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NJ Tax Incentive Dept.'s Role In Virus Relief Raises Questions

By Jeannie O'Sullivan · May 11, 2020, 6:07 PM EDT

New Jersey lawmakers at a committee hearing Monday advanced a measure that would create a tax deferral program for small businesses facing hardships due to the COVID-19 pandemic, although one questioned if the state's embattled economic development agency was suited to steer the initiative.

The Employment and Business-Related Tax Deferral Assistance program, which received approval from the New Jersey Assembly Appropriations Committee, would be administered through the New Jersey Economic Development Authority. The EDA became the target of sweeping reforms after a state audit revealed it handed out millions in corporate tax incentives despite oversight shortfalls.

The EDA's troubled history wasn't lost on the committee members, who nonetheless voted in favor of the twin bills establishing the small business tax deferral program. Assemblyman Brian Bergen, R-Morris, said he applauded the merits of the program but questioned adding it to the EDA's responsibilities.

The EDA has "quite a few things to take care of and they're overburdened as it is," Bergen said, adding that he thinks the state tax authority should handle the small business tax relief program if it comes to fruition.

Assemblyman Gary S. Schaer, D-Passaic, said the EDA has "a long path to go," but didn't express concern about its role in the small business tax deferral program.

"I think if we look at the history of the EDA … we see an agency that's in the path of recovery," Schaer said.

A message seeking comment from the EDA wasn't immediately returned.

The legislation, codified in Assembly Bill 4030 and Senate Bill 2437, received full Senate approval in April and is now before the Assembly for consideration.

The legislation tasks the EDA with reviewing and approving applications by small businesses struggling financially due to the coronavirus. Businesses approved for relief would enter into agreements with the EDA to defer payment and remittance of certain employment and business-related taxes, according to the bills' language. The relief would apply to sales and use tax, motor fuels tax and unemployment compensation contributions, among others.

Businesses that enter deferral agreements would have until June 30, 2021, to pay half of the deferred taxes and one year after that to pay the remainder, according to the bills' sponsors.

The EDA would also monitor and evaluate the effectiveness of the program, the bills said.

The legislation drew support from the New Jersey Chamber of Commerce and New Jersey Business & Industry Association, both of which were represented at the committee hearing Monday.

"There's nothing more important we can do for small businesses than give them liquidity right now," NJBIA Vice President of Government Affairs Chris Emigholz said during his testimony before the committee.

The NJBIA has voiced support for EDA reform measures while also expressing concerns that the Garden State business climate will be harmed by the suspension of the tax incentives.

The EDA came under scrutiny following a January 2019 audit showing that the agency failed to properly track job creation and other investment requirements for a portion of the businesses that received roughly $11 billion in tax incentives over the previous decade.

Gov. Phil Murphy empaneled a task force to study the oversight issues, and in January issued a report calling for a major overhaul of the agency. A separate investigation by a legislative panel also issued a report calling for sweeping reforms.

Murphy in August conditionally vetoed the renewal of two of the incentive initiatives, EDA's Grow New Jersey Assistance Program and the Economic Redevelopment and Growth Program, and called for less expensive programs.

In a November press conference, Murphy said a deal was "close" on new tax programs. The following month, the governor announced he was placing four new members on the EDA's board to replace three board members whose terms were expiring and one who was resigning.

--Additional reporting by James Nani. Editing by Jack Karp.

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