Executive Summary Under New Jersey’s Business Employment Incentive Program, approved businesses that created jobs in New Jersey were awarded annual cash grants. Nearly 500 businesses were awarded grants valued at $1.6 billion. Unfortunately, the New Jersey legislature stopped funding the program, and hundreds of companies haven’t received a check in years, despite having met the necessary job-creation requirements. Businesses have until July 11 to convert their cash grants into tax credits by contacting the Economic Development Authority and amending their existing agreement. Nearly every business with significant operations in New Jersey is affected by this and will need to make their election by July 11.
Under New Jersey’s Business Employment Incentive Program (“BEIP”), approved businesses that created jobs in New Jersey were awarded annual cash grants. By the time the program was phased out in 2013, New Jersey had approved 499 BEIP agreements valued at nearly $1.6 billion. Unfortunately, the New Jersey legislature hasn’t funded the nearly $200 million annual cost of the program since the 2013 fiscal year. As a result, hundreds of companies haven’t received a check in years, despite having met the necessary job-creation requirements.
Earlier this year, legislation was approved to deal with this backlog and provide BEIP recipients with some relief. Under this new legislation (which is codified at P.L. 2016, c. 194), BEIP recipients can elect to convert their cash grants into credits against the corporation business tax, gross income tax, or insurance premiums tax. The credits are awarded in installments; for example, unpaid grants for years prior to 2014 will be awarded over five years beginning in 2017. If a credit exceeds a business’s tax liability in a particular year, the excess will be fully refundable.
To convert your BEIP grant to tax credits, you must contact the Economic Development Authority (“EDA”) and amend your existing BEIP agreement by July 11, 2016. Converting your BEIP grant to tax credits is strictly voluntary. But once made, the decision is irrevocable. Whether the legislature will appropriate any additional funds for the program going forward is unclear. So businesses that don’t amend their existing agreements may risk losing their BEIP benefits entirely.
The EDA began emailing BEIP recipients about the conversion option last Friday. Businesses with unpaid BEIP grants should watch their inbox carefully.
If you have questions about whether to convert your BEIP grant to tax credits or about the conversion process generally, please contact one of the authors of this Alert or the Reed Smith attorney with whom you usually work.
For more information on Reed Smith’s New Jersey tax practice, visit www.reedsmith.com/njtax/.
Client Alert 2016-092