New Jersey Administrative Code › Title 19 - OTHER AGENCIES › NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY › Chapter 31AA - FOOD DESERT RELIEF TAX CREDIT PROGRAM › Subchapter 1 - FOOD DESERT RELIEF TAX CREDIT PROGRAM › Section 19:31AA-1.2 - Definitions

Current through Register Vol. 56, No. 14, July 15, 2024
The following words and terms, when used in this
					 subchapter, shall have the following meanings, unless the context clearly
					 indicates otherwise.
"Act" means the New Jersey Food Desert Relief Act, N.J.S.A.
					 34:1B-303 through 310.
"Affiliate" means an entity that directly or indirectly
					 controls, is under common control with, or is controlled by, the applicant.
					 Control exists in all cases in which the entity is a member of a controlled
					 group of corporations, as defined pursuant to section
					 1563 of the Internal Revenue Code
					 of 1986 (26 U.S.C. § 1563), or the entity is an organization in a group of
					 organizations under common control, as defined pursuant to subsection (c) of
					 section 414 of the Internal Revenue Code
					 of 1986 (26 U.S.C. § 414).
"Applicant" means a person who enters, or proposes to
					 enter, into an incentive award agreement pursuant to the provisions of the Act
					 pursuant to
					 N.J.S.A.
					 34:1B-307, including, but not limited to, a
					 lender that completes a project, operates a project, or completes and operates
					 a project.
"Applicant contributed capital" or "equity" means capital
					 contributed by the applicant that may consist of cash, deferred development
					 fees, costs for project feasibility incurred within the 12 months prior to
					 application, property value less any mortgages when the applicant owns the
					 project site, the cost of infrastructure improvements in the public
					 right-of-way, and any other investment by the applicant in the project deemed
					 acceptable by the Authority. Equity shall include Federal or local grants and
					 proceeds from the sale of Federal or local tax credits, including, but not
					 limited to, the Historic Rehabilitation Tax Credit, 26 U.S.C. § 47, and
					 New Market Tax Credit, 26 U.S.C. § 45D. Equity shall not include State
					 grants or tax credits or proceeds from redevelopment area bonds. If the
					 supermarket or grocery store is a component of a facility, the equity
					 contributed by the applicant to the development of the facility shall be
					 considered as equity for the project only to the extent of the supermarket or
					 grocery store's pro-rata share, based on square footage, of the
					 facility.
"Authority" means the New Jersey Economic Development
					 Authority, as established at section 4 of P.L. 1974, c. 80 (N.J.S.A.
					 34:1B-4).
"Board" means the Board of the New Jersey Economic
					 Development Authority, as established at section 4 of P.L. 1974, c. 80
					 (N.J.S.A.
					 34:1B-4).
"Cash flow" means the profit or loss that an investment
					 property earns from rent, deposits, and other fees after financial obligations,
					 such as debt, maintenance, government payments, and other expenses, have been
					 paid. For purposes of cash flow, government payments shall not include, among
					 other things, payments that are the result of a violation or a settlement of a
					 violation or any payment that is not reasonable and customary, as determined by
					 the Authority.
"Commitment period" means a period that commences after the
					 eligibility period. This period together with the eligibility period equals
					 seven years.
"Co-applicant" means an entity that:
1. Is non-profit for taxation purposes
				  pursuant to the provisions of section 501(c)3 of the Internal Revenue Code (26
				  U.S.C. § 501) ;
2. Contributes
				  capital, real property, or services related to the project that directly affect
				  and serve the anticipated customers or directly support the project or
				  operations of the supermarket or grocery store; and
3. Enters into a participation agreement with
				  the applicant that specifies the co-applicant's participation in the project.
"Director" means the Director of the Division of Taxation
					 in the Department of the Treasury.
"Eligibility period" means the period of four years for a
					 financing gap tax credit award and up to three years for an initial operating
					 cost tax credit award during which an applicant or a co-applicant, if
					 applicable, may claim a tax credit pursuant to the Program.
"Financing gap tax credit" means the tax credit awarded
					 pursuant to N.J.A.C. 19:31AA-1.7 to mitigate a project financing gap.
"First or second new supermarket or grocery store" means
					 the first and second new supermarket or grocery store within each food desert
					 community to be approved for tax credits pursuant to the
Program by the Authority, except that a supermarket or
					 grocery store may lose the designation of first or second new supermarket or
					 grocery store if the project does not meet milestones designated by the
					 Authority in a timely manner, as determined by the Authority.
"Food desert community" means a physically contiguous area
					 in the State in which residents have limited access to nutritious foods, such
					 as fresh fruit and vegetables, and that has been designated as a food desert
					 community pursuant to
					 N.J.S.A.
					 34:1B-306, a list of which is located at
http://www.njeda.gov
.
"Incentive award" means an award of tax credits to an
					 applicant or a co-applicant, if applicable, to reimburse an applicant or a
					 co-applicant, if applicable, for all or a portion of the project financing gap
					 or initial operating shortfall pursuant to the provisions of the Act and this
					 subchapter.
"Incentive award agreement" means the contract executed
					 between an applicant, any co-applicant, if applicable, and the Authority
					 pursuant to
					 N.J.S.A.
					 34:1B-307, which sets forth the terms and
					 conditions under which the applicant and co-applicant, if applicable, shall
					 receive the incentive award.
"Infrastructure improvements in the public right-of-way"
					 means public structures or improvements, including public electric vehicle
					 charging stations, located in the public right-of-way that are located within a
					 project area, and public utilities such as water, sewer, electric, and gas,
					 either of which are dedicated to or owned by a governmental body or agency upon
					 completion of the improvement, or any required payment in lieu of the
					 structures, improvements, or projects, or any costs of remediation associated
					 with the structures, improvements, or projects, and that are determined by the
					 Authority, in consultation with applicable State agencies, to be consistent
					 with and in furtherance of State public infrastructure objectives and
					 initiatives.
"Initial operating costs" means expenditures by the
					 applicant for the operation of a first or second new supermarket or grocery
					 store within the first three years after the opening of the supermarket or
					 grocery store for business to the public, but within a standard range based
					 upon industry standards, as determined by the Authority. Initial operating
					 costs shall not include inventory, incentive consultant fees, or Authority
					 fees. Initial operating costs may include expenditures for the operation of a
					 first or second new supermarket or grocery store incurred within one month
					 prior to the opening of the supermarket or grocery store for business to the
					 public. Initial operating costs may additionally include expenditures by an
					 affiliate of the applicant for costs incurred at the site of the
					 project.
"Initial operating cost tax credit" means the tax credit
					 awarded pursuant to N.J.A.C. 19:31AA-1.8 to mitigate the initial operating
					 costs of a new supermarket or grocery store.
"Initial operating shortfall" means, on an annual basis,
					 initial operating costs, including a net operating profit acceptable to the
					 Authority, reduced by the income to the applicant associated with the operation
					 of the new supermarket or grocery store after cost of goods sold, including,
					 but not limited to, sales income and income from the supermarket or grocery
					 store tenants, sub-tenant, and licensees. If the result is negative, the
					 initial operating shortfall shall be $ 0.00.
"Labor harmony agreement" means an agreement between a
					 business that serves as the owner or operator of a supermarket or grocery store
					 and one or more labor organizations, which requires, for the duration of the
					 agreement: that any participating labor organization and its members agree to
					 refrain from picketing, work stoppages, boycotts, or other economic
					 interference against the business; and that the business agrees to maintain a
					 neutral posture with respect to efforts of any participating labor organization
					 to represent employees at a supermarket or grocery store, agrees to permit the
					 labor organization to have access to the employees, and agrees to guarantee to
					 the labor organization the right to obtain recognition as the exclusive
					 collective bargaining representatives of the employees at a supermarket or
					 grocery store by demonstrating to the New Jersey State Board of
Mediation, Division of Private Employment Dispute
					 Settlement, or a mutually agreed-upon, neutral, third-party, that a majority of
					 workers in the unit have shown their preference for the labor organization to
					 be their representative by signing authorization cards indicating that
					 preference. The labor organization or organizations shall be from a list of
					 labor organizations that have requested to be on the list and that the
					 Commissioner of Labor and Workforce Development has determined represent
					 substantial numbers of supermarket or grocery store employees in the
					 State.
"Net operating profit" means pre-income tax operating
					 profit.
"New supermarket or grocery store" means a supermarket or
					 grocery store that commenced new construction of the building or commenced
					 rehabilitation of at least 75 percent of its square footage, after January 7,
					 2021 (the effective date of the Act). For purposes of this definition,
					 rehabilitation of at least 75 percent of the square footage of a supermarket or
					 grocery store means the repair or replacement of two or more major systems,
					 including, but not limited to: roof, plumbing, heating and cooling (including
					 refrigeration), electrical, load bearing structural systems, or weatherization
					 (for example, solar panels, siding, replacement windows, and doors), where the
					 costs of such repair or replacement, exclusive of soft costs that exceed 20
					 percent of the total costs of repair and replacement, exceeds 60 percent of the
					 fair market value of a rehabilitated supermarket or grocery store after such
					 repair and replacement, and the rehabilitation affects at least 75 percent of
					 square footage of the supermarket or grocery store.
"Opening of the supermarket or grocery store for business
					 to the public" means the date a new supermarket or grocery store has received a
					 temporary certificate of occupancy and all certifications from State and local
					 health departments required to operate; met the requirements of the incentive
					 award; and starts operating the supermarket or grocery store on a full-time
					 basis.
"Operating the supermarket or grocery store on a full-time
					 basis" or "operating on a full-time basis" means operating the new supermarket
					 or grocery store at least 60 hours per week every week of the year, absent
					 unavoidable closures or other circumstances approved by the Authority.
"Program" means the New Jersey Food Desert Relief Tax
					 Credit Program established by the Act and administered pursuant to this
					 subchapter.
"Project" means, pursuant to the approval letter described
					 at N.J.A.C. 19:31AA-1.8: for a financing gap tax credit, the development and
					 opening of the new supermarket or grocery store for business to the public; or
					 for an initial operating cost tax credit, owning, leasing, or subleasing the
					 first or second new supermarket or grocery store and operating the supermarket
					 or grocery store on a full-time basis.
"Project area" means land or lands on which the new
					 supermarket or grocery store is located and land or lands adjacent and
					 necessary to the operation of the new supermarket or grocery store, including,
					 but not limited to, parking lots and loading docks.
"Project cost" means the costs incurred in connection with
					 the establishment of a new supermarket or grocery store within a food desert
					 community by the applicant until the opening of the supermarket or grocery
					 store for business to the public and the certification of costs pursuant to
					 N.J.A.C. 19:31AA-1.8, including the costs relating to lands, buildings,
					 improvements, real or personal property, or any interest therein, including
					 leases discounted to present value, lands under water, riparian rights, space
					 rights, and air rights acquired, owned, developed or redeveloped, constructed,
					 reconstructed, rehabilitated, or improved, and any environmental remediation
					 costs, plus soft costs of an amount not to exceed 20 percent of the project
					 costs, and the cost of infrastructure improvements, including ancillary
					 infrastructure projects. For the purposes of this subchapter, ancillary
					 infrastructure projects may include off-site self-contained
					 temperature-controlled lockers located in a food desert community that is
					 exclusively serviced from the supermarket or grocery store. Project costs shall
					 include otherwise qualifying costs incurred by an affiliate of the applicant.
					 The fees paid by the applicant or a co-applicant, if applicable, to the
					 Authority associated with the application or administration of an incentive
					 award shall not constitute a project cost. Project costs shall not include the
					 cost of acquisition of land. If the supermarket or grocery store is a component
					 of a facility, the otherwise qualifying costs of any shared structures or
					 improvements, including, but not limited to, foundations or parking lots, may
					 be included as project cost only to the extent of the supermarket or grocery
					 store's pro-rata share, based on square footage, of the facility.
"Project financing gap" means the part of the total
					 development costs, including reasonable and appropriate return on investment,
					 that remains to be financed after all other sources of capital have been
					 accounted for, including, but not limited to, applicant contributed capital,
					 which shall not be less than 20 percent of the total project cost, which may
					 include the property value of any existing land and improvements in the project
					 area owned or controlled by the applicant, and the cost of infrastructure
					 improvements in the public right-of-way, and investor or financial entity
					 capital or loans for which the applicant, after making all good faith efforts
					 to raise additional capital, certifies that additional capital cannot be raised
					 from other sources on a non-recourse basis.
"Property value" means the lesser of: the purchase price,
					 provided the property was purchased pursuant to an arm's length transaction
					 within 12 months of application; or the value as determined by a current
					 appraisal acceptable to the Authority.
"Reasonable and appropriate return on investment" means the
					 discount rate at which the present value of the future cash flows of an
					 investment equals to the cost of the investment. For purposes of the analysis
					 of the reasonable and appropriate return on investment, an investment shall not
					 include any Federal, State, or local tax credits and grants.
"Retail space" means the areas of the supermarket or
					 grocery store where customers are allowed to find and purchase items.
"Soft costs" means costs not directly related to
					 construction, including capitalized interest paid to third parties, real estate
					 taxes, utility connection fees, accounting, title/bond insurance,
					 fixtures/equipment with a useful life of five years or less, affordable housing
					 fees, pre-opening costs, and all costs associated with financing, design,
					 engineering, legal, or real estate commissions, including, but not limited to,
					 architect fees, permit fees, loan origination and closing costs, construction
					 management, and freight and shipping costs. The term does not include early
					 lease termination costs, airfare, mileage, tolls, gas, meals, packing material,
					 marketing and advertising, temporary signage, incentive consultant fees,
					 Authority fees, loan interest payments on permanent financing, escrows,
					 reserves, commissions and fees to the applicant, project management, or other
					 similar costs.
"Square feet" or "square footage" means the sum of all
					 areas on all floors of an enclosed retail outlet included within the outside
					 faces of its exterior walls, including all vertical penetration areas for
					 circulation and shaft areas that connect one floor to another, but disregarding
					 cornices, pilasters, buttresses, and similar structures that extend beyond the
					 wall faces.
"Supermarket or grocery store" means a retail outlet with a
					 lease or ownership of at least 16,000 square feet, of which at least 80 percent
					 is occupied by food and related products, which products shall be based on
					 industry standards, as determined by the Authority, except that the food and
					 related products shall not include alcoholic beverages and products related to
					 the consumption of such beverages. The square footage of a supermarket or
					 grocery store shall include any space that the supermarket or grocery store
					 subleases, licenses, or otherwise allows another entity to occupy.
"Tax credit" means credit against a tax liability pursuant
					 to section 1 of P.L. 1950, c. 231 (N.J.S.A.
					 17:32-15),
					 N.J.S.A.
					 17B:23-5, section 5 of P.L. 1945, c. 162
					 (N.J.S.A.
					 54:10A-5), and sections 2 and 3 of P.L. 1945,
					 c. 132 (N.J.S.A. 54:18A-2 and 3).
"Total development cost" means any and all costs incurred
					 for and in connection with the project by the applicant and any affiliate of
					 the applicant until the opening of the supermarket or grocery store for
					 business to the public, or upon such other event evidencing project completion
					 as set forth in the incentive grant agreement, which shall include, but is not
					 limited to, project costs, soft costs, and cost of acquisition of land and
					 buildings. If the supermarket or grocery store is a component of a facility,
					 the costs of any shared structures or improvements, including, but not limited
					 to, foundations or parking lots, may be included as total development costs
					 only to the extent of the supermarket or grocery store's pro-rata share, based
					 on square footage, of the facility.
"Unavoidable closures" means any closure due to weather,
					 strikes, acts of God, governmental restrictions, enemy action, civil commotion,
					 fire, unavoidable casualty, or other causes similarly beyond the control of the
					 operator of the supermarket or grocery store as determined in the sole
					 discretion of the Authority.