Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit

Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit

© 2011 Fox Rothschild

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Fox Rothschild LLP

Putting New Jersey Back in Business: The Urban Transit

Hub Tax Credit

December 1, 2011



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Overview

Bringing Business Back to New Jersey: The UTHTC creates a highly attractivefinancial incentive to large businesses to relocate to or expand existing operations inthe Garden State by offering a tax credit for capital improvements made by a business,tenant or developer.



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In other words



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Projects Approved to Date

13 Projects as of 11/2011 Total UTHTCs approved $747,133,319 Projected new jobs: 2284 Projected construction jobs: 7814 Companies: Campbell Soup Company

(Camden); Panasonic (Newark); Goya Foods, Inc. (Jersey City)



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Is NJ catching up?



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Objectives

Part I: What is the Urban Transit Hub Tax Credit (UTHTC) program?

Part II: Who can benefit from the UTHTC program?

Part III: What are the necessary requirements to qualify for the UTHTC?

Part IV: Answers to Frequently Asked Questions.



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Part I: The Mechanics of the UTHTC Program

Statutory Authority: The Urban Transit Hub Tax Credit Act found in N.J.S.A. 34:1B-207Amendments: The Economic Stimulus Act of 2009and S-2972.

Purpose: Businesses, developers and owners can receive a dollar-for-dollar tax credit equal to100% of the qualified capital investments madewithin an eight year period.



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Program Overview

Administered by the NJEDA Total credits approved under the UTHTC

program are capped at $1.5 billion dollars Applications must be filed by January

2013 Eligibility requirements must be satisfied

by January 2016



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How are the credits used?

A New Jersey taxpayer may apply 10% of the total UTHTC amount per year over a 10-year period.

The credit can be applied towards corporate business tax or insurance premiums tax (but not gross income tax).

The credits are transferrable.



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Part II: Who should look into this program?

Developers, large companies, property

owners and tenants of property owners

who are making a “qualified capital

investment” in designated Urban Transit

Hub.



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Example 1: Mixed-UseThe Gateway, New Brunswick, NJ

$250 million dollar project consisting of $55 million in Urban Transit Hub Tax Credits

150 apartments, 42 condominium units, 50,000 sf of office space, 65,000 sf of retail, 685 parking garage.

Project will include Fresh Grocer supermarket, RWJ fitness center and retail staples like Starbucks and Barnes & Noble.



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The Gateway



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Example 2: The Developer Capital Real Estate Group

Developer of the Vista Center: 700,000-square-foot, 25 Story Office

Tower Adjacent to Trenton Train Station Designed to be LEED Platinum Certified



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The Vista Center by Capital Real Estate Group



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Example 3: The Tenant Haddon Avenue Transit Village

Existing Our Lady of Lourdes Medical

Center Campus identified a need for the

following: Parking garage Office space Workforce housing



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Using the UTHTC to fund capital projects

OLLMC is teaming with Grapevine Development to create the Haddon Avenue Transit Village, a 15 acre mixed-use transit village.

The project will be financed through a blend of UTHTCs, New Markets Tax Credit and county bond financing.



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Haddon Avenue Transit Village



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Part III: What are the requirements – Will the project fit?



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Requirement 1: Urban Transit Hub



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Requirement 1: Urban Transit Hub

1/2 Mile of NJ Transit, PATH, PATCO or

light rail stations in:

East Orange, Elizabeth, Hoboken, Jersey

City, Newark, New Brunswick, Paterson,

Trenton and Camden (expanded to one

mile)



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Requirement 2: Capital Investment



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Requirement 2(a): Capital Investment

For Developers or Owners:

Minimum $50 million dollar capital

investment in a qualified business facility is

required.



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Requirement 2(b): Capital Investment

For Tenants:

Minimum $17.5 million of capital

investment by an individual tenant in a

qualified business facility ($50 million total

for the facility).



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Requirement 3: Jobs



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Requirement 3: Jobs

The qualified business facility must employ a minimum of 250 employees.

To receive the 100% tax credit, at least 200 of the 250 employees must be employed in “new full time positions.” Otherwise the credit drops to 80% of the qualified investment.



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Part IV: FAQ



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What type of entities / projects qualify?

Must have substantial New Jersey tax liability to make use of credits.

Entity types: Corporations, partnerships, S corporations or LLCs.

Project types: broad range of projects including mixed-use projects with a qualified residential component.



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What qualifies as a capital investment?

Expenses used towards a building, facility,

or improvement to real property including: Site preparation and construction for a

new building Repair, renovation and improvement of

an existing building Equipment or furniture



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How does a project get approved?

EDA application process

- Satisfaction of employment and capital investment requirements

- Public Benefit Test



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What about jobs?

Existing jobs count but maintenance is key

Must be full time positions Jobs requirement can be met by

aggregating up to three tenants in a multi-tenant qualified business facility



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What are the risks involved?

Ten year commitment

BUT

Limited exposure for recapture event No forfeiture of prior credits



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Final thoughts

Can your client make use of the credits / how should the transaction be structured?

How large is the project? What other sources of capital are

available? Can a decision be made within the time

frames?



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Thank You

Jeffrey M. Hall, Esq.(609) 895-6755

[email protected]

Daniel V. Madrid, Esq.(609) 844-7413

[email protected]

Documents

Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit