Bill Summary – FastDemocracy

LEGISLATIVE FISCAL ESTIMATE
                              [First Reprint]
                                SENATE, No. 3783
                             STATE OF NEW JERSEY
                              220th LEGISLATURE
                                             DATED: JUNE 22, 2023
                                                  SUMMARY
    Synopsis:                   Modifies certain provisions of "New Jersey Innovation Evergreen
                                Act" and "Food Desert Relief Act."
    Type of Impact:             Annually reduced insurance premiums tax collections. Potential State
                                revenue loss shift to earlier fiscal years.
    Agencies Affected:          New Jersey Economic Development Authority. Department of the
                                Treasury.
                                       Office of Legislative Services Estimate
    Annual Fiscal Impact
    Insurance Premiums Tax Collections
    Decrease                                                           Indeterminate
    Potential State Revenue Loss Shift                                 Indeterminate
    The Office of Legislative Services (OLS) concludes that this bill will result in decreased
     insurance premiums tax collections due to the bill’s provisions that would permit a purchaser
     of tax credits under the New Jersey Innovation Evergreen Program to apply a tax credit or tax
     credit transfer certificate to the purchaser’s insurance premiums tax liability. The magnitude
     of the reduced insurance premiums tax collections is indeterminate because which companies
     will purchase tax credits, and the insurance premiums tax liabilities of those companies, cannot
     be credibly projected.
    The bill may also result in the State incurring revenue losses sooner than it otherwise would
     under current law. This stems from a provision of the bill providing that any tax credit sold
     under the Food Desert Relief Program would be valid in the privilege period in which the sale
     is approved, as opposed to the year in which the sale is completed.
    The OLS notes that overall, direct State revenue losses stemming from the award of tax credits
     will remain unchanged compared to current law as the bill does not change the amount of tax
     credits that may be awarded under the New Jersey Innovation Evergreen Program or the Food
     Desert Relief Program.
      Office of Legislative Services                                    Legislative Budget and Finance Office
           State House Annex                                                    Phone (609) 847-3105
              P.O. Box 068                                                       Fax (609) 777-2442
      Trenton, New Jersey 08625                                                  www.njleg.state.nj.us
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                                     BILL DESCRIPTION
    This bill modifies certain provisions of the New Jersey Innovation Evergreen Program, which
is an economic development program that sells discounted tax credits to raise capital for qualified
businesses in New Jersey. Among other changes, the bill allows a purchaser to apply a credit or
tax credit transfer certificate awarded under the program to the purchaser’s insurance premiums
tax liability, in the case of a purchaser that is an insurance company. Under current law, a
purchaser may apply a credit or tax credit transfer certificate awarded under the program against
the purchaser’s corporate business tax liability.
    The bill also modifies a provision of the Food Desert Relief Program, which is an economic
development program that provides tax credits to eligible businesses to incentivize those
businesses to establish and retain new supermarkets and grocery stores in “food desert
communities.” The bill provides that any tax credit sold by the New Jersey Economic
Development Authority under the program is valid in the privilege period in which the sale is
approved. Under current law, the credit is valid under in the privilege period in which the sale is
completed.
                                      FISCAL ANALYSIS
EXECUTIVE BRANCH
   None received.
OFFICE OF LEGISLATIVE SERVICES
     The OLS concludes that this bill will result in decreased insurance premiums tax collections
due to the bill’s provisions that would permit a purchaser of tax credits under the New Jersey
Innovation Evergreen Program to apply a tax credit or tax credit transfer certificate to the
purchaser’s insurance premiums tax liability. The magnitude of the reduced insurance premiums
tax collections resulting from the enactment of the bill is indeterminate because which companies
will purchase tax credits, and the insurance premiums tax liabilities of those companies, cannot be
credibly projected.
     Under current law governing the Innovation Evergreen Program, the State is authorized to sell
up to $300 million in tax credits via annual competitive auctions to eligible corporations over a
seven-year period. Purchasers of tax credits under the program purchase the credits for a
minimum of 75 percent of the face value of their requested tax credit award to offset their
corporation business tax liability by up to 25 percent. On December 21, 2022, the Economic
Development Authority board approved tax credit awards to eight qualified applicants at a total
purchase price of approximately $41 million.
     While current law only permits the credit to be applied to corporate business tax liabilities, this
bill would allow credits to be applied to insurance premiums tax liability. The insurance premiums
tax applies to premiums collected on insurance risks by every insurance company transacting
business in the State. In general, insurance companies that are subject to the insurance premiums
tax are exempt from paying corporation business tax.
     The bill may also result in the State incurring revenue losses sooner than it otherwise would
under current law. This stems from a provision of the bill providing that any tax credit sold under
the Food Desert Relief Program would be valid in the privilege period in which the sale is
approved, as opposed to the year in which the sale is completed. Under current law, the State is
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authorized to sell up to $240 million annually over a six-year period through competitive auctions.
In April 2023, the Economic Development Authority’s board approved the sale of up to $50
million to fund future grant, loan, and technical assistance programs administered by the authority
to strengthen food security in designated food desert communities. The auction of these credits is
expected to take place in July 2023.
  Section:     Revenue, Finance & Appropriations
  Analyst:     Christopher Myles
               Senior Fiscal Analyst
  Approved:    Thomas Koenig
               Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).
Statutes affected: 
Introduced: 34:1B-289, 34:1B-292, 34:1B-294, 34:1B-295
Advance Law: 34:1B-289, 34:1B-292, 34:1B-294, 34:1B-295, 34:1B-306
Pamphlet Law: 34:1B-289, 34:1B-292, 34:1B-294, 34:1B-295, 34:1B-306