New Jersey-2024-A3577-Introduced

An Act providing a tax credit under the corporation business tax for the development of anaerobic digestion facilities that process food waste and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. (1) For privilege periods beginning on or after January 1 next following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), and for the next six privilege periods thereafter, a taxpayer who develops and constructs an anaerobic digestion facility that processes food waste within the State, shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), to be calculated as provided in paragraph (2) of this subsection, to compensate the taxpayer for the costs incurred during the development and construction of the anaerobic digestion facility.

(2) The amount of the credit authorized shall not exceed the lesser of: (a) 50 percent of the costs incurred to develop and construct the anaerobic digestion facility, or (b) $250,000.

b. To qualify for the tax credit allowed pursuant to this section, a taxpayer shall apply to the commissioner for a certification that provides: (1) that the anaerobic digestion facility developed by the taxpayer is eligible for the tax credit; and (2) the amount of the tax credit calculated pursuant to subsection a. of this section. The application to the commissioner shall demonstrate that the anaerobic digestion facility was developed and constructed prior to applying for the tax credit provided in this section. The application shall include a receipt demonstrating the total cost of the development and construction of the anaerobic digestion facility, a certification that the anaerobic digestion facility will be used to process food waste, and any other information determined relevant by the department. Upon certification, the commissioner shall submit a copy thereof to the taxpayer and the director.

c. The director shall prescribe the order of priority of the application of the tax credit allowed pursuant to this section, and any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period. The amount of the credit applied pursuant to this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) shall not reduce a taxpayer's tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the tax credit otherwise allowable under this section which cannot be applied for the privilege period due to the limitations of this subsection or under other provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) may be carried forward, if necessary, to the seven privilege periods following the privilege period for which the tax credit was allowed.

d. The value of tax credits provided over the six privilege periods by the director pursuant to this section shall not exceed a cumulative total of $15 million.

e. The department, in consultation with the director, shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations as are necessary to implement the provisions of this section.

f. No later than six years after the effective date of this section, the department shall prepare and submit to the Governor, the State Treasurer, and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature, a report that, at a minimum, summarizes the effectiveness of the tax credit in incentivizing the development and construction of anaerobic digestion facilities that process food waste in the State.

g. As used in this section:

"Anaerobic digester" means a device that promotes the decomposition of organic material into simple organics and gaseous biogas products, in the absence of elemental oxygen, by means of controlling temperature and volume, and that includes a methane recovery system.

"Anaerobic digestion facility" means a facility that operates and hosts an anaerobic digester.

"Biogas" means gas resulting from the decomposition of organic matter under anaerobic conditions, the principal constituents of which are methane and carbon dioxide.

"Commissioner" means the Commissioner of Environmental Protection.

"Department" means the Department of Environmental Protection.

"Director" means Director of the Division of Taxation in the Department of the Treasury.

"Food waste" means food processing vegetative waste, food processing residue generated from processing and packaging operations, overripe produce, trimmings from food, food product over-runs from food processing, soiled and unrecyclable paper generated from food processing, and used cooking fats, oil, and grease, but shall not include food donated by the generator for human consumption, any waste generated by a consumer after the generator issues or sells food to the consumer, or any waste regulated by 7 C.F.R. ss.330.400 through 330.403 and 9 C.F.R. s.94.5.

2. This act shall take effect immediately.

STATEMENT

This bill would incentivize the development and construction of anaerobic digestion facilities that process food waste within the State by providing a tax credit against the corporation business tax to compensate a taxpayer for the costs incurred during the development and construction of the anaerobic digestion facility. The tax credit would be available for a period of six years.

The bill defines "anaerobic digestion facility" as a facility that operates and hosts an anaerobic digester. The bill defines "anaerobic digester" as a device that promotes the decomposition of organic material into simple organics and gaseous biogas products, in the absence of elemental oxygen, by means of controlling temperature and volume, and that includes a methane recovery system. The bill also defines "food waste" to mean food processing vegetative waste, food processing residue generated from processing and packaging operations, overripe produce, trimmings from food, food product over-runs from food processing, soiled and unrecyclable paper generated from food processing, and used cooking fats, oil, and grease. "Food waste" does not include food donated by the generator for human consumption, any waste generated by a consumer after the generator issues or sells food to the consumer, or any waste regulated by 7 C.F.R. ss.330.400 through 330.403 and 9 C.F.R. s.94.5.

The amount of the tax credit provided by the bill may not exceed the lesser of: (1) 50 percent of the costs incurred to develop and construct the anaerobic digestion facility, or (2) $250,000. The bill would also limit the cumulative total of tax credits awarded pursuant to the bill to $15 million.

To qualify for the tax credit allowed pursuant to this section, a taxpayer would be required to apply to the Commissioner of Environmental Protection (commissioner) for a certification that provides: (1) that the anaerobic digestion facility developed by the taxpayer is eligible for the tax credit; and (2) the amount of the tax credit. The application to the commissioner would be required to demonstrate that the anaerobic digestion facility was developed and constructed prior to applying for the tax credit. The application would also be required to include a receipt demonstrating the total cost of the development and construction of the anaerobic digestion facility, a certification that the anaerobic digestion facility will be used to process food waste, and any other information determined relevant by the Department of Environmental Protection (DEP). The bill would require the DEP, in consultation with the Director of the Division of Taxation, to adopt rules and regulations as are necessary to implement the bill's provisions

Finally, the bill would require, no later than six years after the bill's effective date, the DEP to prepare and submit to the Governor, the State Treasurer, and the Legislature, a report that, at a minimum, summarizes the effectiveness of the tax credit in incentivizing the development and construction of anaerobic digestion facilities that process food waste in the State.

According to the United States Department of Agriculture, between 30 and 40 percent of food in the United States is wasted. In 2017, nearly 41 million tons of food waste was generated and only 6.3 percent of that food waste was diverted from landfills and incinerators for composting. The Food and Agriculture Organization of the United Nations (FAO) reports that unwanted and discarded food squanders resources, including water, land, energy, labor, and capital, and that when food waste is dumped into a landfill, it rots and creates methane, which is a powerful greenhouse gas. Food waste also contributes to approximately 8 percent of all human-caused greenhouse gas emissions.

A valuable way to divert waste food waste from landfills is anaerobic digestion. Food waste can be converted through anaerobic digestion to produce biogas, which can be used to generate heat and electricity, or can be injected into the natural gas pipeline. According to the DEP, electricity produced from the combustion of biogas from food waste qualifies for Class I Renewable Energy Certificates from the Board of Public Utilities.

According to the United States Environmental Protection Agency (EPA), there are three types of anaerobic digestion facilities that accept food waste, such as stand-alone food waste digesters, on-farm digesters that co-digest food waste, and digesters at water resource recovery facilities that co-digest food waste. A 2017-2018 report by the EPA concerning anaerobic digestion facilities that accept food waste in the United States, reported that there are only four anaerobic digestion facilities that accept food waste in New Jersey. The EPA also reports that there are many anaerobic digestion facilities in the country that currently do not accept or process food waste.

Overall, this bill would incentivize the development of anaerobic digestion facilities that accept food waste in the State in an effort to reduce food waste, limit the amount of food waste being dumped into landfills and incinerators, and further protect the environment from the adverse effects of climate change.