The Murphy Administration recently announced the approval of the first award under the Emerge Program, a new tax credit program created under the New Jersey Economic Recovery Act of 2020 (ERA). The award is for a project by Party City Holdings Inc. (Party City), a Fortune 1000 specialty manufacturing, wholesale, and retail company. Party City plans to bring 357 jobs to New Jersey and will receive a tax credit award of $9,996,000 over seven years.

Key Benefits of the Emerge Program

Through the Emerge Program, small and large businesses, as well as non-profits, can apply for tax credits to support projects that meet minimum capital investment, job creation or retention, and other requirements. To be eligible for Emerge support, a project must:

• Create at least 35 new, full-time jobs. In some circumstances, this job creation requirement may be lower if a business is primarily engaged in a targeted industry, or if a business meets the definition of a “small business” as defined in the Emerge Program rules.
• Be located in an Eligible Incentive location.
• Meet minimum capital investment requirements.
• Emerge tax credits must yield a minimum net positive economic benefit to the state of 200 percent to 400 percent depending on project location.
• Ensure that at least 80 percent of incented employees’ work time is spent in New Jersey and 80 percent of the withholdings of new or retained full-time jobs are subject to the ‘New Jersey Gross Income Tax Act’.
• Ensure the Qualified Business Facility can accommodate at least 50 percent of incented jobs.
• Commit to stay at the Qualified Business Facility for 1.5 times the eligibility period.
• Demonstrate that the award of the tax credit is a “material factor” in the decision to create or retain at least the minimum number of full-time jobs.

The Emerge Program awards are calculated on an annual per job basis, with base credits for new jobs ranging between $500-$4,000 per job depending on project location and other aspects of the project. Bonuses are also available based on project location, industry, and alignment with other policy objectives. These bonuses can increase annual per-job credits to a maximum of $8,000 per job.  Jobs that are covered by a labor harmony agreement are eligible for an additional $1,000 bonus over the capped amounts. 

Tax credits awarded through Emerge can be used to offset Corporate Business Tax or Insurance Premiums Tax. They can also be transferred for no less than 85 percent of their value or surrendered to NJ Division of Taxation for 90 percent of the value of the credits.

Emerge Program’s First Tax Credit Approval

On September 21, Gov. Murphy announced Party City is the first company to receive an approval under the Emerge Program. Party City, the largest retailer of party goods in the United States, Canada, and Mexico, is planning to consolidate its Rockaway, New Jersey and Elmsford, New York sites into a single, new national headquarters.

“When we began working on reforming the state’s tax incentive program four years ago, this was exactly the type of award we envisioned – a project that will bring good, high-paying jobs to New Jersey at a reasonable investment,”  Governor Murphy said in a press statement. “A big piece of building a stronger and fairer New Jersey is fueling a strong 21st century economy that works for everyone. We view this new incentive program as integral to the continued growth of New Jersey’s economy.”

According to the NJEDA, the project is expected to create 357 new full-time jobs and retain 338 full-time jobs currently at risk of leaving New Jersey. Additionally, the project will invest more than $32 million to lease a 208,911 square foot office building in Woodcliff Lake.

The NJEDA approved Party City for a tax credit award of $9,996,000 over seven years, with a discounted present value of $7,434,696. According to the NJEDA’s calculations, the present value of the net positive economic benefit of this project to the State is $35,734,024. This is a 481 percent net positive economic benefit coverage ratio of the present value of the award, which is above the required rate of 400 percent. Party City will also need to enter into a community benefits agreement with Woodcliff Lake or Bergen County.

As the NJEDA highlighted in its announcement, the per-job incentives awarded to this project is significantly lower than the average per-job incentive awarded under New Jersey’s previous job creation tax incentive program. Additionally, Party City is expected to generate economic benefits more than four times as large as the tax credits it receives.

Next Steps for Interested Businesses

The NJEDA is currently accepting applications for the Emerge Program. We encourage interested businesses to work with experienced counsel who can help ensure that your business is able to reap the full benefits of New Jersey’s new tax incentive program.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact Don Pepe or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.