Spreading the Word About NJ Urban Enterprise Zones

One of the largest law firms in New Jersey lost $400,000 for failing to file their Urban Enterprise Zone (UEZ) tax refund on time, but they could chalk it up to public education.

For McCarter & English the embarrassment of missing a deadline probably hurt worse than the financial loss, but the publicity was tremendous free advertising for New Jersey’s UEZ program.  Locating a business in a UEZ is not just good public relations, it is good business.

The UEZ Program was enacted in 1983 and is in the Department of Community Affairs. The goal of the UEZ is to provide economic incentives that will help revitalize designated urban communities and promote their growth by encouraging businesses to locate and invest in those areas.

The UEZ Act provides numerous economic benefits to businesses located in designated urban enterprise zones. One of the most significant benefits of the UEZ is an exemption from sales and use tax for businesses located in the designated UEZ zones. N.J.S.A. 52:27H-79 establishes the UEZ sales tax exemption. Other benefits to UEZ firms include:

  • Reduced retail sales tax rate on certain purchases
  • Tax exemptions on certain purchases
  • Eligibility for priority financial assistance
  • Subsidized unemployment insurance costs for employees who earn less than $4,500 per quarter 
  • Electricity and natural gas sales tax exemption for qualified manufacturing firms with at least 250 employees, over 50% of whom are in manufacturing

·         Tax Credit Options (may elect one of the following)

·         Up to $1,500 for new permanent full-time employees hired

·         Up to 8% Corporate Business Tax credit on qualified investments

·    The Tax Court of New Jersey recently delivered bad news to McCarter & English, ruling that they are out of time to file their Urban Enterprise Zone (UEZ) tax refund.

The UEZ has a one year statutory requirement for qualified businesses to pay the sales tax at the time of the sale and then file a claim for refund within one year of the payment of the tax in order to receive the benefits of the UEZ. For McCarter & English, their failure to meet the deadline cost them more than $400,000, which is not insubstantial for any business.

To determine if your business qualifies for the UEZ Program, you must verify that your firm is located within a designated zone. Your business must also be registered with the NJ Division of Revenue and in tax compliance with the NJ Division of Taxation. If you meet these criteria, you can apply for certification. The UEZ will inform your business of its acceptance into the program by email and the Division of Revenue forwards the appropriate tax permits directly to your business. To remain in the UEZ Program, your business must submit Annual Reports and remain in compliance with the certification requirements.

Donald Scarinci is a managing partner at Lyndhurst, N.J. based law firm Scarinci Hollenbeck.  He is also the editor of the Constitutional Law Reporter and Government and Law blogs.

Spreading the Word About NJ Urban Enterprise Zones