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Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit
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Transcript of 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
Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit
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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.
Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit
© 2011 Fox Rothschild
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In other words
Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit
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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.
Putting New Jersey Back in Business: The Urban Transit Hub Tax Credit
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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
Daniel V. Madrid, Esq.(609) 844-7413