N.J. Admin. Code § 19:31R-1.7

Current through Register Vol. 56, No. 21, November 4, 2024

Section 19:31R-1.7 - Evaluation process; award of tax credits; appeals

(a) The Authority, in consultation with the Director, shall process and evaluate complete applications.

(b) The Authority shall transmit a copy of its decision to the applicant-investor.

(c) Except as provided at (d) below, if the Authority has approved the application, the Authority shall notify the Division of Taxation of the approval, and the Division of Taxation shall then issue the tax credit certificate to the applicant investor.

(d) The following apply to an investor that has been approved for a qualified investment into a qualified venture fund on the basis of an irrevocable contractual commitment:

1. Following approval by the Authority, but before the issuance of tax credits, the Authority shall notify the investor of the Authority's decision.

2. Prior to the issuance of tax credits, the Authority shall provide the investor with a commitment agreement and require the investor to return the commitment agreement executed by the qualified venture fund and the investor. The Authority's award of the credits will be subject to the execution of the commitment agreement. Absent extenuating circumstances or the Authority's determination, in its sole discretion, the Authority's approval of the tax credits shall expire if the investor does not return the executed commitment agreement within the period of time required by the Authority. The terms of the commitment agreement shall include, but shall not be limited to, the following:

i. A requirement that the qualified venture fund shall invest a minimum of 50 percent of its funds in New Jersey-based businesses within the earlier of the qualified venture fund's investment period or 10 years. The total size of the qualified venture fund shall be determined at the qualified venture fund's final closing date;

ii. At the qualified venture fund's option, a requirement that the venture fund shall invest a minimum of 50 percent of its funds in diverse entrepreneurs;

iii. A requirement that the venture fund shall make calls of a minimum of 80 percent of the irrevocable contractual commitments within the earlier of the initial term of the qualified venture fund or 10 years. The initial term shall be determined based on the governing agreement between the investor and the fund;

iv. A requirement that the investor shall satisfy 100 percent of the capital call commitment's from the qualified venture fund;

v. A provision permitting the Authority to recapture, absent extenuating circumstances, from either the venture fund or the investor, based upon who fails to perform. The recapture amount shall be equal to a prorated amount of the tax credits if the qualified venture fund or investor does not comply with (d)2iii or iv above, an amount equal to the total tax credits if the qualified venture fund does not comply with (d)2i above, or an amount equal to the increase in tax credits if the qualified venture fund does not comply with (d)2ii above, as applicable. Such recapture may include interest on the recapture amount, at a rate equal to the statutory rate for tax deficiencies, plus any statutory penalties, and all costs incurred by the Authority and the Division of Taxation in the Department of the Treasury in connection with the pursuit of the recapture, including, but not limited to, counsel fees, court costs, and other costs collection; and

vi. A requirement for the qualified venture fund to submit to the Authority an annual review report in a format as may be determined by the Authority, which shall contain the following information:

(1) A list of any capital calls of the investor's irrevocable contractual commitment that have been made and the date of the capital call(s);

(2) The qualified venture fund's financial statement for the most recent year prepared by an independent certified public accountant, including all investment schedules;

(3) Documentation demonstrating the transfers of cash from the investor to the qualified venture fund in response to the capital call(s), including, but not limited to, a subscription agreement, capital call letters, and bank records or statements;

(4) Documentation demonstrating to the transfer of funds from the qualified venture fund to businesses, including, but not limited to, stock purchase agreements and detailed bank records or statements;

(5) Certification(s) of minority- or women-owned business(es) from the State of New Jersey to confirm investments in diverse entrepreneurs, applicable if the bonus at N.J.A.C. 119:31R-1.6(a)2 was part of the qualified investment approval;

(6) A limited partner roster with final commitment amounts;

(7) A current list of portfolio companies with investment amounts, office location, and full-time employee totals of the portfolio companies; and

(8) A certification from the qualified venture fund's general partner indicating whether the general partner is aware of any condition, event, or act that would cause the qualified venture fund not to be in compliance with the approval, the Act, the commitment agreement, or this subchapter;

vii. A provision permitting an audit from time to time, as the Authority deems necessary, of the evidence and documentation of the qualified venture fund supporting the annual review reports;

viii. A provision permitting the Authority to amend the commitment agreement;

ix. A provision establishing the conditions under which the Authority, the qualified venture fund, the investor, or any of them, may terminate the agreement;

x. Indemnification and insurance from the qualified venture fund and the investor to benefit the Authority; and

xi. Default and remedies, including, but not limited to, a default if the qualified venture fund made a material misrepresentation in any annual review report; and

3. Upon the receipt of the executed commitment agreement, the Authority shall notify the Division of Taxation of the approval, and the Division of Taxation shall then issue the tax credit certificate to the applicant investor.

(e) An applicant investor may appeal the Authority's action by submitting in writing to the Authority, within 20 days from the effective date of the Authority's action, an explanation as to how the investor, the New Jersey emerging technology business, and/or the New Jersey emerging technology business holding company has met the program criteria. Appeals will be handled by the Authority as follows:

1. The Chief Executive Officer shall designate an employee of the Authority to serve as a hearing officer for the appeal and to make a recommendation on the merits of the appeal to the Board. The hearing officer shall perform a review of the written record and may require an in-person hearing. The hearing officer has sole discretion to determine if an in-person hearing is necessary to reach an informed decision on the appeal;

2. Following completion of the record review and/or in-person hearing, as applicable, the hearing officer shall issue a written report to the Board containing his or her finding(s) and recommendation(s) on the merits of the appeal;

3. The Board shall consider the hearing officer's recommendation(s) and, based on that review, shall issue a final decision on the appeal; and

4. Final decisions rendered by the Board shall be appealable to the Superior Court, Appellate Division, in accordance with the Rules Governing the Courts of the State of New Jersey.

N.J. Admin. Code § 19:31R-1.7

Amended by R.2018 d.122, effective 6/4/2018.
See: 49 N.J.R. 3576(a), 50 N.J.R. 1374(a).
In the introductory paragraph of (d), substituted "investor," for "investor or", and inserted ", and/or the New Jersey emerging technology business holding company".
Amended by R.2021 d.139, effective 12/6/2021.
See: 53 N.J.R. 1481(a), 53 N.J.R. 2072(c).
Rewrote the section.

Recodified from 19:31-19.7 56 N.J.R. 807(a), effective 5/6/2024