New Jobs Investment Tax Credit
Among the various Corporation Business Tax Credits and Incentives available in New Jersey is a credit known as the New Jobs Investment Tax Credit. The purpose of this credit is to incentivize New Jersey businesses to invest in new or expanded business facilities that create new jobs for New Jersey residents. The credit is taken in equal annual installments over a five year period and is not to exceed one-half of that portion of the Corporation Business Tax liability which is attributable to and the direct result of the business’ qualified investment. The credit shall not reduce the tax liability below the statutory minimum.
In order to qualify for the credit, the investment must create at least 5 new jobs for small or mid-sized businesses (50 for large businesses) in New Jersey. The new employees must meet the median annual compensation requirement for the current tax year (at least $44,450 for tax years beginning in 2014, or $45,100 for tax years beginning in 2015, or $44,800 for tax years beginning in 2016, or $45,350 for tax years beginning in 2017, or $46,350 for tax years beginning in 2018, or $47,400 for tax years beginning in 2019, or $48,100 for tax years beginning in 2020).
There are certain limitations on which investments are eligible for the credit. First, the average book value of all real and tangible personal property in New Jersey must have increased over the prior year. Investments that qualify for this tax credit must be placed in service during tax years beginning after July 7, 1993 and must have been purchased from an unrelated party. Lastly, the average employment of the business in New Jersey in the first tax year of the credit must not be greater than that of the prior tax year. If a business does not meet these criteria, they do not qualify for the New Jobs Investment Tax Credit.
The new employee must be a New Jersey resident, hired to fill a regular, permanent position that was not available prior to the qualified investment, and would not exist if it weren’t for the qualified investment. The employee must not be related to the taxpayer and must not have been employed by the taxpayer in the prior six months. The taxpayer cannot claim a credit for the number of new employees that exceeds either the increase in the taxpayer’s average employment in New Jersey for the tax year, or one-half of the taxpayer’s average employment in New Jersey for the tax year. Also, individuals included in the determination of the Urban Enterprise Zone Employees Tax Credit or the Redevelopment Authority Project Tax Credit must be excluded in the determination of this tax credit.
Although there is no carryover provision for this tax credit, the amount of the unused annual credit may be refunded to the taxpayer subject to certain limitations. If any amount of the aggregate annual credit remains after the above limitations are applied, that amount may be refunded to the taxpayer. The amount of the refund cannot exceed 50% of the sum of the property taxes paid in the tax year and the implicit property taxes paid through rent or lease payments which are attributable to and the direct result of the taxpayer’s qualified investment.
The New Jobs Investment Tax Credit is quite complex as there are many requirements and limitations. In order to claim this credit, the business must complete Form 304. Form 304 includes multiple pages of instructions and definitions to explain the purpose of the credit, limitations, qualification and certification requirements, and calculations of the credit. If you believe your business is eligible for the credit, we encourage you to read the Form 304 instructions. We also encourage you to contact our office to learn more about the credit and whether or not your business is eligible. As always, our goal is to make your life less taxing!
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