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State Tax Credit Subsidy Program Auction Informational Webinar | New Jersey Housing and Mortgage Finance Agency | YouTubeToText
YouTube Transcript: State Tax Credit Subsidy Program Auction Informational Webinar
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Summary
Core Theme
New Jersey is launching a state tax credit auction program operated by NJHMFA to generate funds for affordable and workforce housing projects. Businesses can bid on these tax credits, which offer a dollar-for-dollar reduction in corporate business or insurance premium tax liabilities.
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So, welcome to the state tax credit
auction webinar. Um, uh, we are very
excited to be announcing that this is a
new program that it will be operated by
NJHMFA. We are going to be hosting a
state tax credit auction. So, it's an
opportunity for New Jersey businesses to
uh, either bid on or purchase uh, state
tax credits that are applicable to
either the uh, corporate business tax or
the insurance premium taxes uh, in New
Jersey. So to that end, we're going to
jump right in. Um, and the funds that uh
are received from or the revenues that
are created from this the sale of these
tax credits are going to be utilized to
create uh affordable and workforce
housing uh projects throughout New
Jersey. All right, so
this is going to be the auction
overview. as some background, the uh in
July of 2025, uh Governor Murphy signed
a a bill uh PL 2025 chapter 111 and in
that it created it it authorized NJHMFA
to sell up to $500 million in state tax
credits through competitive auctions.
Now, the agency will have uh up to six
years to put out each of these uh each
of the $500 million. The agency is
limited to $100 million a year. So, this
first tax credit auction that will be
occurring in 2025 will be making up to a
hundred million available. So, there
will be up to $100 million available for
state tax credits uh in the fall of
2025. Uh and then each year from there
on out, the agency will be making up to
$100 million available until the
entirety of that 500 million uh
authorization is utilized. there will be
there's a sixth year available should
there be any uh unutilized credits that
need to be rolled forward. Now these
credits are these state tax credits are
a dollar fordoll reduction in the state
tax liability again applicable to the
corporate business tax or the insurance
premium tax. Um this is creating a real
uh benefit for the uh the owner of uh of
New Jersey businesses or businesses that
operate in New Jersey. Want to make it
clear for anyone who uh works with
low-inccome housing tax credits. This is
completely separate. Uh low-inccome
housing tax credits are purchased by
syndicators as part of the capital stack
of a multif family uh you know financing
structure which means that the purchaser
of the of the tax credits is putting
equity and is an equity owner of those
properties at least for a few years.
That is not going to be the case with
these state tax credits. These state tax
credits are simply being authorized and
uh made available to uh New Jersey
taxpayers. Um and they are there is no
you know once they they purchased the
tax credit they are not you know going
to have any sort of uh interplay with
the the eventual uh multif family uh you
know affordable and and workforce
housing developments that come forward
out of those funds. they are using in
the purchase of these tax credits are uh
subsidizing or creating a gap subsidy
source that will be put into the
project. So there is a bit of a
difference here whereas in p you know
syndicators for low-inccome housing tax
credits are part of the overall project
in this case with these state tax
credits they are not going to be. So
again uh each year there will be up to
100 million uh made available. Now
again, these are going to be applied to
the corporate business tax or the
insurance premium taxes. They would be
they're applied in the privileged year
that they're purchased. So if somebody
purchases or you know is a winning
bidder uh for the tax credits in 20 in
in this fall, they would then be able to
apply those for the taxes for the you
know for the the 2025 uh fiscal year. So
uh or calendar year. So they would be
able to apply them to the tax obligation
for that year. Anything that goes
unutilized in that purchase year can be
rolled forward for up to seven up up to
seven tax periods. So if a business buys
a, you know, a number of tax credits
that exceed how much they're actually
going to be paying in 2025, they can
roll forward the uh the excess and apply
them in future years as well. Again, the
proceeds from these auctions are going
to be utilized to help municipalities
fulfill their their uh municipal housing
obligations and uh fund the production
of workforce housing. So, that's what we
often refer to as the missing middle.
That is those are going to be deed
restricted units that are that are going
to have higher income uh limitations
than uh you know what we tend to
consider affordable um but they also
should be less than market. So it's
really those who are making too much for
affordable but maybe not enough to
So how does one prepare for this auction?
auction?
So the first auction is going to open up
on Monday, October 27th at 9:00 a.m. It
will uh Eastern time. It will run for 30
days, which means it will close at 5:00
p. p.m. on November 26th. This is right
off our website. you um going forward
you'll be able to see the dates of when
the future tax credit auctions are going
on. Uh as mentioned we will be putting
in uh you know making available uh in
2026 up to $100 million uh potentially
going forward each year until 2020 2030.
If we need to do more we can. Um so just
keep in mind that you know we may even
do multiple tax auctions in a in a
single year. uh you know so in 2026 we
may we may choose to do two auctions um
comparative to putting everything up at
a single point but we those are be
decisions that'll be made after we go
through the first auction. So uh if you
are watching if you're this recording
after the first tax credit uh auction
has occurred and you're because you're
interested in maybe participating in the
2026 or 2027 and you just want to get a
little background information. I
apologize that that information is not
not on this particular slide yet, but um
you know just be aware that uh in future
years you know we'll have the dates made
available uh hopefully give quite a bit
of lead time and you know we may even do
multiple in a single year but again
we're limited to a total of 100 million
per year. Now as you're preparing there
will be there is a an application form
that has a lot of information that's
required you know uh things like you
know what is the business name what do
you do if is there a doing business name
as who is the authorized representative
who is the CEO
um you know who who is doing you know
what are what's the EIN all of this you
know very specific uh information about
your business uh there will also be a
form that we will make available which
is a uh a state law about the not doing
business with you know Russia, Barus or
Iran. Um those form you know the
application and that form will be
available in the portal when somebody
goes to apply. The one thing that they
will need to bring to their application
that is not going to be downloadable in
the online system is the tax clearance
certificate. So all business all biders
are going to be required to possess and
submit a valid tax clearance certificate
from the New Jersey Division on Taxation
um for your bidder organization and if
you have related entities um you would
need to provide those as well. So to
obtain the certificate we would you know
really recommend you email the that
email address right here. Uh it is
business assistance tc.taxation
tres tres.nj.gov.
You can also call the the phone number 6093
6093
uh 2226835.
So just keep that in mind. That's how
you would access that. Um if you are
planning to put in a certificate uh put
in a bid, we would recommend that you
reach out to taxation sooner than later
so that they can process this and uh get
it to you. Again, our portal will be
open for 30 days. Um you know, we
certainly don't recommend waiting until
day 29 and then reaching out to
taxation. We're not, you know, can't
guarantee that they would be able to
turn that around in time. So again, uh
you know, we're trying to make this
available, this information, uh made
known before the auction even opens so
that if you are interested, you could
reach out to taxation and get this this
form because again, that's going to be
really the only thing outside of the
forms that we provide as part of our
application process that the applicant
will also need to provide. So the
website itself, uh bookmark you I we we
really recommend you book bookmark our
auction website page and you check back
when the auction opens. This is going to
be run entirely through our secure
online portal which we use for our uh
procurement software. So um if you go to
or if you just go to njousing.gov
the first panel on our website actually
will take you as a direct link to the
auction page or you can access it by
going to our about and then you know the
drop down on our our top says about. If
you scroll down, if you'll see state tax
credit auction, that's the landing page.
We really recommend that you you check
that out. There's uh quite a bit of
information. Uh this this video will be
posted to that page as well, probably by
October 23rd. Um so it'll be available
for those who are interested then as
well. Um, you know, but you can also
find if you have questions, if you uh,
you know, there's who do, you know,
there's the email address to reach out
to so that you can, uh, you know,
directly send us that information as
well or send us your questions directly.
Uh, or if you're, you know, you feel
ready to go, um, you check in on the n
on at 9:00 am on, uh, October 27th and
the there'll be a link that'll take you
right into that page. We also recommend
that you sign up for updates. Um, so you
join our constant contact email list
specifically for this. Um, you can sign
up by uh checking out the link that we
have there. Uh, or by using the QR code
that's currently on the screen. If
you're watching this as a recording, um,
simply pause it and and and just, you
know, scan scan it. This way you can
sign up. We will be notifying of
upcoming auction dates of reminders of
you know reminders that the auction is
closing reminders uh you know about any
information you need to get as well as
announcements for future updates. So if
you're interested in potentially even
being on the 26 or 27 auction line we
would certainly recommend sign up for
updates through this list. That's how
we're going to be notifying people or
you just keep checking back on the website.
website.
Now, when you are submitting a bid,
um the bid requirements,
uh it is a we are going to the minimum
bid requirement is $250,000 in tax
credit authorization.
The maximum bid amount, you know, is 100
million. So, there's no, you know,
there's no real amount uh maximum that
you can bid on. If you want to take a
bid for all $100 million of the the
authorization that's going forward in a
single year, you are welcome. and you
know to some extent encouraged to make
that you know make that request. Um but
if you know the minimum bid that will be
considered is $250,000 in tax credit
authorization. Statutoily these cannot
go below 80. So
um if you are you know seeking a million
dollars worth of tax credits and you
want to make sure you you know put in a
a bid that you feel is very confident
will probably get a win at 95. you know,
that's a total bid of $950,000.
Uh, which means you're paying $950,000
to try and get a tax credit of a million
dollar. So, you right directly there are
saving $50,000 in your in expenses right
off the bat. Um, but again, the minimum
bid that'll be considered is 250 in
authorization. Not necessarily uh your
bid can be a little can be lower than
that, especially if you're bidding at 80
cents or 90 cents or 95 cents or
whatever it winds up being. It can be
the amount that you could be paying is
less than 250, but the authorization, so
you have to be bidding on at least
$250,000 worth of credits. Again, uh if
you don't use all of them upfront in the
first year, you can roll them forward.
Um there is a you know, to ensure uh
that everyone is uh putting in uh you
know, legitimate bids, there is going to
be a 10% deposit, which is similar to
other state auctions that have been
available in the past. So again, if
you're doing a $950,000 bid for a
million dollars in tax credits, that
means that the the deposit would wind up
being uh $95,000,
it is refundable if you do if you are
not a winning bidder. So if you put in a
bid and you are not selected or your
your bid does not win, you will be
refunded that uh completely and totally.
If you are the winning bidder, we will
notify you and you will have a certain
amount of time to uh
provide the remaining 90% of your of
your bid. In addition, there is a $500
non-refundable bid fee. Uh again, this
is to help with the operating costs of
running this. Uh so, you know, that it's
a relatively nominal fee, but it would
be there's a $500 uh non-refundable bid
fee. So, again, if you're not selected,
you will get back the entirety of your
10%. Uh and then you know but there is a
fee. So submitting bids again all these
bids must be completed through the
auction portal. Um any bids that are
submitted by mail or email will not be
accepted. They will not be reviewed. Um
the refundable 10% uh and the
non-refundable uh $500 bid fee are wired
have to be wired to the agency prior to
the close of auction. So, if you submit
your bid on, uh, let's just say October
30th, you know, three days after it
opens, uh, you can, you know, you have a
little bit of time, you may be able, you
could submit the deposit a week later.
Um, and you would do so by wiring it to
the agency. The wiring instructions are
on the bid form. Uh, once the auction
closes, so, uh, 5:00 pm on November
26th, all bids are final. So, if you're
interested, we would certainly recommend
not waiting till the last minute,
explore the bid port, the au the auction
portal, explore it. Uh, try and get
yourself familiarized with it. Even if
you know, review it and then maybe
submit a bit a bid a week later to fill
all the information out. But, um, take
your time, make sure you do it right.
Um, but again, don't wait till the last moment.
moment.
So, how are bids going to be reviewed
and evaluated? So, right off the bat, if
the bid is priced at less than 80 cents
on the tax credit, uh it will not be
considered because again, the statute
requires that they are at least 80 cents
per credit. Um if you are dis uh
disbarred from conducting business in
New Jersey, uh they'll be disqualified.
You'll be disqualified if you uh are
participating in prohibited activities
in Russia, Bellarus, Iran, um you would
be disqualified. These are statutory
requirements. These are things that um
whether as part of the authorizing
legislation for this bid or otherwise um
are you know things that we have to take
into account um when when reviewing um
if you fail to produce the tax clearance
certificate by the end of the auction
window uh we won't be able to go forward
with your bid. You know that is going to
be a very key component of ensuring uh
compliance with all existing laws as
well. um failure to submit the mandatory
deposit or bid fee by the close of the
auction window means we won't go forward
as well or failure to complete any of
the required bid materials will result
in a disqualification. So again, we
really recommend take your time as
you're filling out the application, but
don't wait till the last moment um
because if there's any issues or
anything that you need to address, you
know, you certainly would want to give
yourself a little bit of lead time uh so
that either you can do that or we can uh
provide you with any sort of guidance
that might be necessary. Now, how bids
are going to be evaluated. Eligible bid
eligible bids are going to be reviewed
after the auction closes. We will not be
reviewing bids prior to the auction
closing. I want to make that very clear.
They are then going to be ranked on
three criteria. The first criteria is
per credit pricing. So, a bid that is
bid, you know, if you bid 99 cents, that
is probably as high as you would likely
see. That is a very strong bid. Then
they're going to be sorted among any
ties based on uh the bid amount. If
there's any ties, so if two people put
in bids at the lowest amount possible,
which is 80 cents, we would then do a
tiebreaker based on the amount of the
bid that has been made. So again, in
that scenario, two two bids that came in
at the minimum uh 1 million, one for 1
million, one for two million, both at uh
80 cents on the dollar. The $2 million
one will be uh get the tiebreaker there.
If there's a tiebreaker after that
second round of of uh ranking, it would
then go based on the who submitted at
the earliest possible who submitted
earlier. So here's a good example uh
that we we just created. As you can see,
uh company A is the winning bidder
because they had the highest cents on
the dollar bid. Uh there was then a tie
amongst the two biders who went for uh
you know 90 cents. So, the bidder who
had the higher bid of $900,000
was the higher ranked bidder. Um, if you
go to the sec to down to D and E, you'll
see there were two bids that were both
uh at 85 cents. They were both also at
$8 million of of credit value. So, I'm
sorry. Uh, yeah. So, in that scenario,
uh, the one who wound up being the
tiebreaker was the one who submitted the
day earlier. Um, and and so on. So, we
will rank them through until we get to
the full credit authorization. So, all
of the bids, we will rank them through
until we get down to $100 million of of
credit value being allocated. If, let's
say, uh, in a future year, we do a
credit, you know, where we do maybe 30
million in one part of in an auction
early in the year and 70 million later.
Um, again, if we wind up with uh we
cutting it off at the max amount
awardable. So, if you are under the 30
mil, if you're the 30 millionth and $1
bidder, that would be you would not be
selected in that scenario. Um, and we
would then go through a review process.
Um so HMFA at that point we are going to
rank it through
and then we will recommend our biders to
in the or in that particular order to
the New Jersey division on taxation.
When we are working down the ranked list
if the next bidder seeks more tax
credits than are available in the
applicable year we may offer a partial
award. So if you if there were 29
million let's say and we're using the
example where there were $30 million
made available and we have $29 million
accounted for the next bidder bid $2
million they will be offered um the
opportunity they could accept whe they
could accept basically uh $1 million in
tax credit authorization. So we may you
know let them know that they were the
lowest ranked bidder who made it over
but that we don't have the full credit
authorization for that remaining at that
point. we would ask them if they wanted
to accept a partial award. Um
now once we have this gone forward, we
will send this to taxation. If taxation
finds a bidder is ineligible for uh the
tax credit certificate or if there's any
other um additional tax credits remain
for the remainder of the year, we may
continue down that rank. So if somebody
gets disqualified by the division of
taxation for you know uh as they do
their version of their review and make
sure that their information is up to
date um if somebody is uh you know not
doesn't want to go forward um we could
we may you know somebody who was an
ineligible builder bidder earlier um may
move in if others above them have been disqualified.
disqualified.
So as we are awarding the tax credits,
this is the process by which it'll work.
So once taxation approves a bidder and
transmit, they will transmit the
certificate to us, the tax credit
certificate to us. Uh HMFA will then
notify the bidder uh and transmit them a
conditional award letter um and a tax
credit purchase agreement via via email.
So they will get an email from the
agency saying, "Congratulations, here's
your conditional award letter and here's
your tax credit purchase agreement. we
will need that to be the tax credit
purchase agreement to be signed.
Again, that is really just outlining all
the uses of the credits. Um, and then
they will need to wire the remainder of
the balance uh of the of the bid balance
to the agency within 5 days. Uh, so once
we get both of those things back, we
will notify the you will get a formal
award notification letter and the tax
credit certificate. So but at that point
once the money and the condition and the
uh uh the agreement are returned at that
point the agency will then uh transmit
over the certificate. The certificate
would then be filed as part of the taxes
in an upcoming year. So HMFA will not uh
transmit that uh letter or the the
certificate until the full payment and
signed purchase agreements are provided.
um if the successful bidder fails to do
so um they may be you know if they
basically choose to not go forward they
may be barred from future auctions. So
unsuccessful biders will be notified and
the wire deposits will be sub uh that
were previously submitted will be
returned. So we do also recommend that
you be very cautious when you're
submitting your application that you
have the correct wiring structures
because the application does require
that you will give us your wiring
instructions so that if you are
unsuccessful we can return your deposit
to you. Um the process timeline again we
will begin review promptly as after the
period closes. We will not review it be
we will not be reviewing bids before the
public before the the period ends. Um
and then as soon as it ends we will
promptly begin reviewing. So um the
timeline for when you may hear back is
it will depend on the individual
circumstances of the biders. um
something that is a more maybe if your
if your company or your business has a
more complex tax arrangement uh that may
require uh you know more information
from taxation or taxation may take a
little longer to ensure everything is in
order and in compliance for their
portion of the review but also you know
if it's a if it's everything's in order
it may it may go quick. So, um, we will
begin it immediately, but how long it
takes to come back to us or to come back
to you with the fi with the
determinations is going to depend on
your individual circumstances.
Now, uh, how are we going to report and
do public transparency on this?
Following the close of the auction, we
are going to release a public sum, you
know, we we may release like a public
summary. Um, and then,
uh, you know, the summary would include
the winning who the winning biders were.
uh the total value of the credits
awarded to the bidder and the percentage
of the face value, you know. So, kind of
high level information uh that we can
make uh aware of, you know, and that'll
go on our website. There'll be a
dedicated page to that very similar to
how we um post the winners of uh 9%
allocations of the low-inccome housing
tax credit.
Now, transferring state tax credits, if
you are a successful uh bidder and maybe
you you apply your taxes in the first
year and then, you know, three years
down the line, you're like realizing you
maybe don't need to use what you've
already purchased, which we certainly
hope would not be the case. But in that scenario,
scenario,
um you can also sell or assign or
transfer your state tax credits. There's
a process um by which you can do so. uh
there will be a form that you will get
from the division of taxation. You
submit it to taxation, the form will be
reviewed by both taxation and and JHMFA
at that point. Um as long as everything
is is in order, we could go forward with
that. Um and then you could you it would
be transferred. So uh but again the
there are some statutory constraints
that you can't transfer that for less
than 80%. Um there is a 10%
consideration that goes to the division
of taxation uh and into the general fund
of the state budget.
And if it's approved, we will not we
will also have to publish that on our
website. So just keep that in mind um as
you are thinking if you were considering
uh transferring state tax credits later on.
on.
Now navigating the auction portal um for
this I want to make it clear that the
agency is actually going to be uh has a
recording of a test application that
should be available on the website on or
around uh October 24th. Uh, so you
should have that available and it it'll
be about a 10-minute video where you can
watch staff do a a test application to
show you all the steps that are going to
be involved to help you prepare for your
own bids. Uh, we figured it would be
easier to break that up with a webinar
being one thing and then having the uh,
how-to video for the auction portal be
separate. So, you'll find that on the
AY's website on the main page of the
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