Murphy defends corporate tax break payment slowdowns

The Statehouse in Trenton. PHOTOS: AARON HOUSTON

By: Daniel J. Munoz / dmunoz@njbiz.com

Gov. Phil Murphy defended a recent, controversial practice by the administration of slowing down tax break payments as scrutiny of the incentive program and its participants has been increased.

In a sit-down editorial board meeting with NJBIZ on Tuesday, Murphy worked to quell the idea that lawmakers and business advocates are worried the new approach could sow confusion and anxiety among businesses dependent on annual tax credit payments.

“We are absolutely scrutinizing these payments given what’s unfolded over the past year. Who could blame us?” Murphy told NJBIZ.

Documents obtained by NJBIZ show the Economic Development Authority has yet to pay out tax break payments to 64 companies this year for taxes they paid in 2018.

Tax breaks are paid out to companies over a 10-year period, and annual payments are not made until those companies certify to the EDA that they met agreed-upon economic and job creation goals. The agency said it is taking extra time to comb through documents submitted by the companies to certify that they have met those goals.

Altogether, companies were paid $175.5 million in 2018 for taxes they paid in 2017—$151 million under the Grow New Jersey corporate tax breaks and $24.4 million under the legacy program.

Senate President Stephen Sweeney, D-3rd District, an often-times political foe of Murphy and ardent supporter of Grow NJ, widely condemned the practice as punishing businesses who played by the rules and acted in good faith.

Sen. Bob Smith, D-17th District, who is chair of a Senate tax incentive committee tasked with hashing out New Jersey’s new incentive programs, has also been critical of the practice.

“With all due respect, we’re going to make sure that if you promise to do X for my giving Y, that you actually did X,” the governor countered.

Sullivan gives testimony during a meeting of the 

Senate Select Committee on Economic Growth Strategies. 

EDA Chief Executive Officer Tim Sullivan has maintained that the slowdown of payments was in response to the state comptroller’s January audit, which found glaring holes in the EDA’s oversight of the program.

According to the audit, the EDA over-awarded tax breaks, or awarded incentives to companies which never should have received them in the first place. Moreover, the EDA failed to make sure companies were compliant with the tax break agreement.

A task force Murphy convened in January has presented allegations and evidence that businesses with close ties to South Jersey political powerbroker George Norcross presented bogus plans about where out of state they would move if they did not win the tax breaks – despite no such actual plans – with the advice of law firm Parker McCay, where George’s brother Philip is a partner.

EDA staff should have been able to easily root out the questionable information about the alternative locations, and because they did not the state over-awarded millions of dollars of tax breaks to Norcross-tied companies for moving to or staying in Camden, according to the task force.

“There’s an overwhelming desire on behalf of taxpayers all over the state, that they want to say ‘hey wait a minute, I want to make sure that I understand where my money went’,” Murphy added. “And we won’t apologize for helping them figure out the answer to that question.”