Relief Requires Time-Sensitive Action on the Part of Businesses
You may have read that the recently enacted New Jersey Economic Recovery Act of 2020 will create a successor business attraction and retention incentive program to Grow NJ to be known as “Emerge.” Lost in all the news coverage, however, is the fact that this new law includes important amendments to the Grow NJ statute that may provide pandemic-related relief to your company as a tax credit recipient.
> A business may elect to suspend its obligations for the 2020 tax period and, if the public health emergency or state of emergency declared due to the COVID-19 pandemic extends past March 2021, a business may also elect to suspend its obligations for the 2021 tax period. To take advantage of this option, the business must make the election in writing to the New Jersey Economic Development Authority (the “EDA”) before the date the annual report is due—which is not later than 120 days after the end of the company’s fiscal year. (For example, if a company’s fiscal year is a calendar year, then the company must elect to suspend its 2020 tax credit before April 30, 2021. Such properly-elected suspension would extend the term of the eligibility period by a corresponding amount of time. The suspension will require an amendment to the incentive agreement, which will provide that the failure to submit the annual report due to the suspension will not be considered a forfeiture or an uncertified tax period.
> A business may also request, before December 31, 2022, to terminate its incentive agreement due to the COVID-19 public health emergency. To avail itself of this option, the business must submit a certification signed by its CEO or equivalent officer stating that the termination is due to the public health emergency and describing the impact of the public health emergency on the business. All tax credits for the tax period in which the termination occurs and all subsequent tax periods would be forfeited, but any prior tax credits of the business would remain unaffected. This is the perfect time for a business negatively affected by COVID to terminate its incentive agreement if the company determines that it will not recover from COVID, while keeping past tax credits without any fear of having those tax credits clawed back by EDA.
> Finally, a business may request a reduction in the number of jobs specified in its incentive agreement based on a certification of the business of the eligible positions at the qualified business facility commencing with the 2020 tax period and each subsequent tax period remaining in the eligibility period. To qualify for this relief, the business must still maintain the minimum number of new or retained full-time jobs required to be eligible for the Grow NJ Program. The reduction in jobs shall first apply to the number of new full-time employees, and then shall apply to the number of retained full-time employees. The EDA will re-calculate the total tax credit amount for the 2020 tax period and the remainder of the eligibility period based on the reduced number of jobs and will amend the incentive agreement to reflect the recalculated award amount.
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If you have any questions regarding the above, feel free to reach out to Ted Zangari (telephone: 973-643-5781 or email: [email protected]) or Cecilia Lassiter (telephone: 973-643-5590 or email: [email protected]).
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