S3783

An Act concerning the "New Jersey Innovation Evergreen Act" and amending P.L.2020, c.156.

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

1. Section 21 of P.L.2020, c.156 (C.34:1B-289) is amended to read as follows:

21. As used in sections 20 through 34 of P.L.2020, c.156 (C.34:1B-288 through C.34:1B-302):

"Authority" means the New Jersey Economic Development Authority established by section 4 of P.L.1974, c.80 (C.34:1B-4).

"Director" means the Director of the Division of Taxation in the Department of the Treasury.

"Follow-on investment" means a subsequent investment made by an investor who has a previous investment in a New Jersey high-growth business.

"Full-time employee" means a person employed by a business for consideration for at least 35 hours a week, or who renders any other standard of service generally accepted by custom or practice, as determined by the authority, as full-time employment.

"Full-time employee filling a position in the State" means a full-time employee having a primary office in the State and spending at least 60 percent of the employee’s work hours at that primary office.

"Fund" means the "New Jersey Innovation Evergreen Fund" established by section 23 of P.L.2020, c.156 (C.34:1B-291).

"High-growth business" means a business that is growing significantly faster than the average growth rate of the economy or is a start-up company that is investing in developing a product or new business model that will allow it to grow significantly faster than the average growth rate of the economy within the next three to five years.

"Incentive area" means an area in this State: (1) designated pursuant to the "State Planning Act," P.L.1985, c.398 (C.52:18A-196 et seq.), as Planning Area 1 (Metropolitan); or (2) that has been designated as a qualified opportunity zone pursuant to 26 U.S.C. s.1400Z-1.

"Innovation ecosystem" means funding, programs, and events that support the establishment and expansion of high-growth companies in targeted sectors. Examples of such funding, programs, and events include: mentoring programs for start-ups, meet-up or networking events, funding for locating a business in a collaborative workspace, programs that provide business services, and entrepreneurial education to companies.

"Opportunity zone" means a federal population census tract in this State that was eligible to be designated as a qualified opportunity zone pursuant to 26 U.S.C. s.1400Z-1 as may be amended.

"Principal business operations" means any of the following: (1) at least 50 percent of the business's employees [, who are] not primarily engaged in retail sales [,] reside in the State [, or] ; (2) at least 50 percent of the business's payroll for employees not primarily engaged in retail sales is paid to individuals living in [this] the State; (3) at least 50 percent of the business’s full-time employees not primarily engaged in retail sales are filling a position in the State; or (4) at least 50 percent of the business’s payroll for employees not primarily engaged in retail sales is paid to full-time employees filling a position in the State.

"Program" means the New Jersey Innovation Evergreen Program established by section 22 of P.L.2020, c.156 (C.34:1B-290).

"Purchaser" means an entity registered to do business in this State with the Director of the Division of Revenue and Enterprise Services in the Department of the Treasury that purchases an allocation of tax credits under the program.

"Qualified business" means a business that, at the time of the first qualified investment in the business and throughout the period of the qualified investment under the program, is registered to do business in this State with the Director of the Division of Revenue and Enterprise Services in the Department of the Treasury; has its principal business operations located in the State and intends to maintain its principal business operations in the State after receiving a qualified investment under the program; is engaged in a targeted industry; and employs fewer than 250 persons at the time of the qualified investment.

"Qualified investment" means the direct investment of money by the fund in a qualified business for the purchase of shares of stock, with an option to make an additional investment in an option or warrant or a follow-on investment, in the discretion of the authority, all of which is matched by an investment by a qualified venture firm.

"Qualified venture firm" means a venture firm that is approved by the authority as a qualified venture firm pursuant to section 29 of P.L.2020, c.156 (C.34:1B-297).

"Special purpose vehicle" means an entity controlled by or under common control with a venture firm that is formed solely for the purpose of investing in a New Jersey high-growth business alongside the venture firm.

"Targeted industry" means any industry identified from time to time by the authority which shall initially include advanced transportation and logistics, advanced manufacturing, aviation, autonomous vehicle and zero-emission vehicle research or development, clean energy, life sciences, hemp processing, information and high technology, finance and insurance, professional services, film and digital media, non-retail food and beverage businesses including food innovation, and other innovative industries that disrupt current technologies or business models.

"Venture firm" means a partnership, corporation, trust, or limited liability company that invests cash in a business during the early or expansion stages of a business in exchange for an equity stake in the business in which the investment is made. Venture firm may include a venture capital fund, a family office fund, or a corporate investor fund, provided that a professional manager administers the venture firm.

(cf: P.L.2020, c.156, s.21)

2. Section 24 of P.L.2020, c.156 (C.34:1B-292) is amended to read as follows:

24. a. The authority shall sell the tax credits authorized pursuant to section 22 of P.L.2020, c.156 (C.34:1B-290) to purchasers through a competitive auction process.

b. The authority shall determine the form and manner in which potential purchasers may bid for tax credits available under the program. To be awarded a tax credit under the program, a potential purchaser shall:

(1) specify the requested amount of tax credits, which shall not be less than $500,000;

(2) specify the amount the potential purchaser will pay in exchange for the requested amount of tax credits, which shall be set by the authority at an amount not [be] less than 75 percent of the requested dollar amount of tax credits;

(3) commit to serve on the New Jersey Innovation Evergreen Advisory Board, established pursuant to section 32 of P.L.2020, c.156 (C.34:1B-300), and to otherwise provide mentorship, networking, and collaboration opportunities to qualified businesses that receive funding under the program; and

(4) provide any other information that the chief executive officer of the authority determines is necessary.

c. Prior to an auction, the authority shall establish and disclose to bidders the weighted criteria the authority will utilize, which the authority shall base on the price offered to purchase the tax credits and the quality of the mentorship and networking opportunities and other support of the State's innovation ecosystem offered by a purchaser in its bid. The authority may pro rate the amount of tax credits allocated to each purchaser. A potential purchaser that submits a bid for tax credits under this section shall receive a written notice from the authority indicating whether the authority has approved it as a purchaser of tax credits and, if so, the amount of tax credits approved.

d. Except as provided in section 22 of P.L.2020, c.156 (C.34:1B-290), the authority shall hold one competitive auction per calendar year.

e. The authority may contract with an independent third party to conduct the competitive bidding process through which State tax credits issued by the authority may be sold.

(cf: P.L.2021, c.160, s.11)

3. Section 26 of P.L.2020, c.156 (C.34:1B-294) is amended to read as follows:

26. a. A purchaser shall apply a credit awarded pursuant to sections 20 through 34 of P.L.2020, c.156 (C.34:1B-288 through C.34:1B-302) against the purchaser’s State tax liability due pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) [of the purchaser] , sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and C.54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5 for the current privilege period as of the date of the credit's approval. A purchaser may carry forward an unused credit resulting from the limitations of subsection b. of this section, if necessary, for use in the seven privilege periods next following the privilege period for which the credit is awarded.

b. The director shall prescribe the order of priority of the application of the credits awarded under sections 20 through 34 of P.L.2020, c.156 (C.34:1B-288 through C.34:1B-302) and any other credits allowed by law. The amount of a credit applied under sections 20 through 34 of P.L.2020, c.156 (C.34:1B-288 through C.34:1B-302) against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, together with any other credits allowed by law, shall not reduce the tax liability of the purchaser 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).

(cf: P.L.2020, c.156, s.26)

4. Section 27 of P.L.2020, c.156 (C.34:1B-295) is amended to read as follows:

27. a. A purchaser may apply to the authority and the director for a tax credit transfer certificate [, in the privilege period during which the director allows the purchaser a tax credit pursuant to sections 20 through 34 of P.L.2020, c.156 (C.34:1B-288 through C.34:1B-302),] in lieu of the purchaser being allowed to apply any amount of the tax credit against the purchaser's State tax liability. A tax credit may be sold or assigned, in full or in part, to another person that may have a tax liability pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and C.54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5. The tax credit transfer certificate provided to the purchaser shall include a statement waiving the purchaser's right to claim the credit that the purchaser has elected to sell or assign.

b. The purchaser shall not sell or assign a tax credit transfer certificate allowed under this section for consideration received by the purchaser of less than 85 percent of the transferred credit amount before considering any further discounting to present value which shall be permitted. The tax credit transfer certificate issued to a purchaser by the director shall be subject to any limitations and conditions imposed on the application of State tax credits pursuant to section 26 of P.L.2020, c.156 (C.34:1B-294) and any other terms and conditions that the director may prescribe.

c. A buyer or assignee of a tax credit transfer certificate pursuant to this section shall not make any subsequent transfers, assignments, or sales of the tax credit transfer certificate.

d. Ten percent of the consideration received by a purchaser from the sale or assignment of a tax credit transfer certificate pursuant to this section shall be remitted to the director and deposited in the General Fund of the State.

e. The authority shall publish on its Internet website the following information concerning each tax credit transfer certificate approved by the authority and the director pursuant to this section:

(1) the name of the transferor;

(2) the name of the transferee;

(3) the value of the tax credit transfer certificate;

(4) the State tax against which the transferee may apply the tax credit; and

(5) the consideration received by the transferor.

(cf: P.L.2020, c.156, s.27)

5. This act shall take effect immediately.

STATEMENT

This bill modifies certain provisions of State law concerning the New Jersey Innovation Evergreen Program (program), which is an economic development program that sells discounted tax credits to raise capital for qualified businesses in New Jersey. This program is administered by the Economic Development Authority.

Under the program, a qualified business is one that: is registered to do business in the State with the Director of the Division of Revenue and Enterprise Services in the Department of the Treasury; has its principal business operations located in the State and intends to maintain its principal business operations in the State after receiving a qualified investment under the program; is engaged in a targeted industry, and employs fewer than 250 persons at the time of the qualified investment. Under current law, the “principal business operations” requirement is satisfied under either of the following circumstances: (1) at least 50 percent of the business’s employees, who are not primarily engaged in retail sales, reside in the State; or (2) at least 50 percent of the business’s payroll for employees not primarily engaged in retail sales is paid to individuals living in the State.

The bill revises these criteria by providing that a business may satisfy the “principal business operations” requirement in any of the following circumstances: (1) at least 50 percent of the business's employees not primarily engaged in retail sales reside in the State; (2) at least 50 percent of the business's payroll for employees not primarily engaged in retail sales is paid to individuals living in the State; (3) at least 50 percent of the business’s full-time employees not primarily engaged in retail sales are filling a position in the State; or (4) at least 50 percent of the business’s payroll for employees not primarily engaged in retail sales is paid to full-time employees filling a position in the State. The bill creates definitions for the terms “full-time employee” and “full-time employee filling a position in the State.”

In addition, the bill modifies one of the requirements for purchasers of tax credits under the program. Under current law, to be awarded a tax credit under the program, a potential purchaser is required to specify the amount the potential purchaser will pay in exchange for the requested amount of tax credits, which shall not be less than 75 percent of the requested dollar amount of tax credits. The bill revises this requirement to provide that the authority will set the amount that a potential purchaser will pay in exchange for the requested amount of tax credits. The payment amount set by the authority will not be less than 75 percent of the requested dollar amount of tax credits.

Current law allows a purchaser to apply a credit or tax credit transfer certificate awarded under the program against the purchaser’s corporate business tax liability due under the Corporation Business Tax Act (1945). The bill allows a purchaser to apply a credit or tax credit transfer certificate awarded under the program to the purchaser’s corporate business tax liability or, in the case of a purchaser that is an insurance company, to the purchaser’s insurance premiums tax liability.