S4828

An Act concerning certain sales and use tax exemptions for clean energy product manufacturers and amending P.L.2004, c.65.

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

1. Section 19 of P.L.2004, c.65 (C.34:1B-185) is amended to read as follows:

19. As used in sections 19 through 22 of P.L.2004, c.65 (C.34:1B-185 through C.34:1B-188) the following terms shall have the following meanings:

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

"Clean energy product manufacturer" means the same as that term is defined pursuant to section 3 of P.L.2025, c.123 (C.34:1B-405).

"Eligible property" means machinery, equipment, furniture and furnishings, fixtures, and building materials, but "eligible property" shall not include "motor vehicles" as defined pursuant to section 2 of P.L.1966, c.30 (C.54:32B-2), parts with a useful life of one year or less, or tools or supplies used in connection with the eligible property;

"Headquarters" means the single location that serves as the national administrative center of a business, at which the primary office of the chief executive officer or chief operating officer of the business, as well as the offices of the management officials responsible for key businesswide functions such as finance, legal, marketing, and human resources, are located;

"Life sciences business" means a business engaged principally in the production of medical equipment, ophthalmic goods, medical or dental instruments, diagnostic substances, biopharmaceutical products; or physical and biological research; or biotechnology;

"Manufacturing facility" means a business location at which more than 50% of the business personal property that is housed in the facility is eligible for the sales tax exemption pursuant to subsection a. of section 25 of P.L.1980, c.105 (C. 54:32B-8.13) for machinery, apparatus or equipment used in the production of tangible personal property; and

"Research and development facility" means a business location at which more than 50% of the business personal property that is purchased for the facility is eligible for the sales tax exemption pursuant to section 26 of P.L.1980, c.105 (C.54:32B-8.14) for property used in research and development.

(cf: P.L.2007, c.253, s.16)

2. Section 20 of P.L.2004, c.65 (C.34:1B-186) is amended to read as follows:

20. The [New Jersey Commerce Commission] authority shall establish and administer a program to approve the issuance of sales and use tax exemption certificates to qualifying businesses as specified in sections 19 through 22 of P.L.2004, c.65 (C.34:1B-185 through C.34:1B-188). The receipts from the certificate holder's purchase of eligible property located or placed at the business location covered by the project approval within the period established pursuant to the terms and conditions of the project approval for the approved business location shall be exempt from the tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et seq.).

(cf: P.L.2007, c.253, s.17)

3. Section 21 of P.L.2004, c.65 (C.34:1B-187) is amended to read as follows:

21. a. A business seeking to participate in the sales and use tax exemption certificate program established pursuant to sections 19 through 22 of P.L.2004, c.65 (C.34:1B-185 through C.34:1B-188) shall submit a project application to the [New Jersey Commerce Commission] authority in such form as required by the [New Jersey Commerce Commission] authority.

b. The location for the project shall be situated in designated Planning Area 1 or 2, as defined in the State Development and Redevelopment Plan adopted by the State Planning Commission; provided however, that a business project involving the renovation or expansion of an existing facility, or a business project involving the construction of a new facility by a clean energy product manufacturer that satisfies the requirements of paragraph (5) of subsection c. of this section, that is not located in designated Planning Area 1 or 2 may be eligible to participate in the program, at the determination of the [New Jersey Commerce Commission] authority, if all other applicable criteria are satisfied.

A business located in an urban enterprise zone designated pursuant to the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et al.) as of the effective date of this section shall not be eligible to participate in this program if the relocation project is from a facility within the urban enterprise zone to a facility outside an urban enterprise zone; provided however, that if the relocation is to a facility already owned or leased by the same business and that business already employs at least the same number of persons as those being relocated from the urban enterprise zone, it may be eligible to apply.

c. To be eligible to apply for the sales and use tax exemption certificate program, a business, other than a clean energy product manufacturer, shall have operated continuously in this State, in whole or in part, in its current form or as a predecessor entity, for at least 10 years prior to filing an application [and]. To be eligible to apply for the sales and use tax exemption certificate program, a business, other than a clean energy product manufacturer, shall satisfy at least one of the following criteria, except that a clean energy product manufacturer shall satisfy the requirements of paragraph (5) of this subsection:

(1) the business has 1,000 or more full-time employees in the State and the project involves relocating 500 or more full-time employees into a new business location or locations;

(2) the business is a life sciences business or a manufacturing facility and the project is: constructing one or more new research and development facilities, constructing one or more new manufacturing facilities in this State, or relocating to a new headquarters in this State that will employ 250 or more full-time employees;

(3) the business is a life sciences business or a manufacturing business and the project is constructing a new, or substantially rehabilitating a vacant, property that will [separately or collectively]:

(a) be predominately a new research and development facility;

(b) be predominately a new manufacturing facility;

(d) separately or collectively be a combination of subparagraphs (a), (b) and (c);

provided, that the new or substantially rehabilitated facility will house a minimum of 250 full-time employees. For the purposes of this subparagraph, "predominantly" means a majority of the employees housed in the new facility are engaged in that activity, or a majority of the square footage of the new facility is used in that activity; or a majority of the total value of the investment made will be employed in that activity; or other measures of activity as may be determined by the [New Jersey Commerce Commission] authority that demonstrate that a critical concentration of research and development, manufacturing, or both, will occur at the new facility; [or]

(4) the business is, at the time of enactment of this section, currently receiving a structured finance special guarantee pursuant to N.J.A.C.19:31-2.1(c)3.ii(5) for the project; or

(5) the business is a clean energy product manufacturer and the project is for the construction of a new facility, or the substantial rehabilitation of an existing facility, that will predominantly serve as a new research and development facility or new manufacturing facility, which facility will house a minimum of 200 new, full-time employees for not less than five years, and which project has an expected cost of $500 million or more.

For the purposes of this paragraph, "predominantly" means a majority of the employees housed in the new facility are engaged in that activity, or a majority of the square footage of the new facility is used in that activity; or a majority of the total value of the investment made will be employed in that activity; or other measures of activity as may be determined by the authority that demonstrate that a critical concentration of research and development, manufacturing, or both, will occur at the new facility.

d. For the purposes of determining a number of full-time employees pursuant to subsection c. of this section, the full-time employees of the members of a "controlled group of corporations" as defined pursuant to section 1563 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1563, shall be considered the employees of a single employer.

e. A project may be completed in up to two phases provided that it will be the national headquarters of a life sciences or manufacturing company, and will include a significant research and development facility, a significant manufacturing facility, or combination thereof if: (1) the first completed phase will house at least 200 full-time employees and the second phase will house at least 100 additional employees; and (2) the project is pre-approved for phases and that all phases are completed within 30 months of project approval.

f. (1) Upon approval of a project, the [Executive Director] executive director of the [New Jersey Commerce Commission] authority shall notify the Director of the Division of Taxation in the Department of the Treasury of the terms and conditions of the project approval and the director shall issue a certificate of exemption pursuant to the terms and conditions of the project approval. In general, the sales and use tax exemption certificate provided by sections 19 through 22 of P.L.2004, c.65 (C.34:1B-185 through C.34:1B-188) should not apply to purchases initiated by the business after the date that the temporary certificate of occupancy is issued, or in cases where no temporary certificate of occupancy is issued should not apply to purchases initiated by the business more than one year from the project commencement date; however, the duration of the certificate of exemption shall be pursuant to the terms and conditions of the project approval.

(2) Notwithstanding any provision of this section to the contrary, as a condition of approval of a project for a business that is a clean energy product manufacturer, the authority shall not require the business to demonstrate that receiving the certificate of exemption is a material factor in the decision of the business to locate the project in the State.

(cf: P.L.2007, c.253, s.18)

4. Section 22 of P.L.2004, c.65 (C.34:1B-188) is amended to read as follows:

22. The [New Jersey Commerce Commission] executive director of the authority shall, after consultation with the Director of the Division of Taxation in the Department of the Treasury, adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) necessary to govern the proper conduct and operation of the program consistent with the provisions of sections 19 through 22 of P.L.2004, c.65 (C.34:1B-185 through C.34:1B-188), as amended.

(cf: P.L.2007, c.253, s.19)

5. This act shall take effect immediately.

STATEMENT

This bill extends eligibility for the sales and use tax exemption certificate program administered by the New Jersey Economic Development Authority (EDA) to purchases made by clean energy product manufacturers related to the construction or renovation of specified business facilities.

A “clean energy product manufacturer” is defined under the bill as a business engaged in the production or assembly of goods by transforming raw materials or sub-components into components for renewable energy, such as offshore wind, solar, geothermal, green hydrogen, nuclear energy, fuel cells, battery storage, or other clean energy manufacturing. The bill specifies that a clean energy manufacturer would not include businesses engaged in retail, wholesale, packaging, software development, resource extraction, or waste incineration.

Under current law, qualifying businesses may apply to the EDA for a sales and use tax exemption certificate to be used for the purchase of eligible property located or placed at the site of an approved project. The exemption certificate allows businesses to purchase machinery, equipment, furniture, fixtures, and building materials without the imposition of tax on the sale of those items. In order to be eligible for the program, a business is required to have operated continuously in the State for at least 10 years, while also satisfying requirements related to the number of full-time employees employed by the business in the State and the location and characteristics of the proposed business facility to be constructed or renovated under the project. Generally, a project is required to be situated in Planning Area 1 or 2, as defined in the State Development and Redevelopment Plan adopted by the State Planning Commission. Planning Areas are regions of the State with shared characteristics that inform where growth or conservation should occur, with a preference for concentrating development primarily in Metropolitan and Suburban Areas, also known as Planning Areas 1 and 2 respectively. In certain instances, a business project is not required to be located in either of these planning areas provided that the project involves renovation or expansion of an existing facility if all other applicable program criteria are satisfied.

The bill would extend eligibility for the EDA’s sales and use tax exemption program to a clean energy product manufacturer that undertakes an eligible project. Specifically, the bill requires the project to involve the construction of a new facility, or a substantial rehabilitation of an existing facility, that will predominantly serve as a new research and development facility or new manufacturing facility, which facility will house a minimum of 200 new, full-time employees for no less than five years, and which project has an expected cost of $500 million or more. The bill exempts clean energy product manufactures from certain existing requirements of the program, such as the requirement to: (1) demonstrate that receiving the exemption certificate is a material factor in the decision of the business to locate the project in the State; (2) have operated continuously in the State for at least 10 years prior to applying for the program; and (3) undertake a business project involving the construction of specified new facilities by a clean energy product manufacturer within Planning Areas 1 or 2.