Enrolled Bill Summary

            House Bill 1200 amends the Tax Code to enact the Texas Economic Development Act, authorizing school districts to grant property tax incentives for economic development by corporations and limited liability companies that pay franchise taxes and make investments to create jobs. The investment incentives are limited to property that is located in a reinvestment zone or enterprise zone; is not subject to an existing tax abatement; and is used in connection with manufacturing, research and development, or renewable energy electric generation. The code provisions authorizing the incentives expire December 3, 2007, but investments approved and begun before then continue to receive the incentives for a specified term under a saving clause.

            The bill divides Texas school districts into two sets. A first set consists of districts that have territory in a strategic investment area or in a county with a population of less than 50,000 if the county is not part of a metropolitan statistical area and had a maximum population increase of three percent or less between the 1990 and 2000 censuses. A second set consists of all other school districts. Within each set, school districts are subdivided into five categories based on the aggregate taxable value of the property in the district. To qualify, investments must create at least 10 jobs in a school district in the first set, and at least 25 jobs in a school district in the second set. At least 80 percent of the jobs must be full-time, covered by a group health benefit plan, not created to replace a previous employee, and not merely a transfer of jobs from one part of the state to another. For each category of school districts, in each set of districts, there are also minimum investment amounts.

            One type of incentive is a limitation on appraised value for purposes of maintenance and operation taxes. A school district may opt to consider or not consider an application for such a limitation. If the district considers the application, it must forward a copy to the comptroller and engage a third party in an economic impact evaluation. The district, in deciding whether to grant the application, may seek assistance from the comptroller, the Texas Department of Economic Development (TDED), the Texas Workforce Commission, and the Council on Workforce and Economic Competitiveness.

            Approval of an application establishes a limitation on appraised value, which, for purposes of maintenance and operations taxes, may not exceed the lesser of the property's market value or an amount acceptable to the school district. In turn, that acceptable amount is subject to a statutorily specified limitation minimum based on the school district's classification by set and category. The limitation applies in tax years 3 through 10 after application approval, but once granted the limitation, the applicant is entitled to an additional incentive in the form of a tax credit on taxes paid in years one and two on the portion of the appraised value in excess of the limitation. The limitation must be formalized in an agreement between the school district and the property owner and must contain provisions for termination of the agreement and recapture of taxes, plus penalty and interest, if the owner fails to comply with the agreement.

            The school district during tax years one and two following approval may not adopt a tax rate that exceeds its rollback tax rate. Property receiving an incentive under the act may not also receive a tax abatement. Counties and municipalities may impose impact fees to fund or recover any costs they incur for capital improvements or facility expansions necessitated by or attributable to the investment.

            House Bill 1200 contains other provisions outside the Texas Economic Development Act but related to it. Amendments to the Education Code entitle a school district to additional state aid to offset the year one and year two credits under the act and make formula allotment adjustments relating to the tax credit amounts. Separate changes to the Tax Code allow a school district to designate a reinvestment zone, postpone the expiration date of the Property Redevelopment and Tax Abatement Act from 2001 to 2005, and require chief appraisers to report annually to the TDED on properties receiving a school district appraisal value limitation. Amendments to the Government Code require the TDED to report to the governor and legislature; adjust the comptroller's determination of school district property values; and mandate the comptroller, TDED, attorney general, and Council on Workforce and Economic Competitiveness to survey tax incentive and economic development laws enacted by other states since 1990. Those entities must report survey results to the governor and legislative presiding officers not later than December 31, 2002, and annually thereafter. The bill takes effect January 1, 2002, except for the postponement of the expiration of the Property Redevelopment and Tax Abatement Act, which takes effect September 1, 2001.