Incentives to be Capped and Targeted Toward High-Growth Industries
Governor Phil Murphy released his plans in January for developing capped and targeted tax incentive programs as part of his economic development vision, with a focus on innovative, high-growth sectors and world-class communities.
“I believe there is a role for tax incentives in economic development, but they must be targeted and closely monitored as part of a broader strategy involving investments in mass transit, public education, infrastructure, and workforce development,” said Governor Murphy. “I look forward to working with the Legislature to encourage State investments in high-growth sectors, support our entrepreneurs and small businesses, and use tax incentives in a sensible, fiscally responsible manner.”
Governor Murphy’s economic plan includes a package of five new programs designed to reform and update the State’s soon-to-be-expired tax incentives. The five programs are:
- NJ Forward – NJ Forward is a jobs-based incentives program to replace Grow NJ. Companies are eligible if they are creating new jobs in a high-growth industry, creating or retaining jobs in an Opportunity Zone-eligible tract, a U.S. business relocating or creating its Northeast headquarters, a foreign business creating a U.S. headquarters, or a major retention project. Bonus criteria emphasize local employment, above average salaries, and transit-oriented development. Awards under NJ Forward will be capped at $200 million annually, allocated on a first-come, first-served basis, and will last for five years.
- NJ Aspire – The replacement for the Economic and Redevelopment Growth (ERG) Program, NJ Aspire is a gap-based financing tool awarded twice annually and capped at $100 million per year to support real estate goals in the new economy. Projects will be assessed on their cost, community benefit, advancement of regional planning, and workforce and apprenticeship programs. Bonus criteria include food dessert alleviation, electric vehicle charging stations, and incubators/shared workspaces. Aspire will support the innovation economy and target urban centers and transit-rich downtowns.
- Brownfields Redevelopment – This credit will catalyze remediation projects and increase job creation and economic development. EDA and DEP will run two competitive application rounds each year. The credit will be capped at $20 million per year and equal 40 percent of rehabilitation costs with a $4 million project cap.
- Historic Preservation – The new Historic Preservation Tax Credit will support place-based economic development with projects evaluated by EDA, DEP, and DCA. It is limited to revenue generating projects and capped at $20 million annually with a $4 million project cap. The State will run two competitive applications each year for recipients with proven financing gaps, and projects will receive bonuses for including affordable housing or collaborative workspaces on-site.
- NJ Innovation Evergreen Fund – A $500 million effort that will raise funds over five years by auctioning off state tax credits and then leveraging partnerships with the State and private venture capital funds to co-invest in New Jersey startups. These investments will target the life sciences, financial technology, digital media, and cybersecurity sectors, among others. The Fund would also require ecosystem building and support diverse founders that reflect the State’s rich cultural makeup. As companies are acquired or IPOs occur, proceeds would flow back to the fund. In the event of significant returns, some funding would flow back to the General Fund.
These proposals also emphasize prevailing wage requirements and regular evaluations by independent parties. The announcement follows an audit released by the Office of the State Comptroller that highlighted mismanagement and abuse of the State’s tax incentives.