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201-896-4100 info@sh-law.comWhat Developers Should Know About NJ Brownfields Tax Incentives
Author: Scarinci Hollenbeck, LLC|December 9, 2021
The New Jersey Economic Recovery Act of 2020 (“ERA”) was signed into law on January 7, 2021 which includes the Brownfield Redevelopment Incentive Program Act…
What Developers Should Know About NJ Brownfields Tax Incentives
The New Jersey Economic Recovery Act of 2020 (“ERA”) was signed into law on January 7, 2021 which includes the Brownfield Redevelopment Incentive Program Act…
The New Jersey Economic Recovery Act of 2020 (“ERA”) was signed into law on January 7, 2021, which includes the Brownfield Redevelopment Incentive Program Act (P.L. 2020, c.156). The Brownfields Redevelopment Incentive Program Act (the “Act”) covers specific costs associated with brownfield remediation and redevelopment. Eligible costs include those associated with the investigation and remediation of environmental contamination and building and structural remedial activities.
Tax credits will be awarded through a competitive application process to ensure the best projects receive State support. The New Jersey Economic Development Authority (“NJEDA”) will partner with the New Jersey Department of Environmental Protection (“NJDEP”) to create evaluation criteria for a competitive application process. To receive tax credits through the program, the developer must demonstrate that a financing gap exists. Parties that caused or contributed to site contamination are not eligible for the program.
A developer seeking a tax credit for a redevelopment project shall submit an application to the authority and the department in a form and manner prescribed in regulations adopted by the authority, in consultation with the department, pursuant to the provisions of the Administrative Procedure Act.
Brownfields Redevelopment Incentive Program Act
Below are several key components of the Brownfields Redevelopment Incentive Program Act:
- Eligibility: A redevelopment project will be eligible for a tax credit only if the developer demonstrates at the time of application that: (1) the developer has not commenced any remediation or clean up at the site of the redevelopment project, except for preliminary assessments and investigations, prior to applying for a tax credit, but intends to remediate and redevelop the site immediately upon approval of the tax credit; (2) the redevelopment project is located on a brownfield site; (3) without the tax credit, the redevelopment project is not economically feasible; (4) a project financing gap exists; (5) the developer has obtained and submitted to the NJEDA a letter evidencing support for the redevelopment project from the governing body of the municipality in which the redevelopment project is located; and (6) each worker employed to perform remediation, or construction at the redevelopment project will be paid not less than the prevailing wage rate for the worker’s craft or trade.
- Project Financing Gap: The term refers to the part of the total remediation cost, including reasonable and appropriate return on investment, that remains to be financed after all other sources of capital have been accounted for, including, but not limited to, developer contributed capital, which may not be less than 20 percent of the total remediation cost, and investor or financial entity capital or loans for which the developer, after making all good faith efforts to raise additional capital, certifies that additional capital can’t be raised from other sources.
- Good Standing Requirements: Prior to approval of an application, the Department of Labor and Workforce Development, the Department of Environmental Protection, and the Department of the Treasury must each report to the chief executive officer of the NJEDA whether the developer is in substantial good standing with the respective department, or has entered into an agreement with the respective department that includes a practical corrective action plan for the developer.
- Application Review: The NJEDA, in consultation with the NJDEP, will review the applications through a competitive application process. In addition to the eligibility criteria set forth above, the agencies may consider additional factors that may include, but are not limited to: the economic feasibility of the redevelopment project; the benefit of the redevelopment project to the community in which the remediation project is located; the degree to which the redevelopment project enhances and promotes job creation and economic development and reduces environmental or public health stressors in an overburdened community; and, if the developer has a board of directors, the extent to which that board of directors is diverse and representative of the community in which the redevelopment project is located. The NJEDA, in consultation with the NJDEP, must submit applications that comply with the eligibility criteria, fulfill the additional factors considered by the NJEDA, satisfy the submission requirements, and provide adequate information for the subject application, to the board for final approval.
- Redevelopment Agreement: Following application approval, but prior to the start of any remediation or clean up at the site of the redevelopment project, the NJEDA must enter into a redevelopment agreement with the developer. The redevelopment agreement must specify the amount of the tax credit to be awarded to the developer, the date on which the developer must complete the remediation, and the projected project remediation cost. The redevelopment agreement must require the developer to submit progress reports to the NJEDA and to the NJDEP every six months. Among other requirements, the NJEDA may not enter into a redevelopment agreement unless the developer demonstrates, to the satisfaction of the NJDEP, that the developer did not discharge a hazardous substance at the brownfield site proposed to be in the redevelopment agreement, is not in any way responsible for the hazardous substance, and is not a corporate successor to the discharger or to any person in any way responsible for the hazardous substance or to anyone liable for cleanup and removal costs pursuant to the Spill Compensation and Control Act.
- NJDEP Certification: Upon completion of the redevelopment project, the developer must seek certification from the NJDEP that: (1) the redevelopment project is complete; (2) the developer complied with the requirements of the bill, including the requirements of any memorandum of agreement or other oversight document that the developer may have executed with the Commissioner of Environmental Protection pursuant to that section; and (3) the remediation costs were actually and reasonably incurred.
- Award of Tax Credit: Upon receipt of certification, and confirmation by the NJEDA that the developer’s obligations under the redevelopment agreement have been met, a developer shall be awarded a credit against the tax imposed pursuant to N.J.S.A. § 54:10A-5 in an amount not to exceed 40 percent of the actual remediation costs, or 40 percent of the projected remediation costs as set forth in the redevelopment agreement, or $4,000,000, whichever is least.
What’s Next?
Scarinci Hollenbeck is closely monitoring implementation of the Act. We will be ready to assist developers when the application process and Rules are finalized. Please contact us to see how we can assist you in the process.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Monica Schroeck, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
What Developers Should Know About NJ Brownfields Tax Incentives
Author: Scarinci Hollenbeck, LLC
The New Jersey Economic Recovery Act of 2020 (“ERA”) was signed into law on January 7, 2021, which includes the Brownfield Redevelopment Incentive Program Act (P.L. 2020, c.156). The Brownfields Redevelopment Incentive Program Act (the “Act”) covers specific costs associated with brownfield remediation and redevelopment. Eligible costs include those associated with the investigation and remediation of environmental contamination and building and structural remedial activities.
Tax credits will be awarded through a competitive application process to ensure the best projects receive State support. The New Jersey Economic Development Authority (“NJEDA”) will partner with the New Jersey Department of Environmental Protection (“NJDEP”) to create evaluation criteria for a competitive application process. To receive tax credits through the program, the developer must demonstrate that a financing gap exists. Parties that caused or contributed to site contamination are not eligible for the program.
A developer seeking a tax credit for a redevelopment project shall submit an application to the authority and the department in a form and manner prescribed in regulations adopted by the authority, in consultation with the department, pursuant to the provisions of the Administrative Procedure Act.
Brownfields Redevelopment Incentive Program Act
Below are several key components of the Brownfields Redevelopment Incentive Program Act:
- Eligibility: A redevelopment project will be eligible for a tax credit only if the developer demonstrates at the time of application that: (1) the developer has not commenced any remediation or clean up at the site of the redevelopment project, except for preliminary assessments and investigations, prior to applying for a tax credit, but intends to remediate and redevelop the site immediately upon approval of the tax credit; (2) the redevelopment project is located on a brownfield site; (3) without the tax credit, the redevelopment project is not economically feasible; (4) a project financing gap exists; (5) the developer has obtained and submitted to the NJEDA a letter evidencing support for the redevelopment project from the governing body of the municipality in which the redevelopment project is located; and (6) each worker employed to perform remediation, or construction at the redevelopment project will be paid not less than the prevailing wage rate for the worker’s craft or trade.
- Project Financing Gap: The term refers to the part of the total remediation cost, including reasonable and appropriate return on investment, that remains to be financed after all other sources of capital have been accounted for, including, but not limited to, developer contributed capital, which may not be less than 20 percent of the total remediation cost, and investor or financial entity capital or loans for which the developer, after making all good faith efforts to raise additional capital, certifies that additional capital can’t be raised from other sources.
- Good Standing Requirements: Prior to approval of an application, the Department of Labor and Workforce Development, the Department of Environmental Protection, and the Department of the Treasury must each report to the chief executive officer of the NJEDA whether the developer is in substantial good standing with the respective department, or has entered into an agreement with the respective department that includes a practical corrective action plan for the developer.
- Application Review: The NJEDA, in consultation with the NJDEP, will review the applications through a competitive application process. In addition to the eligibility criteria set forth above, the agencies may consider additional factors that may include, but are not limited to: the economic feasibility of the redevelopment project; the benefit of the redevelopment project to the community in which the remediation project is located; the degree to which the redevelopment project enhances and promotes job creation and economic development and reduces environmental or public health stressors in an overburdened community; and, if the developer has a board of directors, the extent to which that board of directors is diverse and representative of the community in which the redevelopment project is located. The NJEDA, in consultation with the NJDEP, must submit applications that comply with the eligibility criteria, fulfill the additional factors considered by the NJEDA, satisfy the submission requirements, and provide adequate information for the subject application, to the board for final approval.
- Redevelopment Agreement: Following application approval, but prior to the start of any remediation or clean up at the site of the redevelopment project, the NJEDA must enter into a redevelopment agreement with the developer. The redevelopment agreement must specify the amount of the tax credit to be awarded to the developer, the date on which the developer must complete the remediation, and the projected project remediation cost. The redevelopment agreement must require the developer to submit progress reports to the NJEDA and to the NJDEP every six months. Among other requirements, the NJEDA may not enter into a redevelopment agreement unless the developer demonstrates, to the satisfaction of the NJDEP, that the developer did not discharge a hazardous substance at the brownfield site proposed to be in the redevelopment agreement, is not in any way responsible for the hazardous substance, and is not a corporate successor to the discharger or to any person in any way responsible for the hazardous substance or to anyone liable for cleanup and removal costs pursuant to the Spill Compensation and Control Act.
- NJDEP Certification: Upon completion of the redevelopment project, the developer must seek certification from the NJDEP that: (1) the redevelopment project is complete; (2) the developer complied with the requirements of the bill, including the requirements of any memorandum of agreement or other oversight document that the developer may have executed with the Commissioner of Environmental Protection pursuant to that section; and (3) the remediation costs were actually and reasonably incurred.
- Award of Tax Credit: Upon receipt of certification, and confirmation by the NJEDA that the developer’s obligations under the redevelopment agreement have been met, a developer shall be awarded a credit against the tax imposed pursuant to N.J.S.A. § 54:10A-5 in an amount not to exceed 40 percent of the actual remediation costs, or 40 percent of the projected remediation costs as set forth in the redevelopment agreement, or $4,000,000, whichever is least.
What’s Next?
Scarinci Hollenbeck is closely monitoring implementation of the Act. We will be ready to assist developers when the application process and Rules are finalized. Please contact us to see how we can assist you in the process.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Monica Schroeck, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
