On January 15, 2018, Governor Chris Christie signed into law certain amendments (2016-17 S3305) to the Grow New Jersey Assistance Act ("GrowNJ") and the New Jersey Corporate Business Tax Act that should have a positive impact for participants in the GrowNJ program.
In general, the amendments favorably alter the tax treatment of the gain on the sale of GrowNJ tax credits, expand the time within which the purchaser of GrowNJ tax credits can apply the tax credits received (by purchase or otherwise), and ease the limitations on the transfer of GrowNJ tax credits to an affiliate, all as more specifically described below.
Specifically, the amendments now exclude the gain or income derived from the sale or assignment of GrowNJ tax credit transfer certificates under the New Jersey Corporate Business Tax Act by revising the statutory definition of "entire net income" to exclude such gains or income generated by the sale or assignment of a GrowNJ tax credit transfer certificate under the GrowNJ program. In addition, the amendments now exclude the gain or income derived from the sale or assignment of a GrowNJ tax credit transfer certificate under the New Jersey Corporate Business Tax Act from the distributive share of partnership income and the net pro rata share of S corporation income.
In addition, the amendments also extend the time period under which GrowNJ tax credits may be redeemed by transferees of GrowNJ tax sale certificates (i.e., entities other than the original awardee of the tax credits) from three (3) years to twenty (20) years. This change aligns the timing for redeeming a GrowNJ tax sale certificate by a transferee with the deadline for the redemption of a tax sale certificate by the original tax certificate holder (i.e., allows a subsequent transferee of a tax credit the ability to use the credit for a period of 20 years from transfer ).
Finally, the amendments eliminate the minimum consideration that must be provided by affiliates of the original GrowNJ tax credit awardee upon the sale or assignment of GrowNJ tax credit transfer certificates to such affiliates. Specifically, under the original statute, the sale or assignment of any amount of a GrowNJ tax credit transfer certificate was not permitted to be exchanged for consideration received by the original GrowNJ tax credit awardee of less than seventy-five percent (75%) of the transferred credit amount before considering any further discounting to present value for any and all transfers. The amendment provides that the seventy-five percent (75%) minimum measure of consideration does not apply to the sale or assignment of a GrowNJ tax credit transfer certificate to an affiliate of the original GrowNJ awardee. This change greatly facilitates tax credit transfers between affiliates.
In sum, the changes to the GrowNJ Act and the New Jersey Corporate Business Tax Act implemented through the legislative amendments will reduce corporate tax obligations for the sale of GrowNJ tax credits and will help facilitate the transfer of GrowNJ tax credit certificates to both affiliates and third-party purchasers.
If you would like additional information about the GrowNJ program or the legislative amendments described above please contact Kevin D. Sheehan at (856)985-4020 or Jeffrey D. Winitsky at (856)985-4086.