Aug 23 New Jersey Innovation Evergreen Fund
The New Jersey Economic Development Authority (NJEDA) recently began accepting applications for the Innovation Evergreen Fund (Evergreen Program), which aims to secure funding and strategic support to assist early-stage businesses in New Jersey. The program allows eligible taxpayers to purchase tax credits in an auction at a discount. Still, they must agree to make a strategic commitment to support New Jersey’s innovation ecosystem in exchange. Taxpayers interested in participating in the program for the 2022 auction year should move quickly as the application process will close on October 7, 2022.
The Evergreen Program consists of two components: a tax credit auction and a strategic commitment. Both components are equally important and factor into the program’s competitive scoring process. Each component is scored separately based on certain criteria, then combined to derive the total auction bid score; the higher the score, the better chances of securing a successful bid.
Tax Credit Auction
The program will raise funds by offering tax credits in annual auctions through 2027. For the 2022 auction year, the amount of tax credits available for purchase at auction is $30 million (NJEDA may increase the amount based on demand). Still, subsequent years can be as high as $60 million, not to exceed $300 million in aggregate.
Taxpayers who wish to participate in the program must comply with the below requirements to be eligible to purchase tax credits:
- Submit a minimum bid of $500,000 at auction to purchase tax credits
- Bid at least 75% of the requested dollar amount of tax credits
- Agree to provide a strategic commitment to support New Jersey’s innovative ecosystem
- Be registered to do business in the state and maintain a valid tax clearance certificate, and
- Designate a relevant individual in its organization to sit on the New Jersey Innovation Evergreen Fund Advisory Board for one year
In addition to the above requirements, a refundable deposit equal to 10% of the total tax credit purchase must be included with the application, not to exceed $500,000. However, upon executing the tax credit purchase contract, the deposit becomes non-refundable.
Purchased tax credits must apply to the privilege period in which the NJEDA approves the credits, with any unused credits carried forward to the next seven privilege periods. It is also important to note that tax credits are only available to taxpayers subject to the New Jersey Corporation Business Tax (CBT) under section 5 of P.L.1945, c. 162 (N.J.S.A. 54:10A-5). Additionally, the tax credit statute for the Evergreen Program (N.J.S.A. 34:1B-294) only authorizes a tax credit deduction from a taxpayer’s tax liability due under N.J.S.A 54:10A-5 and cannot offset the surtax imposed under N.J.S.A 54:10A-5.41.
Strategic Commitment
The second component of the program is strategic commitment. Taxpayers who purchase credits must also offer strategic support to strengthen the State’s innovation ecosystem. Commitments are open-ended, allowing taxpayers to propose programs or initiatives that align with their strengths.
Examples include:
- Developing talent
- Hosting start-up events
- Providing investment resources and marketing support.
For a strategic commitment to be valid, taxpayers must specifically identify the objective and detail how the commitment will be achieved. Additionally, taxpayers must submit annual reports to the NJEDA detailing the strategic commitment’s progress up to completion.
The Evergreen Program is a powerful strategic opportunity for eligible taxpayers to purchase tax credits while helping early-stage businesses in New Jersey. If you are interested in learning more about NJEDA’s Evergreen Program, reach out to your Sax advisor for more information.
Reach out to:
Edvin Givargis, State and Local Tax Partner at [email protected]
Stephen Ehrenberg, Tax Partner at [email protected]
John Nunes, State and Local Tax Manager at [email protected]
