Enrolled Bill Summary

            Article 1 of House Bill 2686 amends Government Code and Tax Code provisions relating to tax incentives for businesses located in enterprise zones, defense readjustment zones, and strategic investment areas. The bill reduces from 625 to 250 the maximum number of new permanent jobs or retained jobs eligible to be included in a computation of a tax refund for an enterprise project designated by the Texas Department of Economic Development. The bill provides that, in addition to a refund of state taxes, qualified businesses or enterprise zone projects and defense readjustment zone projects are entitled to certain franchise tax credits rather than the previously allowed deductions from taxable capital. The bill also authorizes the department to monitor such projects and to determine that a project is not entitled to a refund or credit of state taxes if it is not willing to provide necessary information to the department or has substantially failed to follow through on its commitments. The bill provides that such projects are eligible for refunds on purchases of tangible personal property and taxable services and increases from $2,000 to $5,000 the amount of taxes that an enterprise project may be refunded for each new or retained job. Finally, the bill includes enterprise zones or readjustment zones in provisions relating to a corporation's eligibility for certain franchise tax credits.

            Article 2 of the bill takes those provisions amended in Article 1 and restores them to prior law, except for those provisions that substituted franchise tax credits for the previously allowed deductions, which Article 2 deletes altogether. Article 2 also repeals the added provisions in Article 1 that made corporations eligible for franchise tax credits in those zones.

            Article 1 of House Bill 2686 takes effect September 1, 2001, except for provisions relating to certain tax credits, which take effect September 1, 2003. Article 2 takes effect September 1, 2005, except for provisions relating to franchise tax credits for job creation, capital investment, and research and development activities, which take effect January 1, 2005.