New Jersey recently amended the state’s Business Employment Incentive Program (BEIP) to allow for the conversion of BEIP grant commitments to tax credits and tax credit transfer certificates. Under this change in law, businesses that have been approved for a BEIP grant may voluntarily convert the grant to a tax credit or transferable tax credit certificate by notifying the New Jersey Economic Development Authority (NJEDA) of its intent to do so. The deadline to convert a grant is July 11, 2016.
The process by which a taxpayer converts its grant to a tax credit or tax credit certificate is determinant upon the taxpayer’s filing status. The NJEDA recently released Amendment to Agreement forms, which must be filed as part of the conversion. Dependent on the tax type that is filed, a taxpayer would use one of the three amendment agreements the NJEDA has published: CBT, GIT, or IPT.
A decision to convert the grant to a tax credit is irrevocable. The tax credit may only be applied in the tax period for which it is issued and may not be carried forward. If a business that is subject to corporate income tax has no tax liability in a particular year, a cash refund in the amount of the certificate will be issued. Conversely, if a business that is subject to insurance premiums tax has no tax liability in a particular year, no cash refund will be issued.
The legislation sets out a credit payment schedule for grants accrued from 2006 to 2025, directing when and in what installments the credit will be issued. Credits will be made available for use beginning in fiscal year 2017.
For businesses not subject to corporate income or insurance premiums tax, an approved BEIP grant may be converted into a tax credit transfer certificate(s). Tax credit transfer certificate holders may elect to sell the credits for no less than 75% of face value. The first period tax credits will be able to be sold is tax accounting period 2017. Once sold, the credits are available to the buyer immediately as an estimated payment. The same deadline as above applies to convert grants to tax credit transfer certificates.
TECHNICAL INFORMATION CONTACTS:
Allea Newbold
Principal
Ryan
813.228.7100
allea.newbold@ryan.com
Bill Coursey
Director
Ryan
713.629.0090
bill.coursey@ryan.com