S3857

An Act concerning urban enterprise zones, amending P.L.1983, c.303, and supplementing P.L.1966, c.30 (C.54:32B-1 et seq.).

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

1. Section 3 of P.L.1983, c.303 (C.52:27H-62) is amended to read as follows:

3. As used in P.L.1983, c.303 (C.52:27H-60 et seq.):

a. "Enterprise zone" or "zone" means an urban enterprise zone designated by the authority pursuant to P.L.1983, c.303 (C.52:27H-60 et seq.);

b. "Authority" or "UEZ Authority" means the New Jersey Urban Enterprise Zone Authority created by P.L.1983, c.303 (C.52:27H-60 et seq.);

c. "Qualified business" means any entity authorized to do business in the State of New Jersey which, at the time of designation as an enterprise zone or a UEZ-impacted business district, is engaged in the active conduct of a trade or business in that zone or district; or an entity which, after that designation but during the designation period, becomes newly engaged in the active conduct of a trade or business in that zone or district and has at least 25 percent of its full-time employees employed at a business location in an eligible block group as defined under section 12 of P.L.2021, c.197 (C.52:27H-99), and which employees meet one or more of the following criteria:

(1) Residents within the zone, the district, within another zone or within a qualifying municipality; or

(2) Unemployed for at least six months prior to being hired and residing in New Jersey, and recipients of New Jersey public assistance programs for at least six months prior to being hired, or either of the aforesaid; or

(3) Determined to be low income individuals pursuant to [the Workforce Investment Act of 1998, Pub.L.105-220 (29 U.S.C. s.2811)] subsection (36) of section 3 of the Workforce Innovation and Opportunity Act, Pub.L.113-128 (29 U.S.C. s.3102(36));

Approval as a qualified business shall be conditional upon meeting all outstanding tax obligations, and may be withdrawn by the authority if a business is continually delinquent in meeting its tax obligations;

d. "Qualifying municipality" means any municipality that was previously designated as a qualifying municipality prior to the effective date of P.L.2021, c.197;

e. "Public assistance" means income maintenance funds administered by the Department of Human Services or by a county welfare agency;

f. "Zone development corporation" means a nonprofit corporation or association created or designated by the governing body of a qualifying municipality to formulate and propose a preliminary zone development plan pursuant to section 9 of P.L.1983, c.303 (C.52:27H-68) and to prepare, monitor, administer and implement the zone development plan;

g. "Zone development plan" means a plan adopted by the governing body of a qualifying municipality for the development of an enterprise zone therein, and for the direction and coordination of activities of the municipality, zone businesses and community organizations within the enterprise zone toward the economic betterment of the residents of the zone and the municipality;

h. "Zone neighborhood association" means a corporation or association of persons who either are residents of, or have their principal place of employment in, a municipality in which an enterprise zone has been designated pursuant to P.L.1983, c.303 (C.52:27H-60 et seq.); which is organized under the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes; and which has for its principal purpose the encouragement and support of community activities within, or on behalf of, the zone so as to (1) stimulate economic activity, (2) increase or preserve residential amenities, or (3) otherwise encourage community cooperation in achieving the goals of the zone development plan;

i. "Enterprise zone assistance fund" or "assistance fund" means the fund created by section 29 of P.L.1983, c.303 (C.52:27H-88);

j. "UEZ-impacted business district" or "district" means an economically-distressed business district classified by the authority as having been negatively impacted by two or more adjacent urban enterprise zones in which 50 percent less sales tax is collected pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80);

k. "Block group" means statistical divisions of census tracts, that are generally defined by the United States Census Bureau to contain between 600 and 3,000 people and are used to present data and control block numbering;

l. "Municipal Revitalization Index" means the index developed, maintained, and updated from time to time, by the Department of Community Affairs ranking New Jersey's municipalities according to separate indicators that measure diverse aspects of social, economic, physical, and fiscal conditions in each locality;

m. "Qualified assistance fund expense" means any reasonable expense related to:

(1) a construction project improving, altering, or repairing the real property of a qualified business located in an enterprise zone;

(2) full or part time economic and community development positions in the municipality, other governmental, or not-for-profit organization, or marketing;

(3) loans, grants, and guarantees to businesses;

(4) payroll expenses, personnel, services, and equipment purchases primarily for the provision of law enforcement, fire protection, or emergency medical services within commercial and transportation corridors located exclusively in an enterprise zone;

(5) planning and other professional services related to economic and community development;

(6) cleaning and maintenance of commercial and transportation corridors;

(7) the improvement of public infrastructure in a commercial or transportation corridor and transportation infrastructure located within an enterprise zone, including, but not limited to, the payment of debt service related to the financing of a transportation infrastructure project, and the pledge of funds credited to the assistance fund toward the repayment of any loan issued by the State Transportation Infrastructure Bank pursuant to section 34 of P.L.2016, c.56 (C.58:11B-10.4) or any government agency, for a transportation infrastructure project, provided that up to 75 percent of any zone assistance funds may be used to pay debt service related to the financing of the cost of a transportation infrastructure project or pledged toward the repayment of any loan for the cost of a transportation infrastructure project if such use is detailed in that municipality's zone development plan certified by the UEZ Authority;

(8) the improvement of public infrastructure related to a commercial, industrial, mixed use, or multi-family residential property;

(9) employment and training programs; or

(10) events meant to support and draw activity into the enterprise zone, including fairs, festivals, and concerts.

n. "UEZ coordinator" means an individual designated by a qualified municipality or zone development corporation as the individual in charge of the activities related to the Urban Enterprise Zone program in that municipality;

o. "UZ-2 certification" means the UEZ Authority's certification of a qualified business, pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80), allowing the qualified business an exemption to the extent of 50 percent of the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.), when the sales transaction [physically] occurs in-person, or by mail order, telephone, internet, or similar transaction method, provided that the qualified business maintains a physical place of business within an enterprise zone, at which location items are regularly exhibited and offered for retail sale, and the place of business is not utilized primarily for the purpose of catalogue, mail order, or internet sales. The qualified business may [deliver] be allowed an exemption for the delivery of merchandise to the purchaser at a location outside an enterprise zone provided the sales transaction [was physically made within the enterprise zone. The regular tax rate shall be charged for mail order, telephone, internet, and similar sales transactions delivered within the State] otherwise qualifies for the exemption;

p. "UZ-4 certification" means the UEZ Authority's certification of a qualified business, pursuant to section 8 of P.L.2021, c.197 (C.52:27H-79.1), allowing a contractor of the qualified business to make tax-free purchases of materials, supplies, and services for the exclusive use of erecting a structure or building on, or substantially improving, altering, or repairing, the real property of a qualified business located in an enterprise zone at the address indicated on the qualified business's application for certification to the UEZ Authority;

q. "UZ-5 certification" means the UEZ Authority's certification of a qualified business, as defined under section 20 of P.L.1983, c.303 (C.52:27H-79), allowing the qualified business to make tax-free purchases of office and business equipment and supplies, furnishings, trade fixtures, repair, or construction materials and all other tangible personal property (other than motor vehicles and motor vehicle parts and supplies) for the exclusive use or consumption on the premises of the qualified business within an enterprise zone at an address indicated on the qualified business's application for certification to the UEZ Authority. The exemption may be used only for personal property controlled by the qualified business. This exemption shall also apply to delivery charges and charges for services performed for a qualified business at its zone location, including repair, janitorial, and maintenance services;

r. "Economic Distress Index" means a standardized score developed and maintained by the Department of Community Affairs that equally incorporates the block group unemployment rate and median household income according to the most recent five-year estimate by the United States Census Bureau;

s. "Commercial corridor" means the land area with frontage on a State, county, local, or rail thoroughfare in an enterprise zone which is predominantly commercial or industrial;

t. "Transportation corridor" means a broad geographical band that follows a general directional flow or connects major sources of trips. It may contain a number of streets and highways and transit lines or routes;

u. "Improvement of transportation infrastructure" means the undertaking of a capital project for the construction, repair, upgrade, or maintenance of transportation infrastructure;

v. "Transportation infrastructure" includes, but is not limited to:

(1) all public highways, roads, bridges, and streets in the State, whether maintained by the State or by any county, municipality, or other political subdivision; and

(2) public transportation facilities used in connection with public transportation service, such as passenger stations, shelters, and terminals, automobile and bus parking facilities, ramps, track connections, signal systems, power systems, information and communication systems, roadbeds, transit lanes or rights-of-way, equipment storage and servicing facilities, bridges, grade crossings, rail cars, locomotives, motorbuses and other motor vehicles, maintenance and garage facilities, revenue handling equipment, and any other equipment, facility, or property useful or related to the provision of public transportation service;

w. "Public transportation service" means rail passenger service, motorbus regular route service, paratransit service, motorbus charter service, and ferry passenger service;

x. "Rail passenger service" means and includes the operations of a railroad, subway, street, traction, or electric railway for the purpose of carrying passengers in this State or between points in this State and points in other states;

y. "Motorbus regular route service" means and includes the operation of any motorbus or motorbuses on streets, public highways, or other facilities over a fixed route and between fixed termini on a regular schedule for the purpose of carrying passengers for hire or otherwise in this State or between points in this State and points in other states;

z. "Paratransit services" means and includes any service, other than motorbus regular route service and charter services, including, but not limited to, dial-a-ride, non-regular route, jitney or community minibus, and shared-ride services such as vanpools, limousines, or taxicabs which are regularly available to the public. Paratransit services shall not include limousine or taxicab service reserved for the private and exclusive use of individual passengers;

aa. "Motorbus charter service" means and includes subscription, tour, other special motorbus services, school bus services, or charter services as set forth in section 7 of P.L.1979, c.150 (C.27:25-7); and

bb. "Ferry passenger service" means any service which involves the carriage of persons for compensation or hire by waterborne craft in this State or between points in this State and points in other states.

(cf: P.L.2024, c.80, s.1)

2. Section 29 of P.L.1983, c.303 (C.52:27H-88) is amended to read as follows:

29. a. (1) There is created an enterprise zone assistance fund to be held by the State Treasurer, which shall be the repository for all moneys required to be deposited therein under section 21 of P.L.1983, c.303 (C.52:27H-80), as amended by this act, P.L.2023, c.282, and moneys appropriated annually to the fund. All moneys in the fund shall be held and disbursed in accordance with this section and section 11 of P.L.2021, c.197 (C.52:27H-98) as necessary to fulfill the purposes of this section and subject to the requirements hereinafter prescribed. The State Treasurer may invest and reinvest any moneys in the fund, or any portion thereof, to strengthen capital structures, leverage additional debt capital, and increase lending and investing in economically disadvantaged communities, and in any other manner that advances the goals of the Urban Enterprise Zone program, including, but not limited to, legal obligations of the United States or of the State or of any political subdivision thereof or government-sponsored enterprises. Any income from, interest on, or increment to moneys so invested or reinvested shall be included in the fund.

The amount in the enterprise zone assistance fund, which shall be available to fulfill the purposes of this section, shall be as follows:

(a) In the first five State fiscal years next following the effective date of P.L.2021, c.197, 100 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section;

(b) In the sixth State fiscal year next following the effective date of P.L.2021, c.197, 95 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section and five percent of such amount shall be deposited in the General Fund;

(c) In the seventh State fiscal year next following the effective date of P.L.2021, c.197, 90 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section and 10 percent of such amount shall be deposited in the General Fund;

(d) In the eighth State fiscal year next following the effective date of P.L.2021, c.197, 85 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section and 15 percent of such amount shall be deposited in the General Fund;

(e) In the ninth State fiscal year next following the effective date of P.L.2021, c.197, 80 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section and 20 percent of such amount shall be deposited in the General Fund; and

(f) In the 10th State fiscal year next following the effective date of P.L.2021, c.197, 75 percent of the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall be available to fulfill the purposes of this section and 25 percent of such amount shall be deposited in the General Fund.

(2) The State Treasurer shall maintain separate accounts for each enterprise zone designated under P.L.1983, c.303 (C.52:27H-60 et seq.) that is in good standing with the UEZ Authority in accordance with rules adopted by the UEZ Authority, and one in the authority's name for the administration of the Urban Enterprise Zone program, and for providing grants, including planning grants, investments, loans, or other guaranties related to qualified assistance fund expenses. The State Treasurer shall credit to each account an amount of the moneys deposited in the fund and available to fulfill the purposes of this section, which amount shall be determined by a weighted formula that applies 50 percent weight to a zone municipality's number of commercial and industrial parcels as recorded by the municipal tax assessor, its Municipal Revitalization Index Distress Score, as determined by the Department of Community Affairs, and the average number of unemployed persons in the municipality according to data provided by the New Jersey Department of Labor and Workforce Development, and 50 percent weight to the gross taxable sales in the municipality subject to reduced sales tax pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80), as determined by the State Treasurer. The data used in the formula, developed under this section, shall be the most recent data that has been made available by the Department of Community Affairs, the Department of Labor and Workforce Development, and the State Treasurer. When funds are received by a qualifying municipality pursuant to this subsection, the funds shall be placed in a new trust or, for a qualifying municipality that has a trust for an enterprise zone on the effective date of P.L.2021, c.197, in the existing trust. The Division of Local Government Services in the Department of Community Affairs shall promulgate regulations, policies, or procedures as necessary to implement the provisions of this section.

(3) Beginning in State Fiscal Year 2022, $2,500,000 shall be appropriated annually from the account in the authority's name for the administration of the Urban Enterprise Zone program, and for providing grants, investments, loans, or other guaranties related to qualified assistance fund expenses. This amount shall be adjusted annually by the percentage change in the 12-month Consumer Price Index from June 30 to July 1.

(4) The State Treasurer shall promulgate the rules and regulations necessary to govern the administration of the fund for the purposes of this section, which shall include, but not be limited to, regulations requiring the establishment of separate bank accounts for funds credited to the enterprise zone account of each municipality from the enterprise zone assistance fund, commonly known as "first generation funds," and funds generated from the repayments of loans to individuals and businesses from the enterprise zone account of each municipality and the proceeds from the sale of properties and equipment acquired through the enterprise zone program, commonly known as "second generation funds," and the review, compilation, and monitoring of second generation fund quarterly reports submitted by each enterprise zone.

Any individual, including an individual who is not directly employed by a municipality, with the authority to administer, allocate or approve the use of zone assistance funds is subject to the "Local Government Ethics Law," P.L.1991, c.29 (C.40A:9-22.1 et seq.), unless the individual is a State employee or a special State officer.

b. The enterprise zone assistance fund shall be used for the purpose of assisting qualifying municipalities in which enterprise zones are designated in undertaking economic development projects in designated enterprise zones by funding qualified assistance fund expenses. However, a municipality shall not appropriate or expend: more than 25 percent of the amount annually credited to its enterprise zone assistance fund for public safety purposes, as described in paragraph (4) of subsection m. of section 3 of P.L.1983, c.303 (C.52:27H-62); or more than [10] 15 percent of the amount annually credited to its enterprise zone assistance fund for administrative expenses.

c. The governing body of a qualifying municipality in which an enterprise zone is designated and the zone development corporation created or designated by the municipality for that enterprise zone may, by resolution jointly adopted after public hearing, propose to undertake an economic development project in the enterprise zone, and to fund that project from moneys deposited in the enterprise zone assistance fund and credited to the account maintained by the State Treasurer for the enterprise zone.

The proposal so adopted shall set forth a plan for the project and shall include:

(1) A description of the proposed project;

(2) An estimate of the total project costs, and an estimate of the amounts of funding necessary annually from the enterprise zone account;

(3) A statement of any other revenue sources to be used to finance the project;

(4) A statement of the time necessary to complete the project;

(5) A statement of the manner in which the proposed project furthers the municipality's policy and intentions for addressing economic development in the enterprise zone as set forth in the zone development plan approved by the authority; and

(6) A description of the financial and programmatic controls and reporting mechanisms to be used to guarantee that the funds will be spent in accordance with the plan and that the project will accomplish its purpose.

As used in this section, "project" means an activity that satisfies the requirements of a qualified assistance fund expense, as that term is defined in subsection m. of section 3 of P.L.1983, c.303 (C.52:27H-62), and which will lead to the creation of new jobs and increased economic activity within the zone.

d. (Deleted by amendment, P.L.2021, c.197)

e. (Deleted by amendment, P.L.2021, c.197)

f. (Deleted by amendment, P.L.2021, c.197)

g. (Deleted by amendment, P.L.2021, c.197)

h. At the end of a State fiscal year, if a municipality has not encumbered a portion of its allocation, such amount may be carried forward to the next State fiscal year and the State fiscal year thereafter. If at the end of the third State fiscal year any of those unencumbered funds remain, then the funds shall be transferred to the UEZ Authority's account in the enterprise zone assistance fund.

i. At the end of a State fiscal year, if a municipality has not expended or otherwise committed a portion of its encumbered funds, then such amount may be carried forward to the next three succeeding State fiscal years. If at the end of the third State fiscal year any unexpended funds remain, then the funds shall be transferred to the UEZ Authority's account in the enterprise zone assistance fund.

j. At the end of a State fiscal year, the Department of Community Affairs shall review an enterprise zone's expenditures of funds received from the zone assistance fund. If the department finds that an enterprise zone expended such funds in a manner inconsistent with the provisions of P.L.1983, c.303 (C.52:27H-60 et seq.) and P.L.2021, c.197, then the enterprise zone shall repay such funds to the department through the forfeiture of future zone assistance fund disbursements. The department shall withhold future funding from the enterprise zone until the enterprise zone enters into and complies with a corrective action plan developed by the department.

k. If in a State fiscal year the amount allocated to the enterprise zone assistance fund is less than the amount required to be allocated to fulfill the purposes of this section pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) and paragraph (1) of subsection a. of this section, the Legislature shall appropriate to the enterprise zone assistance fund the amount that was not allocated in such State fiscal year in a succeeding State fiscal year along with the funds required to be allocated in that State fiscal year.

(cf: P.L.2023, c.282, s.2)

3. (New section) a. Notwithstanding the provisions of section 17 of P.L.1966, c.30 (C.54:32B-17) or any other law to the contrary, the director shall permit any person that is required to collect or pay tax under P.L.1966, c.30 (C.54:32B-1 et seq.), and which operates a qualified business, as designated pursuant to section 3 of P.L.1983, c.303 (C.52:27H-62), to make and file a return for the remittance of sales and use tax on a quarterly basis. The return shall show all receipts from sales and also the aggregate value of tangible personal property, specified digital products and services sold by the person within the State, including sales occurring inside and outside of an enterprise zone, the use of which is subject to tax under P.L.1966, c.30 (C.54:32B-1 et seq.), and the amount of taxes required to be collected with respect to such sales and use.

b. The return of a qualified business shall be submitted to the director on or before the 20th day following the quarter covered by the return. If the due date falls on a weekend or holiday, the return shall be due on the following business day.

4. This act shall take effect immediately, except that sections 1 and 3 shall apply to retail sales occurring, and sales and use tax returns filed, on or after the first day of the second month next following the date of enactment.

STATEMENT

This bill modifies certain requirements concerning the administration of the sales and use tax in urban enterprise zones (UEZ) and increases the percentage of funds that a qualified municipality receiving funding from the enterprise zone assistance fund would be allowed to use for administrative expenses.

Under the current law, a 50 percent exemption from the sales and use tax is allowed for taxable sales made by a qualified business operating within a UEZ, as designated under the “New Jersey Urban Enterprise Zones Act.” However, the exemption applies only to sales transactions that physically occur within a UEZ. A qualified business is allowed to deliver merchandise to the purchaser at a location outside a UEZ, provided that the sale was physically made within the UEZ.

The bill expands the applicability of the 50 percent sales and use tax exemption to include transactions made by mail order, telephone, internet, or similar transaction. Specifically, the bill provides that these transactions would be subject to the 50 percent exemption, provided that the transaction is made by a qualified business that maintains a physical place of business within a UEZ, at which location items are regularly exhibited and offered for retail sale, and the place of business is not utilized primarily for the purpose of catalogue, mail order, or internet sales. The exemption would also apply when the qualified business delivers merchandise to the purchaser at a location outside a UEZ, so long as the sales transaction otherwise qualifies for the exemption.

Additionally, the bill provides that a qualified business operating within a UEZ would be allowed to file quarterly returns for the remittance of sales and use tax to the State. Under the bill, the return is required to be submitted on or before the 20th day following the quarter covered by the return, and the return is required to include the amount of all sales and use tax collected within the State, including the amounts collected from transactions occurring both inside and outside of a UEZ. Currently, sellers that collect more than $30,000 in sales and use tax in the preceding calendar year are required to file a return monthly, while sellers that collect less than $30,000 in sales and use tax are permitted to file a return quarterly.

Lastly, under current law, a portion of the sales and use tax revenues generated within each UEZ are deposited into an enterprise zone assistance fund and used to assist the municipalities in which the UEZ is located in undertaking economic development projects. Current law provides that a municipality may use no more than 10 percent of these funds for administrative expenses. Instead, the bill provides that a municipality would be allowed to use no more than 15 percent of the funding credited to its enterprise assistance fund for administrative expenses.