New NJ Brownfields Tax Credit Program Enacted Under Economic Recovery Act of 2020
At the end of 2020, the legislature passed and on January 7, 2021, Governor Murphy signed into law a massive new economic development law – the Economic Recovery Act of 2020. Among the variety of new economic development incentives is the Brownfields Redevelopment Incentive Program Act (BRIPA), which provides for the awarding of tax credits to brownfields developers to promote the redevelopment of brownfields in New Jersey.
Under BRIPA, an eligible developer (i.e., one not responsible for the contamination) of a redevelopment project may submit an application to the Economic Development Authority (EDA) and NJDEP for approval of tax credits to compensate for remediation costs, including both the cost of remediating soil and groundwater and also the cost of addressing contamination in building structures (e.g., asbestos, lead paint PCBs, etc.).
To be eligible, the project must have a project financing gap – meaning that the developer has contributed at least 20 percent of the project’s capital itself and the project has a capital shortfall that cannot be satisfied from other sources. The developer must also demonstrate that the project is not economically feasible without the credit, the municipality will provide a letter of support, workers will be paid prevailing wage and, with limited exceptions, remediation (except for preliminary assessment and investigative work) has not yet commenced.
Applications will be reviewed by EDA (in consultation with NJDEP) through a competitive process and a variety of factors may be considered as part of that process. Among those factors is whether the project reduces environmental and public health stressors in an overburdened community, another reflection of the state’s commitment to apply environmental justice principles.
The remediation may be performed under a memorandum of agreement or other oversight document with the NJDEP or pursuant to the NJDEP’s LSRP program. Once the application is approved by EDA and prior to starting remediation, the developer must enter into a redevelopment agreement with EDA. The agreement will specify the amount of the credit, the date of completion for the remediation, the project remediation cost and require six-month progress reports. Conditions include compliance with EDA’s affirmative action requirements and green building standards, A labor harmony agreement may be required for certain retail and distribution establishments in the project and NJDEP is subrogated to the rights of the developer to recover any remediation costs from third parties. The credits are transferable one time.
A total of up to $50 million per year in credits is available through the first six years of the seven-year program. Credits will be awarded in an amount not to exceed 40 percent of actual remediation costs, 40 percent of projected remediation costs as set forth in the redevelopment agreement, or $4 million, whichever is least.
The above summary only begins to scratch the surface of this new program, and full implementation will have to await the promulgation of new regulations - an expedited process of temporary regulations is provided under the law; however, it appears likely that BRIPA will generate a lot of interest among brownfields redevelopers in 2021 as they consider how to factor the new incentives into their plans.