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Tax Credit Programs

Division of Taxation’s Corporation Business Tax Credits and Incentives

Manufacturing Equipment and Employment Investment Tax Credit Program

Available from the NJ Division of Taxation, the Manufacturing Equipment and Employment Investment Tax Credit provides a credit against corporation business tax liability for investments in certain manufacturing equipment and for certain increased employment. The manufacturing equipment portion of the credit is limited to 2 percent (4 percent for companies with 50 employees or less) of the net cost of qualified equipment up to a maximum allowed credit of $1 million. The employment investment portion of the credit is computed for each of the two succeeding years following the year a credit is allowed for the equipment investment. The tax credit in these years is limited to 3 percent of the net cost of qualified equipment, not to exceed $1,000 per job created directly related to the equipment.

Research and Development Tax Credit

Available from the NJ Division of Taxation, the R&D Tax Credit provides a credit for increased research activities based on qualified expenditures. This credit is calculated in the same manner as the federal tax credit for increasing research activities. It provides a credit of 10 percent of excess qualified research expenditures over a base amount, plus 10 percent of basic research payments. For periods beginning on or after January 1, 2012, the amount of the credits applied cannot reduce the tax liability to an amount less than the statutory minimum tax.

Items to Note

  • There have been major changes to the New Jersey R&D Credit, pursuant to section 6 of P.L. 2018, c. 48, amended by N.J.S.A. 54:10A-5.24. These changes are prospective only. If you are filing a return for tax years beginning prior to January 1, 2018, use the previous version of Form 306, which is available on the Division’s website (refer to N.J.A.C. 18:7-3.23 for information on how the credit was previously calculated).
  • For tax years beginning on and after January 1, 2018, New Jersey has recoupled to I.R.C. § 41 currently in effect, but only the Federal corporate income tax credit. The intent was to allow the new calculation methods (e.g., the alternative simplified credit), to make it easier for a business to qualify for the New Jersey R&D Credit, and to allow amounts paid or incurred to energy consortia in New Jersey to qualify. Previously the New Jersey R&D Credit was based on I.R.C. § 41 in effect on June 30, 1992, which was nonrefundable for Federal purposes and not refundable for New Jersey Corporation Business Tax purposes. The New Jersey credit made it clear that despite being coupled to the current Federal corporate income tax credit under I.R.C. § 41, any subsequent changes by Congress (e.g., terminating the Federal credit or making the Federal credit refundable) would not have any impact on the New Jersey credit.
  • A credit can be claimed for only those research activities that are performed in New Jersey.
  • The filing of a consolidated tax return by a controlled group of corporations is not permitted, however for tax years ending on and after July 31, 2019, combined returns are mandatory or elective. Taxpayers should otherwise use the Federal rules for computing the New Jersey R&D Credit that are applicable to consolidated groups if the taxpayers are a taxable member of a combined group included on a New Jersey combined return.

Urban Enterprise Zone Tax Credit

Available through the NJ Division of Taxation, a one-time credit of $1,500 is allowed for each new full-time, permanent employee who resides in any municipality which contains a zone, and immediately prior to employment by the qualified business was unemployed for at least 90 days or dependent upon public assistance as the primary source of income. A one-time credit of $500 is allowed for new full-time permanent employees who do not meet the qualification for the $1,500 tax credit, but are residents of any municipality in which a designated enterprise zone is located, and were not employed at a location within the qualifying municipality immediately prior to employment by the qualified business. The credit is available only for new full-time permanent employees who have been employed by the qualified business for at least six continuous months during the year for which the credit is claimed. For a new employee to be considered a full-time permanent employee, the total number of full-time permanent employees, including the new employee, employed by the qualified business during the calendar year must exceed the greatest number of full-time permanent employees employed in the zone by the qualified business during any prior calendar year since the zone was designated.

Urban Enterprise Zone Program, Department of Community Affairs 101 South Broad Street, PO Box 822, Trenton, NJ 08625

Questions? Contact the UEZ Help Desk at (877) 913-6837

In lieu of / Alternate Urban Enterprise Zone Tax Credit

Businesses that were established at least one year prior to Zone designation or expansion with fewer than 50 employees that are unable to meet the increased employment requirement may (with UEZ approval) make annual investments in the zone until their employment requirement is met. In-Lieu applications may be obtained by contacting the help desk.

  • Businesses with 10 or fewer employees are required to invest $5,000 per year
  • Businesses with over 10 employees are required to invest $500 per employee per year. The annual minimum investment during the 3 year recertification period must at least equal the greater of $5,000 or $500.00 times the # of employees on the later of the certification date or last recertification date.

Investments could be improvements to the exterior appearance or customer facilities of the business.

  • All improvements must be permanent.
  • The qualified business must submit at least one vendor's estimate of the project's costs (in advance).
  • A paid in full bill must be submitted to the UEZ Program upon completion of the pre-approved project.

Improvements to comply with existing ordinances are not eligible.

Financial or in-kind contributions to the zone municipality for improvements that increase the safety or attractiveness of the zone may be proposed.

  • Litter clean up and control
  • Landscaping
  • Creation or improvement of parking areas and facilities
  • Creation or improvement of recreational and rest area facilities
  • Repair or improvement of public streets, curbing, sidewalks and pedestrian thoroughfares
  • Creation or improvement of street lighting
  • Increase in police, fire or sanitation services

Purchasing Tax Credits

The EDA administers two programs (Technology Business Tax Certificate Transfer Program and the BRRAG Tax Credit Certificate Transfer Program) that allow companies to sell stranded corporate business tax credits. Profitable companies with New Jersey Corporate Business Tax liability may purchase these stranded tax credits for a discount. If your company is interested in purchasing these credits if and when they become available for sale, please contact a Business Incentive Officer.

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