A3621

An Act providing gross income tax and corporation business tax credits to certain businesses that cultivate marijuana and supplementing P.L.1974, c.80 (C.34:1B-1 et seq.), Title 54A of the New Jersey Statutes, and P.L.1945, c.162 (C.54:10A-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in this act:

“Authority” means the New Jersey Economic Development Authority, created pursuant to P.L.1974, c.80 (C.34:1B-1 et seq.).

“Director” means the Director of Taxation in the New Jersey Department of the Treasury.

“Eligible zone” means an urban enterprise zone that, at any time, has been designated pursuant to the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et seq.), irrespective of whether the urban enterprise zone designation for that area has expired.

“Marijuana” means all parts of the plant genus Cannabis L., whether growing or not; the seeds thereof, and every compound, manufacture, salt, derivative, mixture, or preparation of the plant or its seeds, except those containing resin extracted from the plant; but shall not include the weight of any other ingredient combined with marijuana to prepare topical or oral administrations, food, drink, or other product.

“Marijuana cultivation facility” means a business that is licensed by the State to cultivate marijuana.

“Qualified business expense” means the costs, as determined by the authority pursuant to subsection e. of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), incurred by a business related to the installation, operation, or maintenance of a marijuana cultivation facility.

2. a. The authority, in consultation with the Department of Law and Public Safety and the Department of the Treasury, shall establish a five year pilot program, entitled the “New Jersey Green Development and Growth Program,” to permit a qualifying business, which is engaged in the industry of marijuana cultivation in an eligible zone, to claim credits against the business’s gross income tax liability, pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), or credits against the business’s corporation business tax liability, pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. (1) A business seeking to participate in the pilot program established pursuant to this section shall apply to the authority, in a form and manner as determined by the authority. In addition to the criteria adopted pursuant to subsection e. of this section, the business shall submit, as part of an application, a detailed business plan with demonstrable information sufficient to establish to the satisfaction of the authority that the business’s participation in the pilot program will result in:

(a) the creation of full time jobs in an eligible zone in which the business’s marijuana cultivation facility is located;

(b) utilization of property that has been abandoned, under-utilized, in need of rehabilitation, or otherwise designated pursuant to the “Abandoned Properties Rehabilitation Act,” P.L.2003, c.210 (C.55:19-78 et seq.); and

(c) the implementation of community safeguards to support public safety and welfare in the eligible zone in which the business’s marijuana cultivation facility is located.

(2) The authority shall review a completed application and, if meeting the requirements established pursuant to this subsection and subsection e. of this section, approve the application within 60 days after receipt thereof.

c. The authority may, in its discretion, require a business that qualifies to participate in the pilot program pursuant to this section to submit audited financial statements to the authority in order to ensure the continued viability of the business’s operations.

d. The authority, in cooperation with the Department of Law and Public Safety and the Department of the Treasury, shall submit to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), the Legislature, annually until expiration of the pilot program, a report summarizing and detailing the effectiveness of the pilot program in promoting job growth and community investment in eligible zones.

e. The authority, in consultation with the Department of Law and Public Safety and the Department of the Treasury, shall adopt, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), and immediately upon filing with the Office of Administrative Law, rules and regulations necessary to effectuate the purposes of this section, including but not limited to:

(1) the criteria and procedures necessary for a business to qualify for participation in the pilot program established pursuant to this section;

(2) the costs that shall be deemed qualified business expenses;

(3) the requirements for a business to qualify as a marijuana cultivation facility; and

(4) community safeguards required to be implemented by a business that qualifies for the pilot program,

which shall be effective for a period not to exceed 360 days following enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and may thereafter be amended, adopted, or readopted by the authority in accordance with the requirements of P.L.1968, c.410.

3. a. For taxable years beginning on or after January 1, 2019, but before January 1, 2024, a taxpayer that has been approved by the authority to participate in the pilot program established pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be allowed a credit against the tax otherwise due for the taxable year pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in an amount equal to 25 percent of the qualified business expenses incurred by the taxpayer in relation to a marijuana cultivation facility located in an eligible zone.

b. The total value of the grants of tax credits approved by the director, pursuant to subsection a. of this section and subsection a. of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), that may be applied against tax liability for a taxable year shall not exceed an aggregate annual limit of $6,000,000. The total amount of tax credits allowed for a taxpayer by this subsection shall not exceed $500,000, to be applied for over no more than a period of five taxable years. The amount applied against a tax liability for a taxable year for a taxpayer may not exceed $250,000. If the amount of tax credits applied for by taxpayers in a taxable year, pursuant to sections 3 and 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), exceeds the aggregate annual limit of $6,000,000, then a taxpayer who has first applied for and has not been allowed a tax credit amount for that reason shall be allowed, in the order in which the taxpayer submitted an application, the taxpayer’s approved amount of tax credit on the first day of the next succeeding taxable year in which tax credits are issued pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and are not in excess of the amount of credits available.

c. To obtain a tax credit pursuant to this section, a taxpayer shall apply for a certification from the director that certifies: (1) that the taxpayer’s expenses are qualified business expenses pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill); and (2) the amount of the tax credit. The application shall be made thereto in a form and manner as determined by the director and shall include such information as the director deems relevant. Upon certification, the director shall submit a copy thereof to the taxpayer, the Attorney General, and the executive director of the authority. When filing a tax return that includes a claim for a credit pursuant to this section, the taxpayer shall include a copy of the certification issued by the director.

d. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed against the tax imposed pursuant to N.J.S.54A:1-1 et seq. for a taxable year shall be as prescribed by the director. The amount of credit allowed pursuant to subsection a. of this section shall be taken by the taxpayer to reduce the tax otherwise due and required to be paid for the taxable year to which the credit applies, but shall not reduce a taxpayer’s tax liability for a taxable year to an amount less than zero. The amount of credit otherwise allowable pursuant to this section that cannot be applied for the taxable year against the tax liability otherwise due for that taxable year may be carried over, if necessary, for the five taxable years next following the taxable year for which the credit was allowed or until depleted, whichever is earlier.

e. A business entity that is classified as a partnership for federal income tax purposes shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of the taxpayer in respect of a distributive share of partnership income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the partnership that is equal to the taxpayer’s share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer’s taxable year.

A taxpayer that is a New Jersey S corporation shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of a taxpayer in respect of a pro rata share of S corporation income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the New Jersey S corporation that is equal to the taxpayer’s share, whether or not distributed, of the total pro rata share of S corporation income of the New Jersey S corporation for its taxable year ending within or with the taxpayer’s taxable year.

4. a. For privilege periods beginning on or after January 1, 2019, but before January 1, 2024, a taxpayer that has been approved by the authority to participate in the pilot program established pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 25 percent of the qualified business expenses incurred by the taxpayer in relation to a marijuana cultivation facility located in an eligible zone.

b. The total value of the amount of tax credits approved by the director, pursuant to subsection a. of this section and subsection a. of section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), that may be applied against tax liability for a privilege period shall not exceed an aggregate annual limit of $6,000,000. The total amount of tax credits allowed for a taxpayer by this subsection shall not exceed $500,000, to be applied for over no more than a period of five privilege periods. The amount applied against a tax liability for a privilege period for an individual taxpayer may not exceed $250,000. If the amount of tax credits applied for by taxpayers in a privilege period, pursuant to sections 3 and 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), exceeds the aggregate annual limit of $6,000,000, then a taxpayer who has first applied for and has not been allowed a tax credit amount for that reason shall be allowed, in the order in which the taxpayer has submitted an application, the taxpayer’s approved amount of tax credit on the first day of the next succeeding privilege period in which tax credits are issued pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and are not in excess of the amount of credits available.

d. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall be as prescribed by the director. The amount of the credit applied pursuant to this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), for a privilege period, when taken together with any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) shall not reduce the tax liability of a taxpayer for a privilege period to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5).Except as provided in subsection e. of this section, the amount of credit otherwise allowable under this section which cannot be used to reduce the taxpayer’s corporation business tax liability for the privilege period may be carried over, if necessary, for the five privilege periods following the privilege period for which the credit was allowed or until depleted, whichever is earlier.

e. A taxpayer may not carry over any amount of credit allowed under subsection a. of this section to a privilege period during which a corporate acquisition with respect to which the taxpayer was a target corporation occurred or during which the taxpayer was a party to a merger or a consolidation, or to any subsequent privilege period, if the credit was allowed for a privilege period prior to the year of acquisition, merger, or consolidation, except that if in the case of a corporate merger or corporate consolidation, the taxpayer can demonstrate, through the submission of a copy of the plan of merger or consolidation and any other evidence that may be required by the director, the identity of the constituent business which was the acquiring business, a credit allowed to the acquiring person may be carried over by the taxpayer.

5. This act shall take effect immediately but remain inoperative until the enactment into law of an act legalizing the possession, personal use, sale, cultivation, and distribution of marijuana for purposes other than medicinal.

STATEMENT

This bill provides gross income tax and corporation business tax credits for qualified business expenses incurred by businesses that cultivate marijuana located in UEZ, establishes a five year pilot program, called the “New Jersey Green Development and Growth Program,” which authorizes credits against the New Jersey gross income tax or corporation business tax, in an amount equal to 25 percent of qualified business expenses, available to a business that operates a marijuana cultivation facility located in a current or formerly-designated Urban Enterprise Zone.

The bill provides that the total value of the amount of tax credits available to businesses to be applied against a gross income tax and corporation business tax liability for a tax year is not to exceed an aggregate annual limit of $6 million. Each individual taxpayer, or business paying the corporation business tax, is allowed a total of $500,000 in tax credits to be taken over a period up to five tax years, but no more than $250,000 per tax year. If the amount of tax credits applied for exceeds the aggregate annual limit of $6 million, a taxpayer who has applied for but has not been allowed a tax credit amount because the annual limit has been reached is then allowed, in the order in which the applications have been submitted, their approved amount of tax credits on the first day of the next succeeding year in which tax credits are issued and are not in excess of the amount of credits available. A taxpayer may carry forward the amount of any unused credits up to a period of five years, though the taxpayer may not reduce its gross income tax liability to an amount less than zero or an amount below the corporation business tax statutory minimum provided by subsection (e) of N.J.S.A.54:10A-5.

The term “qualified business expense” is defined in the bill to mean those costs incurred by a business, located in an area that is presently, or formerly was, designated an Urban Enterprise Zone, pursuant to N.J.S.A.52:27H-60 et seq., related to the installation, operation, and maintenance of a marijuana cultivation facility. The Executive Director of the New Jersey Economic Development Authority (the “EDA”), in consultation with the Department of Law and Public Safety and the Department of the Treasury, is required to promulgate rules and regulations to further define the scope of “qualified business expense,” as well as the scope of the term “marijuana cultivation facility.”

In order to be eligible to receive tax credits pursuant to this pilot program, a business is required to submit an application to the EDA. The EDA is required to establish procedures and criteria to be evaluated in the application, but at a minimum the application is required to demonstrate that the business will create full-time jobs; utilize abandoned property or property in need of rehabilitation; and implement community safeguards. Within 60 days after an application is received, the authority is required to make a determination as to whether the applicant qualifies for the pilot program. Each year, the EDA is required to submit a report to the Governor and the Legislature that evaluates the effectiveness of the pilot program.

The effective date of this bill is contingent upon the enactment into law of an act legalizing the possession, personal use, sale, cultivation, and distribution of marijuana for purposes other than medicinal.