The discussion focused on “Opportunity Zones,” areas enabled by the 2017 Tax Cuts and Jobs Act. Governor Murphy quickly jumped on the chance for economic development in New Jersey and submitted 169 areas within 75 towns and municipalities for approval. They were approved by the Federal government.
Booker, a Democrat, and Tim Scott, a Republican, were instrumental in writing and getting this bipartisan piece of the tax act passed. Most New Jersey observers believe that most of the tax reform package negatively impacts New Jersey. The Opportunity Zone piece is a silver lining.
As an article in NJ Spotlight points out, this “designation means investors will be able to earn tax breaks for buying stakes in real estate or companies that are taking root in communities where the new opportunity zones have been established. Sections of some of New Jersey’s biggest cities, like Newark, Camden, and Paterson, have qualified for these opportunity zones. But swaths of other communities throughout the state like Bound Brook, Bridgeton, Plainfield, and Willingboro are also in the program.”
“To qualify as an opportunity zone, a census tract — typically a section of a town or a small municipality — generally must have a poverty rate of 20 percent or a median family income of up to 80 percent of the area median.”
Murphy and his team, while selecting which tracts to put forward, looked for areas that had the potential to be transportation hubs. Thus, in New Jersey, they will be places where people can get to work and if residential, places where residents can easily leave to commute.
So how will this impact the tech industry in New Jersey? If the tax breaks and other economic incentives do actually attract private investment to these zones, places with developing tech hubs like Newark and New Brunswick will continue to look better and better to both startups and their employees. Who doesn’t want to live and work in an area that is booming? Who doesn’t want to be part of a community with a growing tax base?
The New Jersey Tech Council also believes that Opportunity Zones will positively impact New Jersey. James Barrood, president and CEO of the New Jersey Tech Council told us, “We welcome the prospect of these Opportunity Zones attracting new ventures and growth companies so that they can receive funding from investors taking advantage of the tax incentives.
“We believe these zones will also attract mid-sized companies who are outgrowing their existing locations inside and outside the state. Lastly, we’re hopeful that they will help incentivize larger companies to set up innovation labs and/or additional offices in these zones.”
Barrood added, “Furthermore, I’m confident that the administration will offer additional incentives, several of which were outlined in the transition, to make the state and its growing ecosystem even more attractive to entrepreneurs and innovators.”
NJBIA President and CEO Michele N. Siekerka, said in a prepared statement, “While the success of the Opportunity Zone program may ultimately depend on private investment commitment in each community, we feel strongly it can be an effective economic development tool that will help small businesses grow and create private sector jobs in some of the state’s most economically challenged cities.
“NJBIA feels this program can be a great opportunity for public-private partnerships and an effective part of a comprehensive economic development strategy.”