21 January 2016 New Jersey Governor signed bill (S3232) allowing participants in the NJ Business Employment Incentive Program (BEIP) to receive tax credits instead of cash grants On January 11, 2016, New Jersey Governor Chris Christie signed S. 32321 — a bill authorizing current participants in the NJ Business Employment Incentive Program (BEIP) program to make a voluntary one-time election to convert outstanding approved, but unpaid grant awards, to tax credits. Provisions of the bill allow a business that is eligible to receive a grant under the BEIP to direct the New Jersey Economic Development Authority (NJEDA) to convert the grant to a tax credit that can be applied against the business's corporate, gross income, or insurance premium tax liability in an amount equal to the credit payment schedule provided in the bill. The direction to convert the grant to a tax credit is irrevocable and must be made within 180 days (by July 11, 2016). A company cannot opt into the program after July 11, 2016. Approved tax credits only may be applied in the tax period for which they are issued and are not to be carried forward. If the credit exceeds the amount of tax liability otherwise due from a business that pays corporate business taxes, the amount of excess is to be deemed an overpayment and the business is to receive a refund without interest due to it, subject to limitations to be clarified by NJEDA at a later date. The bill allows a business that does not pay corporate business taxes to apply to the NJEDA executive director for a tax credit transfer certificate, covering one or more years. The tax credit transfer certificate may be sold or assigned, in full or in part, in an amount not less than $100,000, or the amount of the refundable tax credit issued if less than $100,000, of tax credits to any other person that may have a corporate, gross income, or insurance premium tax liability. The sale or assignment of any amount of a tax credit transfer certificate is not to be exchanged for consideration received by the business of less than 75% of the transferred credit amount before considering any further discounting to present value, which is permitted. The tax credit transferee may not transfer its tax credit to any other party. The tax credit transfer certificate provided to the business shall include a statement waiving the business's right to claim that amount of the credit against the taxes that the business has elected to sell or assign. This new law will enable New Jersey to meet its obligations to current BEIP participants with outstanding payments due from the state. Companies that elect to convert their BEIP grants to tax credits can anticipate that outstanding BEIP awards will be paid in full by calendar year 2025 if New Jersey follows the payment schedule outlined in S. 3232. NJEDA has not yet finalized a mechanism to process requests to convert agreements from BEIP grants to tax credits, but has indicated that the application is likely be electronic and will be linked to the existing NJEDA online compliance portal in some manner yet to be determined. Further details will be provided when available. Current BEIP participants should determine if they wish to opt into the program and convert existing BEIP cash grant awards to tax credits, thereby providing a mechanism for payment of these obligations over the time periods noted in the legislation. Companies that do not elect to convert their BEIP grants to tax credits by July 11, 2016 will not be paid until (and if) New Jersey funds its outstanding BEIP grant liabilities. New Jersey has not allocated funds for BEIP payments in several years and has not issued any timetable nor communicated an intention to provide an allocation of funds for the BEIP program in the future. Therefore, the potential for future payment of BEIP cash grants is uncertain. Please note that BEIP participants that elect to take part in the conversion may need to review their tax accounting methodology to properly account for these accrued obligations from the state. New Jersey has historically issued BEIP disbursements after NJEDA completes the review and approval of annual compliance reports, a process that generally lags several years behind the submission of the yearly reports. As a result, some outstanding BEIP payments to companies date back to 2010 or even earlier. New Jersey has proposed a phased pay-out period for unpaid BEIP awards approved from 2008 through 2025. The chart below provides an illustration of the percentages of approved awards that would be paid by New Jersey in each calendar year starting in 2017 if tax credits are issued in accordance with the new legislation.
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