Urban Transit Hub Tax Credit

Transcription

1 New Jersey Redevelopment Authority Urban Transit Hub Tax Credit Anne S. Babineau, Esq. Wilentz, Goldman & Spitzer, P.A. 90 Woodbridge Center Drive Woodbridge, New Jersey 07095

2 Urban Transit Hub Tax Credit UTHTC Provided Support For Residential Tower On Top Of Parking Garage ( Qualified Residential Project ) Photo of Gateway Transit Village project in New Brunswick, NJ Gateway Transit Village 2

3 Urban Transit Hub Tax Credit Photo of Gateway Transit Village project in New Brunswick, NJ Gateway Transit Village 3

4 Urban Transit Hub Tax Credit This QRF Will Provide Workforce and Affordable Housing in Newark Photo of Halsey Street Project Charter Schools, Workforce Housing, and Retail in Newark, NJ Teachers Village, Newark, NJ 4

5 Urban Transit Hub Tax Credit The UTHTC Provided Support for the Residential Development in the Context of Larger Project That Includes Charter Schools and Retail Photo of Halsey Street Project Charter Schools, Workforce Housing, and Retail in Newark Teachers Village, Newark, NJ 5

6 Urban Transit Hub Tax Credit Photo of Halsey Street Project Charter Schools, Workforce Housing, and Retail in Newark Teachers Village, Newark, NJ 6

7 Urban Transit Hub Tax Credit A UTHTC Application Was Approved for the New Panasonic Building in Newark Artist s rendering of new Panasonic Building in Newark 7

8 Urban Transit Hub Tax Credit Prudential Recently Announced That It Is Submitting an Application That Could Provide for a Brand New Office Tower Near NJPAC Photo of NJPAC area in Newark 8

9 Urban Transit Hub Tax Credit Purpose of Program Tax credit program To encourage capital investment and employment in 1. Eligible municipalities 2. For transit oriented development Originally authorized by 2007, amended 2009 and

10 Urban Transit Hub Tax Credit What are Eligible Municipalities Eligible Municipalities are municipalities which i. qualify for State Aid or continue to qualify for State Aid and ii. in which 30% or more of the value of the real property was exempt from local property taxation during the year The only nine eligible municipalities are Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson and Trenton. 10

11 Urban Transit Hub Tax Credit Urban Transit Hub An urban transit hub ( Hub ) means the following properties which have been specifically delineated by the EDA: Property located within a 1/2 mile radius surrounding the mid point of a New Jersey Transit Corporation, Port Authority Transit Corporation [PATCO] or Port Authority Trans-Hudson Corporation [PATH] rail station platform area, including all light rail stations. 11

12 Urban Transit Hub Tax Credit Property located within a one mile radius of the mid point of the platform area of such a rail station if the property is in a qualified municipality under the Municipal Rehabilitation and Economic Recovery Act (C.52:27BB-1) (Camden). Property located within a 1/2 mile radius surrounding the mid point of one of up to two underground light rail stations' platform areas that are most proximate to an interstate rail station (subway stations in Newark near Penn Station). Property adjacent to, or connected by rail spur to, a freight rail line if the business utilizes that freight line at any rail spur located adjacent to or within a one mile radius surrounding the entrance to the property for loading and unloading freight cars on trains. 12

13 Urban Transit Hub Tax Credit A property which is partially included within the radius shall only be considered part of the Hub if over 50% of the land area falls within the radius. A rail station at an international airport is not a Hub. 13

14 Urban Transit Hub Tax Credit Tax Credit - Generally applicable to All Projects The combined credits under the Act shall not exceed $1.5B Credit can be applied against corporate business tax, and certain insurance premiums tax. Credit must be taken over ten years (the eligibility period ), At a rate of 1/10th of the total credit. Beginning with the tax period in which the business is first approved as having met the investment capital and employment qualification. Credit may be carried forward under certain circumstances. 14

15 Urban Transit Hub Tax Credit Businesses that don t pay Taxes for which Hub credit is applicable will be able to transfer all or part of credits to receive benefit of the UTHTC. (Will discuss later.) 15

16 Non-Residential Projects Credits are available to a business (corporation, partnership, S corporation or limited liability company) with respect to its capital investment made in a qualified business facility ( QBF ). QBF is a building, complex of buildings, or structural components of buildings, and all machinery and equipment located within a Hub, used in connection with operation of its business. 16

17 Non-Residential Project Investment made in QBFs must be made after January 13, 2008 and before January 13, Only capital investments made prior to the submission of documentation of a business s credit amount qualify for the credit. 17

18 Non-Residential Project Business must apply by January 13, Business must submit documentation for approval of credit amount by January 13,

19 Non-Residential Project Amount of tax credit = up to 100% of the capital investment made by the business, or the capital investment represented by the business s leased area, or area owned by the business as a condominium. A business that acquires a QBF shall also be deemed to have acquired the capital investment made or acquired by the seller. (This is not intended to permit a transfer of a project during the 10 year eligibility period; see Transfer Limitations) 19

20 Non-Residential Project OWNER Must make or acquire capital investment in a QBF equal to at least $50M (capital investments made by a tenant shall be deemed to be included in the owner s capital investment but only to the extent necessary to meet owner s minimum capital investment of $50M). Capital investment of owner (if owner uses space at the facility) = capital investment made x net leasable area not leased or acquired by owner total net leasable area in QBF 20

21 Non-Residential Project TENANT Owner must make or acquire capital investment in a QBF equal to at least $50M. Tenant must occupy a leased area of the QBF that represents at least $17.5M of capital investment in the QBF. Credit amount allowed a business that is a tenant shall not exceed the total lease payments Capital investment represented by the tenant s leased area capital investment made x net leasable area/leased acquired by owner total net leasable area in QBF 21

22 Non-Residential Project Employment If business is other than tenant: Must employ not fewer than 250 full-time employees at the QBF. If business is a tenant: Tenant and up to two other tenants in the QBF shall employ not fewer than 250 full-time employees in the aggregate. 22

23 Non-Residential Project If in any tax period, fewer than 200 full-time employees of the business at the QBF are employed in new full-time positions, the tax credits are reduced by 20% for the tax period. If in any tax period the business reduces the total number of fulltime employees in its Statewide workforce by more than 20% from the number in the last tax period, then the business shall forfeit its credit for that period and each subsequent tax period until the first tax period for which documentation demonstrating the restoration has been approved by the EDA. [Beware of other forfeiture possibilities.] 23

24 Net Positive Benefit Test Must demonstrate to EDA that Non-Residential Project the State s financial support of the proposed capital investment will yield a net positive benefit to both the State and the eligible municipality. EDA can consider the transfer of an existing job from one location in the State to another location in the State as the creation of a new job under certain circumstances. 24

25 Residential Projects Credit is available to Developer who invests in a qualified residential projects ( QRP ) QRP means any: building, complex of buildings or structural components of buildings consisting predominately of residential units located in a Hub within an eligible municipality. 25

26 Residential Projects Investment made in QRPs must be made after July 28, 2009 and before July 28, Only capital investments made prior to the submission of documentation of a business s credit amount qualify for the credit. 26

27 Residential Project A developer shall apply by July 28, 2014 (5 years after effective date of Act), and (Submit documentation for approval of credit amount by July 28, 2017.) 27

28 Residential Projects Amount of the Credit A developer shall be allowed credit of up to 35% of its capital investment made in a QRP. A developer must make or acquire capital investments of not less than $50M. A developer that acquires a QRP shall also be deemed to have acquired the capital investment made or acquired by the seller. (This is not intended to permit a transfer of a project during the 10 year eligibility period; see Transfer Limitations). 28

29 Residential Project But For Test A developer shall demonstrate to EDA through a project pro forma analysis that the QRP is likely to be realized with the provision of tax credits at the level requested but is not likely to be accomplished by private enterprise without the tax credits. (Does not also impose net benefit test.) 29

30 Residential Projects The value of all credits under the residential portion of the Act is limited to $150M out of the combined credits under the Act shall not exceed $1.5B. EDA may in its discretion exceed the $150M cap. In allocating credits, the executive director shall take into account, together with other factors deemed relevant by the executive director, input from the municipality in which the project is located, whether the project furthers specific State or municipal planning and development objectives, or both, and whether the project furthers a public purpose, such as catalyzing urban development or maximizing the value of vacant, dilapidated, outmoded, governmentowned, or underutilized property, or both. 30

31 Mixed Use Projects A mixed use project means a project comprising both a QRP and a QBF The new amendment to the statute is more like a clarification, incorporating as it does requirements of QRP and QBF. 31

32 Mixed Use Projects Capital Investments made for QBF and QRP that are part of a in Mixed Use Project must be made after July 26, 2011 (effective date of P.L. 2011, c. 89). For QBF that is part of a Mixed Use Project: The allowance of credits under this paragraph shall be subject to the restrictions and requirements, to the extent that those are not inconsistent with the provisions of this paragraph, set forth in paragraphs [setting forth requirements for QBF]. For a QRP that is part of a Mixed Use Project: The allowance of credits under this paragraph shall be subject to the restrictions and requirements, to the extent that those are not inconsistent with the provisions of this paragraph, set forth in paragraphs [setting forth requirements for QRP]. 32

33 Mixed Use Projects A business shall be allowed a credit of 100% of its capital investment in a QBF that is part of a mixed use project provided that The QBF represents at least $17.5M of the total capital investment in the mixed use project, Business employs not fewer than 250 full-time employees in the QBF, and Total capital investment in the mixed use project of which the QBF is a part is not less than $50M Must show that QBF will yield a net positive benefit. 33

34 Mixed Use Projects A developer shall be allowed a credit of 35% of its capital investment in a QRP that is part of a mixed use project provided that The capital investment in the QRP represents at least $17.5M of the total capital investment in the mixed use project, Total capital investment in the mixed use project of which the qualified residential facility is a part is not less than $50M, Must show that QRP is not likely to be accomplished by private enterprise without the tax credits. 34

35 Urban Transit Hub Tax Credit Limitations and Restrictions A business is not allowed urban transit credits if: the business participates in a Business Employment Incentive Program ( BEIP ) relating to the same capital investment, employees and site that qualify the business for the urban transit hub credits; and the business receives assistance from the Business Retention and Relocation Assistance Grant Program ( BRAG ). A business that is allowed credits under this Act is not eligible under the Municipal Rehabilitation and Economic Recovery Act. (Camden) 35

36 Urban Transit Hub Tax Credit Approval and Application Process Not as of right Net Positive Benefit But for See regs for how EDA is evaluating projects. 36

37 Urban Transit Hub Tax Credit Transfers/Sales/Subleases If the qualified business facility is sold during the 10 year eligibility period, the new owner shall not acquire the capital investment of the seller and the seller shall forfeit all tax credits for the tax period in which the sale occurs and all subsequent tax periods but the tenant s credits remain unaffected. If tenant subleases during the 10 year eligibility period, the new tenant shall not acquire the credit of sublessor, and the sublessor tenant shall forfeit all credits for the tax period of its sublease and all subsequent tax periods. 37

38 Transfer of Credits Urban Transit Hub Tax Credit A business may apply to the Director of the Division of Taxation and executive director of the EDA for a tax credit transfer certificate, covering 1 or more years, in lieu of business being allowed any amount of the tax credit against its tax liability. The tax credit transfer certificate may be sold or assigned. The business waives the right to the credit it elects to sell or assign. The consideration for the sale or assignment shall not be less than 75% of the transferred credit amount. Tax certificate must be accompanied by a letter of compliance, issued annually. 38

39 Urban Transit Hub Tax Credit Green Initiatives The capital investment may include environmental components required to attain the level of silver rating or above in the LEED building rating system. Affordable Housing Municipality has the option of deciding the percentage of newlyconstructed residential units within the project, up to 20% of the total, required to be reserved for occupancy by low or moderate income households. 39