A massive, $14 billion corporate tax-break bill won its final signoff from lawmakers on Monday, just days after being formally introduced amid a worsening pandemic.
The voluminous tax-break bill would update economic-development incentive programs that were allowed to expire more than a year ago and also enact several new programs to encourage things like historic preservation and brownfield remediation.
Debate was brief, at times sharp and with lawmakers raising objections about the speed of the process, a lack of transparency to the public and a worry that not enough was being done to boost small businesses.
In the end, the Assembly passed it by a 68-11 margin with the Senate approving it about an hour later in a 38-1 vote.
Those votes are a sign of the bill’s strength, Gov. Phil Murphy during a news briefing on the pandemic.
“The principles that underpin this incentives package have been out there for two years,” Murphy said, discounting critics who said the bill was bing rushed into law. “The more that people look at this…it gets better on close inspection.”
Murphy ticked off benefits to main streets, underserved communities, the innovation economy and it includes an inspector general and other checks and balances. “It’s got all the stuff we’ve been preaching since day one. And we’re going to need it,” he said, noting the fallout from the pandemic and what he called an “underwhelming federal response.”
The measure had cleared appropriations committees in both the Assembly and Senate on Friday, even as numerous amendments were made at the last minute in the online hearings. Among the amendments was new language inserted into the bill that would double the amount that can be allocated annually for an existing tax-credit program for film production. That change, which would also extend the life of the film-credit program by several years, added another roughly $2 billion to the legislation’s original price tag.
Business-lobbying groups that have been urging the governor and lawmakers to restore state incentive programs since they lapsed in 2019 are backing the legislation, which was introduced after Murphy and fellow Democrats who control the Legislature announced a breakthrough last week.
But several liberal groups are raising concerns about the legislation, including over the size of the tax breaks that would be authorized over the new program’s six-, and possibly, seven-year term. The speed at which the bill was advanced through the Legislature during the coronavirus pandemic is also being questioned, including by some lawmakers.
Here’s a breakdown of key points in the tax-break plan:
Tax-break programs: The current version of the bill would effectively restore and update two incentive programs that were in place to encourage job creation and redevelopment projects before they were allowed to expire in 2019. The measure would also establish several new programs to incentivize other economic-development efforts. They include more targeted tax breaks for historic preservation, brownfield remediation, eliminating food deserts and supporting so-called anchor institutions. There’s also a one-time appropriation to help small businesses.
The measure would also establish a public-private venture-capital fund to seed investments in startups and other emerging businesses in New Jersey. Tax breaks could also be provided under the bill for “transformative projects” such as large-scale housing or mixed-use developments.
Caps: The legislation establishes new caps covering seven different programs created by the bill. For some of the programs, the measure also caps how much can be awarded by region in a bid to ensure equitable geographic distribution of the tax breaks. And in some cases, there would also be lower limits on per-job awards than in previous incentive programs.
In all, the bill would allow for up to $1.5 billion in tax breaks to be awarded annually over six years. But if the total value of awarded tax breaks doesn’t hit the proposed program caps in the first six years, they could be extended for one additional year, according to one of the many amendments introduced on Friday. Another up to $2.5 billion in tax breaks could also be awarded for “transformative projects” over the six to seven years, pushing the total amount of authorized spending on tax breaks up to $11.5 billion. The annual spending caps could be exceeded in a given year with approval from the Economic Development Authority, but overall tax-break awards would remain capped at $11.5 billion over the six or seven years, according to the bill.
The total price tag for the legislation is $14 billion, counting the changes to the film-tax credit program and other additions approved by lawmakers Friday.
Oversight: Several investigations and audits have raised serious concerns about weak oversight requirements that were in place for previous state tax-incentive initiatives, making those programs prone to abuse. In response, the bill calls for policy changes to improve government oversight. These include the establishment of an inspector general position within the EDA to serve as a new watchdog. A so-called net-benefit test for tax incentive projects has also been upgraded; companies and their executives will also now have to certify under “penalty of perjury” that they are telling the truth in applications for tax breaks. New worker protections would also be established under the bill.
Timing: The bill’s introduction last week came roughly a year-and-a-half after Murphy and legislative leaders could not reach agreement before the prior tax-incentive initiatives expired in mid-2019. After their breakthrough was announced last week, Murphy and lawmakers have maintained the legislation should be enacted quickly, better positioning the state economy as an expected recovery from the pandemic begins in earnest next year. The measure was put on a fast track by legislative leaders and it is on schedule to be introduced, amended and put up for final legislative approval, all within less than one week.
But the fast-tracking of the bill has been harshly criticized by liberal groups and some Republican lawmakers. They’ve called for the approval process to be slowed to allow for more time to assess how the tax breaks could impact the state’s roughly $40 billion annual budget. They also note the funding of the tax breaks will be occurring at the same time the state will also be paying back significant borrowing that was authorized earlier this year to help offset revenue losses triggered by the coronavirus pandemic. However, business-lobbying groups are urging quick adoption, citing concerns about the ongoing economic impact of the pandemic.