new jersey tax incentive for pharmacey industries.Tax Incentives to Help Companies Grow

Pharmaceuticals

New Jersey is respected globally for its strength in the biopharmaceutical and medical device industry. The State is home to 14 of the world's 20 largest pharmaceutical companies, including Novartis, Johnson & Johnson, Bristol-Myers Squibb, Merck & Co., Novo Nordisk and Bayer Healthcare. Furthermore, New Jersey boasts a well-educated workforce with a high concentration of scientific professionals. Each year, 22,000 students graduate with degrees in the life sciences from the State's 66 colleges, universities and technical schools-ready to work at New Jersey pharmaceutical companies. New Jersey also offers six higher education institutes that offer graduate and post-graduate degrees in biomedical and healthcare fields and 11 schools that confer doctorates for science, technology, engineering and mathematics.

New Jersey Advantages

• World-class research institutions include 13 teaching hospitals and three medical schools.
• The State's R&D tax credit is 100% of a company's corporate tax liability.
• The State's Talent Network initiative links businesses and education institutions with job seekers.
• Incentive grants for job growth and tax exemptions to help with relocation enhance the State's desirability for pharmaceutical companies.
• The State's concentration of medical institutions, population density and transportation infrastructure make it ideal for clinical trials.

Tax Incentives to Help Companies Grow

Signed into law in September, 2013, the New Jersey Economic Opportunity Act of 2013, created two powerful tax incentives programs to help attract jobs and investment to the state and help New Jersey companies grow: The Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth (ERG) Program.

The Grow New Jersey Assistance Program (Grow NJ) provides tax credits ranging from $500 to $5,000 per job, per year, over ten years, with numerous bonus credits each ranging from $250 to $3,000 per job, per year if the project meets certain requirements, such as location in an urban area, or high job creation levels. Maximum awards can reach as high as $15,000 per job, per year, and projects can earn up to $300 million over 10 years.

Grow NJ’s job creation threshold to qualify for tax breaks is as low as 10 new full-time jobs for technology start-ups and manufacturers, and 25 new jobs in targeted industries, including transportation, defense, energy, logistics, life sciences, technology, health and finance. In Garden State Growth Zones (Camden, Trenton, Passaic, Paterson and Atlantic City) and the eight South Jersey counties, employment requirements are 25% lower and capital investment requirements are also lower by 1/3.

The highest levels of base credits are for “mega projects” and projects located in Garden State Growth Zones (Camden, Trenton, Passaic, Paterson and Atlantic City); or in Urban Transit Hubs (Bridgeton, Camden, East Orange, Elizabeth, Hoboken, Jersey City, Mount Holly, New Brunswick, Newark, Paterson, Salem, Trenton and West New York).

New Jersey’s Grow NJ benefits are superior to incentives under the StartUpNY program in many ways. Click here to see why.

The Economic Redevelopment and Growth (ERG) Program provides incentive grants to developers who prioritize development and job creation in smart growth locations with infrastructure in place, particularly in urban areas and those near train stations.

Through ERG, state incentive grants are available for up to 30% of the total project cost, with an increase to 40% of project cost if located in a Garden State Growth Zone.

For more information about business tax incentives offered in New Jersey, visit the New Jersey Economic Development Authority website at www.njeda.com.

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A Comparison of GROW NJ Incentives & StartUpNY

Thinking about starting, relocating or growing a business? The Grow New Jersey Assistance Program helps companies large and small, regardless of industry type, access tax incentives that can take them to the next level. And, with all due respect to StartUpNY, New Jersey’s 63 colleges and universities offer companies access to state-of-the-art research facilities and top talent wherever in the state they choose to grow.

Learn more about the Grow New Jersey Assistance Program and contact us for an in-depth analysis. Seriously, what are you waiting for?

New Jersey		New York
Grow New Jersey Assistance Program  Tax Credits		StartUpNY Tax-Free Locations
Corporate income tax credits available up to 10 years Unused tax credits transferable and saleable at a discount Minimum of 10 to 50 new or retained jobs, depending on industry type Jobs can be new to NJ or retained in state (retained jobs allowed only 50% of credit value) Capex based on investment per square foot (psf) ($20 psf to $120 psf, depending on project type) Incentives available across the state No limits on building square footage All industries eligible, with bonus for target industries Base awards from $500 to $5,000 per job, per year, for up to 10 years Bonuses in Garden State Growth Zone (GSGZ) Cities; Urban Transit Hub (UTH) cities, distressed cities; and 8 southern NJ counties Bonus awards of $250 to $3,000 per employee, per year, based on factors such as location, industry, salary levels, capex, # of jobs, environmental investment Approved incentives amount based on net benefits test for NJ.		No capex minimums No job number minimums, but new jobs to NY must be created No corporate income tax, real property tax, sales tax, employee income tax for up to 10 years Incentives only available in specific locations associated with a state or private college. Depending on location of college, only space on-campus or within 1 mile can be used Space limited to 200,000sf in any one location Business must be allied with school's academic mission All industry types eligible except retail, wholesale, law, accounting,retail banking, medical, utilities, real estate management, restaurants, hospitality In Downstate locations, businesses must be high-tech or start-up.

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Grow New Jersey Tax Credit Program Expanded

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10/28/2013

Practice Area : Redevelopment

Author : Anne S. Babineau

One of the major features of the New Jersey Economic Opportunity Act of 2013 (A-3680) is that it builds upon and adds flexibility to the prior Grow New Jersey (Grow NJ) and Urban Transit Hub Tax Credit (UTHTC) tax credit programs, providing substantial incentives for large and small businesses that can create or retain jobs in New Jersey. Consistent with the overall design of the prior programs, it permits the NJ EDA to attract such businesses by providing tax credits that a recipient business can apply against its Corporate Business Tax and Insurance Premium Tax obligation, and it also permits the recipient to transfer the tax credits to another party having liability for such taxes.

The Jobs: Under the new Grow NJ program, businesses are eligible to receive tax credits with far fewer jobs than under the prior programs. For technology start ups or manufacturing, 10 new or 25 retained jobs will suffice; for targeted industries, 25 new or 35 retained jobs; and for other businesses, 35 new or 50 retained jobs. This feature is a significant evolution of the program from the original UTHTC program, which required a minimum of 250 jobs for a business to qualify. The jobs must be full time positions, but the definition of “full-time” is now more flexible. The tax credits must be a “material factor” in the decision to create the jobs and NJ EDA is responsible to investigate whether the jobs to be created or maintained are really “new” or at risk of leaving the State. In addition to the new/retained jobs requirement, the business risks forfeiture of the credits if it reduces its statewide workforce by more than 20%. The new law continues the requirement for payment of prevailing wages for each worker employed to perform construction work at the qualified business facility.

The Credits: The new version of the Grow NJ program also provides more flexibility because the dollar value of credits available to a qualified business facility is based on the number of new or retained jobs. The legislation offers a “base” dollar amount of credits per job, with the potential for multiple bonus credits per job, each category of bonus being designed to achieve specific policy objectives. These goals include channeling more tax credits to the southern counties of the State (which had not benefited significantly from the prior programs), encouraging businesses to locate in certain challenged municipalities such as Passaic, Paterson, Trenton and Camden, and attracting higher than average salary jobs, and/or more substantial facility investments. Retained jobs generally generate 50% of the gross amount of the tax credits, and newly created jobs 100%.

There are overall caps on the dollar amount of credits available for each project per year, however they are generous ones. For example, a “mega project” can generate up to $300 million over a ten year period, while a project in an eligible area which is not even an area specially targeted for development under the Act could have a smaller, yet still significant, maximum amount of $25 million over the same period. If the application exceeds $4 Million annually, EDA will also need to determine the “amount necessary to complete the project,” and that amount will be the maximum tax credits for the project if it is less than amount based on the caps referenced above. The total amount of tax credits that NJ EDA can approve for all projects in the State is no longer limited, as it was previously.

The other cap on the amount of credits per project is that credits can only be approved if NJ EDA finds that there will be a net positive benefit to the State equal to at least 110 percent of the requested tax credit allocation amount. The calculation is performed based on the now judicially sanctioned “RIMS” multiplier-based method employed by NJ EDA under the prior programs to estimate direct and indirect benefits.

A recipient business can claim the tax credits annually for up to ten years. In order to remain eligible for the credits, the business must continue to satisfy the program requirements, including maintaining the number of created or retained jobs for 1.5 times the term of the credits, and must continue to own or lease the qualified business facility during that period.

The qualified business is entitled to credits based on the investment of owners, landlords and/or tenants, as well as based on the jobs the user brings to the facility, making the relationship between the parties more complex and important to address.

The Investment: Here again the new legislation provides a sliding scale of tax credit benefits based on the amount invested in specific types of projects. Projects may qualify with investments as small as $20/sq. ft. for rehabilitation of existing industrial premises, $40/sq. ft. for rehabilitation of existing non-industrial premises, $60/sq. ft. for new construction for industrial use, and $120/sq. ft. for new construction for non-industrial use. A significant improvement is that the amount of the investment can now include the cost of land, provided land is acquired within two years prior to submitting the application. Generally, retail is not a qualifying business.

Transferring credits: The Division of Taxation and the NJ EDA may issue transfer certificates so that the tax credits may be sold or assigned. A market for the credits had already evolved under the previous version of Grow NJ and the UTHTC program, and the new program will continue to feed the demand for credits among buyers who need to offset their Corporate Business Tax and/or Insurance Premium Tax liability. As in the past, the credits can be transferred for no less than 75% of their face value. The need for ongoing compliance and a strong market for the credits—driven by both demand on the part of transferee businesses and by the desire of transferor businesses to realize value for their unused credits—ensure that attention to the detailed requirements of the program throughout the term will be more important than ever.

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Anne S. Babineau, Esq., is a partner in the firm of Wilentz