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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: May 19, 2022
The Firm
201-896-4100 info@sh-law.comThe New Jersey Economic Development Authority (NJEDA) recently proposed rules to establish the New Jersey Innovation Evergreen Fund. The new fund will serve as a source of capital for the State to co-invest with venture capital investment firms in early-stage businesses based in New Jersey, with the goal of fostering innovation and attracting businesses to New Jersey.
“The New Jersey Innovation Evergreen Fund is a groundbreaking public-private partnership that will fuel our innovation economy by attracting entrepreneurs and venture capital to the state,” Governor Phil Murphy said in a press statement
The New Jersey Economic Recovery Act of 2020 authorizes the NJEDA to sell up to $300 million of corporate tax credits through the auction of up to $60 million of tax credits annually for the entirety of the seven-year program. In exchange for the tax credits, the New Jersey Innovation Evergreen Fund (Evergreen Fund) will receive capital from the tax credit purchasers along with strategic commitments to support early-stage businesses.
The NJEDA will return dividends and returns on investments to the Fund, making it self-sustaining or “evergreen.” Once the Fund has received total deposits from dividends and returns from qualified investments equaling $500 million, the NJEDA will pay 50 percent of any return on investment that exceeds two times the amount invested for that qualified investment to the State’s General Fund. The NJEDA will also utilize 75 basis points of the total funding amount in the Evergreen Fund to establish and administer additional programs that support the growth of innovation in the State.
To be eligible to purchase tax credits, a potential tax credit purchaser must meet criteria including, but not limited to:
To receive an investment through the Evergreen Fund, a business must satisfy the following criteria:
The NJEDA will also establish an application process through which a venture firm may apply for certification as a qualified venture firm. Approval will enable the qualified venture firm to apply for funding from the Fund to make qualified investments in early-stage New Jersey businesses. To be eligible to become a qualified venture firm, a venture firm must meet various eligibility criteria, including but not limited to:
The NJEDA expects to launch the Evergreen Fund later this year. In the meantime, interested entities should review the proposed rules, eligibility requirements, auction application and review process, and other materials on the NJEDA website. We also strongly recommend working with experienced counsel who can walk you through the approval process.
If you have any questions or if you would like to discuss the matter further, please contact Ashley Brinn or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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