URBAN TRANSIT HUB TAX CREDIT: Newly signed legislation (S-2972) addresses a number of practical financial and market challenges that had inhibited the Urban Transit Hub Tax Credit program (UTHTC) from fulfilling its potential as major source of economic development stimulus, while also confronting head-on the chilling effect pending litigation was having on efforts to retain major companies with existing jobs at risk of leaving the State. The following summarizes the changes.
MIXED USE PROJECTS: Expands and clarifies eligibility for "mixed-use" project including both commercial and residential components. It allows such projects to aggregate their capital investment to satisfy the $50 million minimum in cases where neither component satisfies this requirement on its own, so long as (a) each component has at least $17.5 million in capital expenditures, and (ii) the commercial component has a minimum of 250 full-time employees.
INCREASED POTENTIAL RESIDENTIAL TAX CREDIT: Increases the maximum potential tax credit for residential projects from 20% to up to 35% of total "project costs" so long as developers can demonstrate need.
AFFORDABLE HOUSING - LOCAL OPTION: The amendment allows eligible municipalities to require that up to 20% of newly-constructed residential units be set aside for low or moderate income households.
FREIGHT RAIL-INCREASED FLEXIBILITY: Clarifies that "urban transit hub" extends to businesses that utilize any rail spur located adjacent to or within a 1 mile radius surrounding the entrance to the property for loading or unloading freight cars on trains.
TAX CREDIT CARRY-FORWARD: Under current law tax credits have to be either used or sold in the year that they are allocated. The amendment allows credits to be carried forward for 20 years, provided that the value of all credits approved by the Authority in any fiscal year shall not exceed $150 million.
STATWIDE EMPLOYMENT REQUIREMENT: The law already required tax credit recipients to maintain at least 80% of its statewide employment, in addition to maintaining at least 250 employees at the transit hub project site. The amendment signed yesterday adds the additional requirement that a company also must maintain 80% of its statewide employment outside of the transit hub project. Although not specified, this new requirement is intended to be applied only to projects based on retained at-risk jobs (as opposed to new jobs), essentially capping the number of additional future intra-state transfers into a transit hub.
EXISTING AT-RISK JOBS: The Amendment took a number of important steps to address the cloud of uncertainty created by the Hartz lawsuit seeking to overturn the Legislature's policy acknowledging the retention of at-risk jobs in the Net Benefit Test. First, the amendment clearly confirmed the Legislature's original intent to include retention of existing at-risk jobs in the calculation of "net benefits." Going forward, the amendment clarifies the circumstances under which new projects can be credited with retaining jobs at risk of leaving the state, limiting at-risk jobs to two scenarios:
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The business proposes to transfer existing jobs as part of a consolidation of operations from two or more municipalities (either within or outside of NJ), or
The second scenario has the following components:
The company's CEO submits the following certification: (i) the existing jobs are at risk of leaving NJ, (ii) the information submitted to the EDA and the representations are accurate, and (iii) the business intends to employ at least 500 full-time employees in the transit hub project.
The EDA will then conduct specified due diligence inquiries into the reasonableness of the assertions in the certification -- e.g., review comparative economic analysis of all locations under consideration, lease or ownership documents of the business' existing operations, as well as similar documentation for out-of-State alternatives (if available)--, and before awarding any tax credits on this basis, the EDA will make a factual finding by separate vote of the Authority's Board that the business' jobs are genuinely "at risk".