New Jersey Administrative Code › Title 19 - OTHER AGENCIES › NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY › Chapter 31R - ANGEL INVESTOR TAX CREDIT PROGRAM › Subchapter 1 - ANGEL INVESTOR TAX CREDIT PROGRAM › Section 19:31R-1.7 - Evaluation process; award of tax credits; appeals

Current through Register Vol. 56, No. 14, July 15, 2024
(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.