N.J. Admin. Code § 19:31AA-1.8

Current through Register Vol. 56, No. 12, June 17, 2024

Section 19:31AA-1.8 - Approval letter; incentive award agreement

(a) Upon receipt of a recommendation from the Authority staff on the project, the Board shall determine whether or not to approve the application, the maximum amount of tax credits and the maximum percentage amount of allowed tax credits, and promptly notify the applicant, any co-applicant, and the Director of the Division of Taxation in the New Jersey Department of the Treasury of the determination.

1. The Board's award of the credits will be subject to conditions subsequent that must be met in order to retain the credits. An approval letter setting forth the conditions subsequent will be sent to the applicant and any co-applicant. Such conditions shall include, but not be limited to, the requirement that the project complies with the Authority's prevailing wage requirements, N.J.S.A. 34:1B-5.1, and affirmative action requirements, N.J.S.A. 34:1B-5.4, as set forth at N.J.A.C. 19:31AA-1.13, and that the project does not violate any environmental law requirements, including, but not limited to, the Flood Hazard Area Control Act Rules, N.J.A.C. 7:13. The approval letter shall also provide the requirements necessary for the Authority to execute the incentive award agreement.

2. For a financing gap tax credit the approval letter shall:

i. Require documentation evidencing project financing and planning approvals, including the submittal of executed financing commitments, documents that evidence site control by the applicant or an affiliate of the applicant, a copy of the site plan approval, a copy of an executed agreement with the operator of the supermarket or grocery store at the site of the project, and a copy of all required permits and planning and zoning approvals and permits; and

ii. Provide estimated dates of completion for the opening of the supermarket or grocery store for business to the public and include a requirement for periodic progress reports.

3. For an initial operating cost tax credit the approval letter shall:

i. Require documentation evidencing project and financing approvals, including the submittal of executed financing commitments, documents that evidence site control by the applicant or an affiliate of the applicant, a copy of all executed leases, licenses, or other occupancy agreements executed by the applicant for space at the supermarket or grocery store, and a copy of all required permits; and

ii. Provide the estimated date of the opening of the supermarket or grocery store for business to the public and include a requirement for periodic progress reports.

4. Absent extenuating circumstances or the Authority's determination, in its sole discretion, the Authority's approval of the tax credits shall expire if the applicant or co-applicant, as applicable, does not submit the documentation required at (a)2 and 3 above within one year after approval of the application.

5. If the Authority does not receive a periodic progress report when required, or if the progress report demonstrates unsatisfactory progress or inadequate information, then the Authority may rescind the commitment of the incentive award. If the Authority rescinds an incentive award or the approval of an award expires, the Authority may designate another new supermarket or grocery store as the first or second new supermarket or grocery store.

6. If the terms of the financing commitment in the evidence required by the approval letter are materially different from the projected terms in the application, the Authority may re-evaluate the project financing gap or the amount of initial operating shortfall and reduce the size of the incentive award accordingly or may rescind the commitment of the incentive award.

(b) Following satisfaction of the requirements for the execution of an incentive award agreement, the Authority shall enter into an incentive award agreement with the applicant and any co-applicant. The award of tax credits shall be conditioned on the applicant's and any co-applicant's compliance with the requirements of the agreement.

(c) The incentive award agreement shall specify and include:

1. A detailed description of the proposed project;

2. The duration of the eligibility period and the commitment period;

3. An ongoing requirement to provide the Authority with current personnel information that will enable the Authority to administer the Program;

4. A requirement that the supermarket or grocery store shall not cease operating on a full-time basis during the eligibility period and the commitment period;

5. A method for the applicant to certify that it has met the project costs or initial operating costs and other eligibility requirements of the Program;

6. A requirement for the applicant to provide annual financial statements, as certified by a certified public accountant and accompanied by an unqualified opinion reporting the project's financial performance. For the initial operating cost tax credit, the financial statements during the eligibility period shall list initial operating costs on an income statement approved by the Authority;

7. Representations that the applicant and any co-applicants are in substantial good standing and that the project will comply with all applicable laws, including, but not limited to, prevailing wage requirements as set forth at N.J.A.C. 19:31AA-1.13(b) and (c), affirmative action requirements as set forth at N.J.A.C. 19:31AA-1.13(a), and environmental laws, including, but not limited to, the Flood Hazard Area Control Act Rules, N.J.A.C. 7:13;

8. A provision acknowledging the Authority's right to confirm with the New Jersey Department of Environmental Protection, the New Jersey Department of Labor and Workforce Development, and the New Jersey Department of the Treasury, as set forth at N.J.A.C. 19:31AA-1.7(b)1, that the applicant and any co-applicant is in substantial good standing or has entered into an agreement with the respective department that includes a corrective action plan, as applicable;

9. A provision providing that if the applicant and any co-applicant is not in substantial good standing with the New Jersey Department of Environmental Protection, the New Jersey Department of Labor and Workforce Development, and the New Jersey Department of the Treasury, and has not entered into an agreement with the respective department, as set forth at N.J.A.C. 19:31AA-1.7(b)1, and after being given written notice thereof and an opportunity to be heard or to contest the determination by the respective department, then the applicant and any co-applicant may forfeit or the Authority may recapture tax credits in any year or in proportion to any year in which the applicant and any co-applicant is neither in substantial good standing with each department nor has entered into a corrective action;

10. A requirement that the applicant shall confirm that each contractor or subcontractor performing work at the project: is registered as required by the Public Works Contractor Registration Act, N.J.S.A. 34:11-56.48 et seq., has not been debarred by the New Jersey Department of Labor and Workforce Development from engaging in or bidding on public works contracts in the State, and possesses a tax clearance certificate issued by the Division of Taxation in the New Jersey Department of the Treasury. The incentive award agreement shall also include a provision that the Authority may suspend the tax credits, if the applicant and any co-applicant is not in compliance with this requirement, and if the suspension continues for two years, then, at the Authority's sole option, the applicant and any co-applicant may forfeit or the Authority may recapture the tax credits for those years or in proportion to those years;

11. A provision permitting an audit of evidence and documentation of the applicant and any co-applicant supporting the certifications pursuant to (e) below, and the annual reports pursuant to N.J.A.C. 19:31AA-1.9, as the Authority deems necessary, including, but not limited to, site visits and verification with the United States Department of Agriculture Food and Nutrition Service;

12. Reporting requirements pursuant to N.J.A.C. 19:31AA-1.9;

13. A provision permitting the Authority to amend the agreement;

14. A provision establishing the conditions pursuant to which the Authority, the applicant and any co-applicant, or all parties, may terminate the agreement;

15. A provision allowing the Authority to extend, in individual cases, the deadline for any annual report, project completion certification, or the opening of the supermarket or grocery store for business to the public;

16. Indemnification and insurance requirements from the applicant and any co-applicant;

17. Events that would trigger forfeiture, reduction, or recapture of the tax credits, including, but not limited to, provisions in this subchapter;

18. Default and remedies, including, but not limited to, a default if an applicant made a material misrepresentation on its application;

19. For a financing gap tax credit, the incentive award shall additionally specify and include:

i. The maximum amount of project cost and the maximum percentage of the project cost that will be used to calculate the amount of tax credits. If the actual project costs are less than the project cost set forth in the application, the tax credit shall be calculated based on the actual project cost;

ii. A description of the temporary certificate of occupancy permit, or other event evidencing completion of construction, and the opening of the supermarket or grocery store for business to the public, that begins the eligibility period;

iii. Milestones for the project, that shall include the estimated dates of commencement and completion of the project, and the opening of the supermarket or grocery store for business to the public, and a provision that the Authority may rescind the commitment of the award of tax credits if a project fails to advance in accordance with milestones in the incentive award agreement and may designate another new supermarket or grocery store as the first or second new supermarket or grocery store;

iv. A provision to verify the project financing gap at the time the applicant provides executed permanent financing commitments to the Authority and a verification of the applicant's projected cash flow at the time the applicant submits the evidence of the completion of the project pursuant to (f) below. To ensure the protection of taxpayer money, if the Authority determines at project certification that the actual capital financing approach utilized by the project has resulted in a project financing gap that is smaller than the project financing gap determined at Board approval, the Authority shall reduce the amount of the tax credit or accept payment from the applicant on a pro-rata basis. If there is no project financing gap due to the actual capital financing approach utilized by the project, then the applicant shall forfeit the incentive award;

v. A provision requiring that at the conclusion of the third year of the eligibility period, the Authority shall evaluate the applicant's reasonable and appropriate return on investment and compare that reasonable and appropriate return on investment to the reasonable and appropriate return at the time of Board approval. If the actual return on investment exceeds the reasonable and appropriate return on investment at the time of Board approval by more than 15 percent, the Authority shall reduce the amount of tax credits allowed in the certificate of compliance for the fourth year by 20 percent of the amount in excess of the reasonable and appropriate return on investment to the Authority; and

vi. A provision stating that if the applicant sells, leases, or subleases the supermarket or grocery store during the eligibility period or the commitment period, the Authority shall determine if the applicant's return on investment exceeded the reasonable and appropriate return on investment determined at Board approval. The applicant shall provide to the Authority any information that the Authority determines is necessary to re-evaluate the applicant's return on investment, including, but not limited to, the purchase price. If the applicant's final return on investment exceeds the reasonable and appropriate return on investment determined at Board approval by more than 15 percent, the applicant shall pay 20 percent of the amount of the excess to the Authority, and the Authority shall deposit such funds in the State General Fund; and

20. For an initial operating cost tax credit, the incentive award agreement shall additionally specify and include:

i. A detailed description of the operating years for which the tax credit is applicable;

ii. The maximum amount of initial operating shortfall and the maximum percentage of initial operating costs that will be used to calculate the amount of tax credits. If the actual initial operating costs are less than the initial operating costs set forth in the application, the tax credit shall be calculated based on the actual initial operating costs and the annual operating costs shortfall;

iii. The opening of the supermarket or grocery store for business to the public that begins the eligibility period; and

iv. Milestones for the project, that shall include the estimated date of commencement of construction, if applicable, the estimated date of commencement and completion of any tenant improvements undertaken by the applicant, the estimated date of the opening of the supermarket or grocery store to the public, and a provision that the Authority may rescind the commitment of the award of tax credits if a project fails to advance in accordance with milestones in the incentive award agreement and may designate another new supermarket or grocery store as the first or second new supermarket or grocery store.

(d) A labor harmony agreement shall be required if the State has a proprietary interest in a supermarket or grocery store and the agreement shall remain in effect for as long as the State acts as a market participant in the project. The provisions of this subsection shall apply to a supermarket or grocery store that will have more than 10 full-time employees. A labor harmony agreement shall not be required if the Authority determines that the supermarket or grocery store would not be feasible if a labor harmony agreement is required. The Authority shall support the determination by a written finding, which provides the specific basis for the determination.

(e) An applicant shall submit, prior to the issuance of tax credits pursuant to the incentive award agreement, satisfactory evidence of the opening of the supermarket or grocery store for business to the public and the Program eligibility requirements, that shall include, but not be limited to, the documents in this subsection:

1. Evidence that the supermarket or grocery store meets the definition of a new supermarket or grocery store and the supermarket or grocery store is operating on a full-time basis, which may include, but not be limited to, access to reports from an independent scanning data company and, if applicable, a certification from a licensed engineer that the major systems, as approved by the Authority, have been repaired or replaced for the supermarket to satisfy the definition of a new supermarket or grocery store;

2. A floor plan identifying the actual uses of the supermarket or grocery store, including square footage for any alcoholic beverages and products related to the consumption of such beverages, all retail space (for example, planogram), and the retail space dedicated to fresh and/or frozen fruit and vegetables;

3. A copy of a permit from the Supplemental Nutrition Assistance Program (SNAP) and an executed vendor agreement from the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) within 90 days of the opening of the supermarket or grocery store for business to the public or evidence of applications for SNAP and WIC retailer authorization made prior to the opening of the supermarket or grocery store for business to the public;

4. A certification indicating whether or not the applicant is aware of any condition, event, or act that would cause the applicant or any co-applicant not to be in compliance with the approval, the Act, or this subchapter;

5. A certification by the chief executive officer or equivalent officer of the applicant that the information provided pursuant to this subsection is true and correct pursuant to the penalty of perjury;

6. If the Authority approval included a co-applicant, a certification that the participation agreement between the applicant and the co-applicant remains in effect and is not in default;

7. Copies of all government permits and approvals required to open the supermarket or grocery store for business to the public and for operating the supermarket or grocery store on a full-time basis;

8. If applicable, satisfactory evidence that the applicant complies with the labor harmony agreement requirement pursuant to (d) above or as required for the tax credit pursuant to N.J.A.C. 19:31AA-1.7(d)1. For a financing gap tax credit award calculated as set forth at N.J.A.C. 19:31AA-1.7(d)1, if the applicant does not provide satisfactory evidence of the executed agreement, the incentive award shall be reduced to the amount set forth at N.J.A.C. 19:31AA-1.7(d)2;

9. For a financing gap tax credit, the documents shall additionally include:

i. Evidence of a temporary certificate of occupancy or other event evidencing completion of construction, and the opening of the supermarket or grocery store for business to the public that begins the eligibility period indicated in the incentive award agreement;

ii. A certification by a qualified independent certified public accountant of the actual project costs. The certification shall be made pursuant to an "agreed upon procedures" letter acceptable to the Authority. If applicable, the certification shall include the costs of the repair or replacement of the major systems, as approved by the Authority, for the supermarket or grocery store to satisfy the definition of a new supermarket or grocery store. If the project cost in the certification is less than the project cost in the approval of the application, the Authority may reduce the size of the tax credits accordingly. The Authority shall qualify certified public accountants and provide to the applicant the list of qualified certified public accountants; provided, however, the applicant may select a certified public accountant that is independent to the applicant and not on the Authority's list of qualified certified public accountants for purposes of the project cost certification if the applicant demonstrates an extenuating circumstance prohibiting the applicant from retaining a qualified certified public accountant. Such circumstances include, but are not limited to, the unavailability of any of the qualified certified public accountants to timely complete the certification or none of the qualified certified public accountants are independent to the applicant; and

iii. Verification of the applicant's projected cash flow at the time of the submission of the documents; and

10. For an initial operating cost tax credit, evidence of continued financing approvals, including the submittal of executed financing commitments.

(f) The documents required at (e) above shall be submitted by the following dates:

1. For a financing gap tax credit, no later than six months following the opening of the supermarket or grocery store for business to the public.

2. For an initial operating cost tax credit, no later than six months after the later of the opening of the supermarket or grocery store for business to the public or the date of approval of the application.

(g) Once the Authority accepts the documentation required at (e) above and the Authority determines that other required conditions have been met, within 90 days of the Authority's acceptance of the documentation and evidence satisfactory to the Authority, the Authority shall notify the applicant, any co-applicant, and the Director of the Division of Taxation in the Department of the Treasury, and the applicant shall receive its tax credit certificate that will be based on the information submitted in the documents, provided it shall not exceed the maximum amount determined by the Board pursuant to N.J.A.C. 19:31-23.7(d) and (e). The use of the tax credit certificate shall be subject to the receipt of an annual certificate of compliance issued by the Authority. Notwithstanding this subsection, if the applicant submitted a copy of the application for Supplemental Nutrition Assistance Program (SNAP) or Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) retailer authorization, the Authority shall only review all other documents and shall not finalize its acceptance of the documentation until the applications for SNAP and WIC retailer authorization have been approved. If an application for SNAP or WIC retailer authorization is denied by the administrative agency, the Authority shall not accept the documentation, shall rescind the commitment of the incentive award, and may designate another supermarket or grocery store as the first or second new supermarket or grocery store.

(h) For a financing gap tax credit, the eligibility period shall start with the privilege period in which the applicant establishes and opens the supermarket or grocery store for business to the public.

(i) For an initial operating cost tax credit award, the eligibility period shall start with the later of the privilege period in which the applicant opens the supermarket or grocery store for business to the public or in which the applicant submits a completed application to the Authority. Notwithstanding the date when the eligibility period starts, the eligibility period shall terminate at the end of the third year after the opening of the supermarket or grocery store for business to the public.

(j) Any modification to the project as approved by the Board, including, but not limited to, a reduction in the amount of the project cost, square feet, or initial operating costs, shall require review and approval by the Authority to determine that the project as modified does not undermine the basis for the tax credit award approved. The Authority may re-evaluate the project financing gap or the amount of initial operating shortfall and reduce the size of the incentive award accordingly.

N.J. Admin. Code § 19:31AA-1.8

Recodified from 19:31-28.8 56 N.J.R. 807(a), effective 5/6/2024