LEGISLATIVE FISCAL ESTIMATE

[Second Reprint]

SENATE, No. 3189

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: SEPTEMBER 18, 2025

 

 

SUMMARY

 

Synopsis:

Makes various changes to “New Jersey Angel Investor Tax Credit Act” and Technology Business Tax Certificate Transfer Program; repeals “New Jersey Ignite Act.”

Type of Impact:

Potential annual net State revenue loss.

One-time reduction in State costs.

Potential annual increase in local revenues.

Agencies Affected:

Department of the Treasury.

New Jersey Economic Development Authority.

 

 

Office of Legislative Services Estimate

Fiscal Impact

 

 

Potential Annual Net State Revenue Loss

Indeterminate

 

One-Time State Cost Reduction

About $300,000

 

Potential Annual Local Revenue Increase

Indeterminate

 

 

 

 

·         The Office of Legislative Services (OLS) estimates that the bill may result in State revenue losses.  The magnitude any potential State revenue losses will be driven by whether or not the New Jersey Economic Development Authority approves more than $35 million in angel investor tax credits each year.  The bill increases the value of tax credits that may be awarded for qualified investments through the program and increases the limit on total annual awards.

 

·         The bill reduces the Angel Investor Tax Credit Program annual cap from $35 million to $25 million and requires the authority to transfer unused tax benefits allocated through the Technology Business Tax Certificate Transfer Program to the Angel Investor Program.  The total amount of tax credits available through the Angel Investor Program may exceed $25 million, depending on the amount transferred from the Technology Business Tax Certificate Transfer Program.

·         The repeal of the New Jersey Ignite Act and the elimination of the NJ Ignite Program will result in a reduction in State costs of approximately $300,000.  The State appropriated a total of $1.25 million to support the program in fiscal years 2021 and 2022.

·         To the extent that additional investments in emerging technology business ventures resulting from the bill spur greater economic activity, the State and local governments could benefit from increased tax revenues.  However, the magnitude of these revenues cannot be determined.

 

 

BILL DESCRIPTION

 

      The bill makes various changes to the New Jersey Angel Investor Tax Credit Program. The program provides tax credits for qualified investments made in a New Jersey emerging technology business venture. 

      Under current law, a taxpayer is allowed a credit against the gross income tax and the corporation business tax in an amount equal to 20 percent of a qualified investment made by the taxpayer in a New Jersey emerging technology business or a qualified venture fund.  A taxpayer may be allowed a credit of 25 percent of the qualified investment if the emerging technology business is: (1) located in an opportunity zone or low-income community, as defined by federal law; or (2) is certified by the State as a minority business or women’s business, and in the case of a qualified venture fund, commits by contract to invest 50 percent of its funds in diverse entrepreneurs.  The tax credit is capped at $500,000 for each qualified investment and the total amount of tax credits that may be approved through the program each year by the authority is capped at $35 million. 

      The bill increases the amount of the tax credit that may be provided to a taxpayer from 20 percent to 35 percent of the taxpayer’s qualified investment in a New Jersey emerging technology business or qualified venture fund.  The bill also increases, from 25 percent to 40 percent, the tax credit allowed for a taxpayer that makes a qualified investment in an emerging technology business that is: (1) located in an opportunity zone or low-income community, as defined by federal law; or (2) is certified by the State as a minority business or women’s business, and in the case of a qualified venture fund, commits by contract to invest 50 percent of its funds in diverse entrepreneurs.  The bill also revises the definitions of “New Jersey based business” and “New Jersey emerging technology businesses” to lower, from 224 to 149, the maximum number of employees that a business may employ in order for a taxpayer to qualify for the tax credit.

      The bill reduces, from $35 million to $25 million, the amount of tax credits that may be approved annually through the program and requires unused tax benefits from the Technology Business Tax Certificate Transfer Program to be transferred to support tax credit awards through the Angel Investor Tax Program.  The total amount of tax credits available through the program will vary annually, depending on the amount transferred.

      The bill also repeals the New Jersey Ignite Act, which authorized the authority to establish and administer the New Jersey Ignite Program to foster early stage innovation economy businesses.

      The bill takes effect immediately and applies to Angel Investor Tax Credit applications submitted and approved for taxable years and privilege periods beginning on or after January 1 of the year next following the date of enactment.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that the bill may result in State revenue losses and will result in a reduction in State costs.  The magnitude of any State revenue loss will depend on whether the authority approves angel investor tax credits in excess of $35 million, the maximum amount of tax credits that may be approved by the authority under current law.  The total amount of tax credits approved annually will be driven by the total amount of qualified investments under the program and the total amount of tax credits available for award.  The bill allows the authority to approve tax credits equal to the sum of $25 million plus the amount of unused tax benefits reallocated from the Technology Business Tax Certificate Transfer Program. 

      There will be no revenue loss prior to FY 2027 because the bill applies to tax years and privilege periods beginning on the January 1 next following the date of enactment.  The bill has been enacted in calendar year 2025; therefore, angel investor tax credits will be awarded at the higher amounts under the bill beginning in calendar year 2026.  Calendar year 2026 tax returns for both corporation business taxpayers and gross income taxpayers will be due in April of 2027, or in FY 2027.

      According to the authority, the amount of unused tax benefits authorized under the Technology Business Tax Certificate Transfer Program in calendar years 2022 through 2024 ranged from about $7 million to about $19 million.  Assuming the bill had been in effect at that time, these unused tax benefits would have been transferred to the Angel Investor Tax Credit Program.  The maximum amount of tax credits available for award under the Angel Investor Tax Credit Program would have ranged from $32 million to $44 million.  If in any year in which the total amount of tax credits approved by the authority is less than $35 million, then the State will likely experience a revenue increase because the total amount of tax credits approved will be less than the maximum allowed under current law.  However, if the total amount of tax credits approved by the authority in a calendar year exceeds $35 million, then the State will incur a revenue loss because the total amount of tax credits would exceed the current statutory limit.

      Data available through the authority indicates that the program has yet to utilize the full amount of tax credits available in any year.  For example, the average amount of tax credits awarded annually in calendar years 2022 through 2024 was about $23.0 million.  The OLS notes that the enhanced credit may incentivize more activity under the program, which could in turn increase the utilization of available tax credits.

      The bill also reduces, from 224 to 149, the maximum number of employees that a business may employ in order to qualify for the tax credit.  Thus, some qualified investments that qualify for a tax credit under current law would not be eligible for a tax credit under the bill, thereby reducing the potential State revenue loss. 

      The repeal of the New Jersey Ignite Act and the elimination of the NJ Ignite Program will result in a reduction in State costs.  NJ Ignite, a grant program supporting the rent of early-stage companies in targeted industries at participating collaborative workspaces, was initially established as a pilot program by the authority in 2018 and was later codified by the New Jersey Economic Recovery Act of 2020.  The State has provided total appropriations of $1.25 million for the program.  According to the most recent program update available through the authority, 25 co-working spaces were approved for participation, of which nine subsequently withdrew from the program or closed.  The authority also approved 19 tenant applications and grants totaling $166,260 out of a $500,000 allocation.  Assuming the authority would have utilized five percent of the allocation for administrative costs, or $25,000, there would be about $309,000 of remaining unspent funds.

      To the extent that additional investments in emerging technology business ventures resulting from the bill spur greater economic activity, the State and local governments could benefit from increased tax revenues. However, the magnitude of these additional revenues cannot be determined.

 

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Scott A. Brodsky

Staff Fiscal and Budget 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.).