may be made in a qualified business will result in an increase in State costs to the extent that the authority permits the qualified venture firms to make larger investments in qualified businesses than permitted under current law. These costs may be offset by returns achieved by investments in qualified businesses. However, the OLS cannot predict if and when that will occur.