N.J. Admin. Code § 19:31Y-1.3

Current through Register Vol. 56, No. 18, September 16, 2024

Section 19:31Y-1.3 - Eligibility criteria

(a) A business entity shall be eligible to receive a tax credit award for a rehabilitation project only if the business entity demonstrates to the Authority at the time of application that:

1. Without the tax credit award, the rehabilitation project is not economically feasible;

2. A project financing gap exists, and the tax credit award being considered for the project is equal to or less than the project financing gap;

3. The proposed project is a rehabilitation project;

4. The business entity has not commenced any construction or rehabilitation activity at the site of the rehabilitation project prior to submitting an application, and will not commence any construction or rehabilitation activity until the execution of the rehabilitation agreement except as follows:

i. In the event that the business entity has been ordered by a building code or other official with jurisdiction over the site or the rehabilitation project to correct a health, safety, or other hazard if:

(1) The business entity provides a copy of the order to the Authority;

(2) The business entity documents to the Authority's satisfaction that the proposed construction or rehabilitation activity is limited to resolve the hazard; and

(3) The proposed construction or rehabilitation activity complies with the Secretary of the Interior's Standards for Rehabilitation, 36 CFR 67.7; and

ii. Any construction or rehabilitation activity at the site of the rehabilitation project was conducted by an entity that is not the current owner or business entity, or an affiliate of the current owner or business entity, and was not done at the direction of or under contract with the owner, business entity, or an affiliate of the owner or business entity; and

5. The business entity has complied with all the requirements for filing tax and information returns and for paying or remitting required State taxes and fees by submitting, as a part of the application, a tax clearance certificate, as described in section 1 at P.L. 2007, c. 101 (N.J.S.A. 54:50-39).

(b) The following are the only costs incurred prior to application that may be eligible project costs:

1. For applications submitted on or after January 1, 2023, soft costs incurred within 12 months prior to the date of application; and

2. For applications submitted prior to January 1, 2023, soft costs incurred within 24 months prior to the date of application.

(c) The Authority shall review the proposed total cost of rehabilitation and evaluate and validate the project financing gap estimated by each business entity applying for a tax credit award as follows:

1. The business entity shall demonstrate that the rehabilitation project has equity of at least 20 percent of the total cost of rehabilitation, except that if a rehabilitation project is located in a government-restricted municipality, the equity shall be at least 10 percent of the total cost of rehabilitation;

2. The Authority shall evaluate the proposed total cost of rehabilitation against reasonable costs;

3. The Authority shall determine if the business entity's submitted financial information for the rehabilitation project and, if applicable, all phases, is satisfactory. If satisfactory, the Authority shall incorporate the financial information in the project financing gap, including the reasonable and appropriate return on investment; and

4. The project financing gap analysis shall include, but not be limited to, an evaluation of the total cost of rehabilitation, amount of capital sufficient to complete the rehabilitation project, proposed rental rates, vacancy rates, reasonable and appropriate return on investment, and, in the Authority's sole discretion, a comparison to alternative financing structures for a comparable project available to the developer or its tenants.

(d) The cost of rehabilitation during a business entity's selected rehabilitation period shall not be less than the greater of the adjusted basis of the structure of the qualified property or transformative property used for Federal income tax purposes as of the beginning of the business entity's selected rehabilitation period, or $ 5,000.

(e) In addition to the requirements set forth at (a), (b), (c), or (d) above, for a residential project or a redevelopment project consisting of newly-constructed residential units to qualify for a tax credit award, the developer shall reserve at least 20 percent of the residential units constructed for occupancy by low- and moderate-income households with affordability controls as required pursuant to the Fair Housing Act, P.L. 1985, c. 222 (N.J.S.A. 52:27D-301 et seq.).

(f) The rehabilitation project shall be completed, and the business entity shall be issued a temporary certificate of occupancy for the rehabilitation project facilities by the applicable enforcing agency within the selected rehabilitation period.

(g) To the extent that a rehabilitation project is within more than one geographic area with different eligibility criteria and tax credit calculations, the more favorable shall apply to the rehabilitation project.

N.J. Admin. Code § 19:31Y-1.3

Recodified from 19:31-26.3 56 N.J.R. 807(a), effective 5/6/2024