Last week, legislation was enacted that will exempt the transfer of GrowNJ tax credits from taxation at the state level and change certain other rules associated with such transfers. Specifically, P.L. 2017, C.313 provides a complete tax exclusion for gains from the sale of Grow New Jersey tax credits for state Corporation Business Tax (CBT) and Gross Income Tax (GIT) purposes.
The bill also clarifies that Grow New Jersey tax credit recipients have three years from the date of issuance to sell the credits, while buyers will have the same 20-year carry forward available beginning with the tax period in which the credit is issued. This marks a stark change from the previous policy of limiting buyers’ tax credit utilization to only the vintage year in which the tax credit certificate was issued. In addition, providing sellers with a period of up to 3 years to sell the credits should allow them to receive long term capital gains treatment for federal income tax purposes should they choose to hold the credit for more than one year prior to selling.
Finally, the same legislation allows for companies to transfer these credits to affiliates for less than 75 percent of the net present value of the credits, regardless of whether the affiliate contributed to the tax credit project or not. This will make tax credit utilization easier and cheaper for companies with subsidiaries and affiliates with New Jersey CBT liabilities.
The changes take effect for periods beginning on or after January 1, 2017.