In this interview, Daniel Effron, a tax partner at accounting firm Marcum LLP in New York City, discusses some of the opportunities created by the revamped GrowNJ program. While the revamped credit regime is unlikely to attract out-of-state businesses, he says it will likely spur economic development by extending the benefits to more businesses through lowering the eligibility thresholds and broadening the scope of eligible geographic locations.
The New Jersey Economic Opportunity Act of 2013, enacted in September 2013, consolidated certain tax credit programs into two main programs – the GrowNJ program and the Economic Redevelopment and Growth (ERG) Program – in order to increase access to these programs for smaller businesses and allow for more effective administration of the economic development incentive programs in New Jersey. In addition, the amount of tax credits available under the GrowNJ program was increased and the credit cap was eliminated for the program, as well as for nonresidential projects under the ERG program.
Bloomberg BNA: What is the impact of the GrowNJ Program?
Effron: The GrowNJ Program should open the door to additional job hires and development in many areas of the state in most need of jobs creation/retention and development. This program consolidates several former New Jersey incentive programs, but it also broadens the scope of qualified geographic areas, as well as lowers the thresholds for eligible businesses to participate.
Bloomberg BNA: What effect will the program have on New Jersey’s economy?
Effron: As with any tax incentive program, the impact on the economy will be both short term and long term - short term with respect to the construction industry and related jobs fields that would need to be retained in order to bring the projects to completion and long term with respect to jobs which are both created and retained as a result of this program.
The GrowNJ tax credits are available for job creation and retention for up to a 10-year period. Real estate development and the addition or retention of jobs all means additional state tax dollars entering the New Jersey economy.
Bloomberg BNA: Who benefits from the program?
Effron: Businesses will benefit as they move forward with projects that may not have come to fruition if not for this program. Individuals will benefit from the potential for new jobs in areas of the state with the greatest needs. Finally, the State of New Jersey benefits as a result of new development in areas of need, which may serve as a potential platform for a turnaround in those economically depressed areas.
Bloomberg BNA: Do you think businesses will be attracted to New Jersey as a result of this program? If so, what specific type of businesses will be attracted to the state?
Effron: While this program does provide good tax benefits for those choosing to participate, due to the geographic limitations on where the benefits of the GrowNJ program can be enjoyed, I do not believe, absent the desire for a very large project, that this program would attract new businesses to the state (other than those in neighboring states, such as PA and NY, where “relocation” would not really be required).
Bloomberg BNA: Do you think businesses from outside New Jersey will move to the state based on this program, or do you think the program will mostly drive businesses already located in New Jersey to participate in the program, or both?
Effron: I believe that the GrowNJ program will attract current New Jersey businesses to consider participation more than the attraction of business outside of NJ to move to the state. Of course, should a multimillion dollar project be on the horizon for one of the designated areas then the program could attract an out-of-state company. The issue is that, under the program, the taxpayers have certain minimum job retention criteria to maintain.
Bloomberg BNA: How will the surrounding states prevent businesses from leaving and moving to New Jersey to take advantage of the GrowNJ program?
Effron: All states, including Pennsylvania and New York, have various tax incentive programs in place at the present time and more programs seem to appear almost annually. While the GrowNJ program should provide stimulation to the development and job markets in New Jersey, I do not think this program, in and of itself, will cause a company to pack up and relocate to New Jersey. Had the program been a complete broad statewide area of coverage, then maybe there would be a risk of a company leaving to come to New Jersey.
Bloomberg BNA: Are there any downsides to the program?
Effron: I cannot see any downside. The program is designed to attract and retain jobs and development in areas most in need of such activity. I think it is a win-win for business and the State of New Jersey.
For more information about New Jersey’s tax credits and incentives, check out Bloomberg BNA’s Credits and Incentives Portfolios.
By: Kathleen Caggiano
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