Rule Changes Enable Greater Access to Industry Opportunities
The New Jersey Economic Development Authority (NJEDA) Board today approved a series of amendments to the Offshore Wind Economic Development Tax Credit Program rules to reflect changes to the program enabled by the New Jersey Economic Recovery Act (ERA) of 2020, signed by Governor Phil Murphy on January 7, 2021. The primary changes enacted by the ERA include: modifying the period over which tax credits are paid out from 10 years to five years; revising the minimum number of new full-time jobs required to be eligible for the program from 300 to 150, and allowing for a project to ramp-up jobs over time; and expanding the eligible geography for the program from the seven southern counties to the entire state.
Offshore wind is one of the high-growth, high-wage sectors the State identified in Governor Murphy’s Economic Development Plan. The Offshore Wind Economic Development Tax Credit Program provides tax credits for capital investment in a qualified wind energy facility located in New Jersey, as it is designed to spur employment growth and offshore wind supply chain development as a result of capital investment in land-based offshore wind industry projects.
“As a result of Governor Murphy’s vision for New Jersey as a national hub for offshore wind, the state is well-positioned to lead this rapidly-growing sector. The changes to the Offshore Wind Tax Credit approved by our Board today will enable greater flexibility for businesses creating new jobs in New Jersey,” said NJEDA Chief Executive Officer Tim Sullivan. “Companies up and down the offshore wind supply chain will find that New Jersey offers a vast pool of skilled talent, a firm commitment to investment in first-rate offshore wind infrastructure, and an innovation ecosystem that offers resources to prepare companies for this vast opportunity.”
By adjusting the period over which tax credits are paid out, a business can now receive the tax credits over the course of five years at a rate of one-fifth of the total amount of the business’s award. This shorter pay-out timeframe is better suited for an industry this is rapidly scaling up brand new operations to support wind farm projects across the U.S. East Coast.
The changes adopted today also create a pathway for additional projects to participate in the program. Previously a project needed at least 300 new full-time jobs to be eligible for tax credits. Now, projects that projects creating between 150-300 new full-time jobs can apply for tax credits, however awards will be sized using a pro-rated award formula. In recognition of offshore wind being a new industry in the State, the rules also now allow a project to ramp-up job creation over the first four years of a project.
Another change made by the ERA of 2020, expands the eligible geography for the program from the seven counties to the entire state. In addition, to provide clarity on the above statutory changes, the approved amendments also include policy updates on eligible costs, calculating net benefits test parameters, and fees.
To receive tax credits through the Offshore Wind Economic Development Tax Credit Program, a business must:
- Make or acquire capital investments totaling at least $50 million in a qualified wind energy facility. If the business is a tenant, the business must lease an area of the qualified wind energy facility that represents at least a $17.5 million capital investment in the facility.
- Create a minimum of 150 new full-time jobs over the four-year commitment period. A tenant may meet the employment requirements with other tenants at the qualified wind energy facility. A project that creates between 150 and 300 new full-time jobs will receive a prorated award compared to those that create 300 or more jobs.
- Demonstrate a net positive economic benefit to the State.
Limited by a net positive economic benefits test, the tax credits can equal up to 100 percent of the business’s qualified capital investments. The credits can be used against corporation business or insurance premiums tax. The calculation of new full-time employees may include select positions resulting from equipment supply coordination agreements with equipment manufacturers, suppliers, installers, and operators associated with the supply chain required to support the qualified wind energy facility.
Tenants in qualified wind energy facilities may also receive tax credits, if they occupy space in a qualified wind energy facility that proportionally represents at least $17.5 million of the capital investment in the facility, and, employ at least the minimum number of new, full-time employees in that facility.
Businesses must apply for the tax credits by July 1, 2025 and satisfy the capital investment and employment conditions for award of the credits by July 1, 2028.