Urban Transit Hub Amendments Summarized by Tony Coscia and Charles Liebling

Friday, August 5, 2011

You may already be aware that on July 26, 2011, the New Jersey Governor signed S. 2972; P.L. 2011, c.89 (the "Act"), making various amendments to the Urban Transit Hub Tax Credit program ("UTHTC"). These amendments should further catalyze development in the New Jersey's nine "transit hubs". What follows is a summary of these new changes to the program; if you are interested in a full description of how the program works, please contact Tony Coscia or Charles Liebling.

Under the Act, mixed use projects can now more easily qualify for UTHTCs. Furthermore, the percentage of qualified costs that are eligible for the credit has increased from 20% to 35% for stand-alone qualified residential projects and the higher percentage also applies to the residential component of the newly-authorized mixed use projects.

Previously, there were two separate types of credits under the UTHTC program:

  • (i) a 100% credit, taken over 10 years, for capital investments made into "qualified business facilities" and
  • (ii) a 20% credit, taken over ten years, for capital investments made into "qualified residential projects."

Each required an independent investment of $50 million. While the treatment of a qualified business facility being built on its own has not changed, under the Act, in a qualified business facility that is part of a mixed use project, a business/developer can be awarded a credit equal to 100% of its capital investment if that qualified business facility represents at least $17,500,000 of the total capital investment (of a minimum of $50 million) in the mixed use project.

For a qualified residential project that is part of a mixed use project, a business/developer can be awarded a credit of up to 35% of its capital investment if the capital investment in the qualified residential project is at least $17,500,000 of the total capital investment (again, of a minimum of $50 million) in the mixed-use project.

Both business and residential components of a mixed use project still have to show the need for the credits:

  • for residential projects, the developer must demonstrate to the State that the project is likely to be realized with the tax credits but is not likely to be accomplished without them; and
  • for business facilities, the State has to determine that the State financial support of the capital investment will yield a net positive benefit for both the State and the municipality where the mixed use project will be located.

The issue of determining "net positive benefit" is, as you may know, currently the subject of litigation in connection with Panasonic's proposed intrastate move from its existing Secaucus location to a new site in Newark, where UTHTC would be available to it. The Act adopted specific language on how to analyze the "net benefit" of an intrastate transfer of a job: specifically, the New Jersey Economic Development Authority (the "Authority") shall not consider an intrastate transfer equal to the creation of a new job unless (i) it is part of the businesses' consolidation from two or more locations (in different municipalities) or (ii) the businesses' CEO certifies that the jobs are at risk for leaving the state and that the business intends to employ at least 500 employees in the qualified business facility.

The Act also made additional substantive changes to the UTHTC program. The Act now leaves it up the municipality to determine how much affordable housing should be required in a mixed use or qualified residential project, up to a maximum of 20% (as opposed to the previous blanket requirement of 20% of the units having to be reserved for affordable housing), with the caveat being that if a project has already received preliminary or final site plan approval, the percentage of affordable housing is governed by the terms of such approval. Furthermore, the Act allows businesses receiving the tax credit to carry forward unused credits for up to 20 years, provided that the value of all credits approved by the Authority against tax liabilities in any given fiscal year does not exceed $150,000,000.

For a full description of how the program works, please contact

  • Anthony R. Coscia
    • Email: acoscia@windelsmarx.com 
    • Phone: 732.846.2120
  • Charles B. Liebling
    • Email: cliebling@windelsmarx.com
    • Phone: 732.448.2526