SRC-BWC H.B. 2686 77(R)   BILL ANALYSIS


Senate Research Center   H.B. 2686
77R10881 CBH-DBy: Solis, Jim (Lucio)
Finance
5/9/2001
Engrossed


DIGEST AND PURPOSE 

The Texas Enterprise Zone Program was created to generate capital
investment and job creation in economically distressed areas of Texas by
providing communities with an economic development tool to offer state and
local incentives and program priority to new or expanding businesses in
these designated areas.  An essential function of this program is to create
partnerships for promotion of business expansion and revitalization of
these areas.  The Defense Economic Readjustment Zone Program was
established to assist adversely impacted defense-dependent communities in
responding to or recovering from defense closures or realignments of
defense installations, or reductions or termination of defense contracts.
H.B. 2686 makes substantive changes to the Texas Enterprise Zone Program
and Defense Economic Readjustment Zone Program and provides for increased
incentives for certain businesses located in an enterprise zone, federal
empowerment zone, or federal enterprise community.  

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 2303.407, Government Code, to prohibit the
number of new permanent jobs or retained jobs eligible to be included in a
computation of a tax refund for the enterprise project from exceeding 250,
rather than 625, or a number equal to 110 percent of the number of
anticipated new permanent jobs or retained jobs specified in the
application for designation of the business as an enterprise project under
Section 2303.504, whichever is less. 

SECTION 2.  Amends Section 2303.504, Government Code, as follows:

Sec. 2303.504.  New heading:  STATE TAX REFUNDS AND CREDITS.  Provides that
subject to Section 2303.516, an enterprise project is entitled to a
franchise tax credit under Chapter 171P or Q, rather than to a deduction
from taxable capital under Section 171.1015, Tax Code.  Requires the
comptroller, not later than the 60th day after the last day of each fiscal
year, to report to the department the statewide total of the tax refunds
and credits made under this section during that fiscal year.  Makes a
conforming change. 

SECTION 3.  Amends Chapter 2303G, Government Code, by adding Section
2303.516, as follows: 

Sec. 2303.516.  Authorizes the Texas Department of Economic Development
(department) to monitor a qualified business or enterprise project to
determine whether and to what extent the business or project has followed
through on any commitments made by it or on its behalf under this chapter.
Authorizes the department to determine that the business or project is not
entitled to a refund or credit of state taxes under Section 2303.504 if the
department discovers certain information.   

 SECTION 4.  Amends Section 2310.404, Government Code, as follows:

Sec. 2310.404.  New heading:  STATE TAX REFUNDS AND CREDITS REPORT.
Provides that subject to Section 2310.413, a defense readjustment project
is eligible for a franchise tax credit under Chapter 171 P or Q, rather
than to a deduction from taxable capital under Section 171.1016, Tax Code.
Makes a conforming change. 

SECTION 5.  Amends Chapter 2303F, Government Code, by adding Section
2310.413, as follows: 

Sec. 2310.413.  Authorizes the department to monitor a defense readjustment
project to determine whether and to what extent the project has followed
through on any commitments made by it or on its behalf under this chapter.
Authorizes the department to determine that the defense readjustment
project is not eligible for state tax refunds and credits under Section
2310.404 if the departments discovers certain information.  

SECTION 6.  Amends Sections 151.429(a) and (b), Tax Code, to provide that
an enterprise project is eligible for a refund in the amount provided by
this section of the taxes imposed by this chapter on purchases of tangible
personal property purchased and consumed in the normal course of business
in the enterprise zone and taxable services.  Provides that an enterprise
project, subject to the limitations provided by this section, qualifies for
a refund of taxes under this section of $5,000, rather than $2,000, for
each new permanent job or job that has been retained by the enterprise
project for a qualified employee. 

SECTION 7.  Amends Section 151.4291(a), Tax Code, to make a conforming
change. 

SECTION 8.  Amends Section 171.751, Tax Code, to define "defense
readjustment project," "enterprise project," "enterprise zone," and
"readjustment zone," and redefine "qualifying job." 

SECTION 9.  Amends Section 171.752(b), Tax Code, to authorize a corporation
to claim a credit or take a carryforward credit without regard to whether
the strategic investment area, enterprise zone, or readjustment zone in
which it created the qualifying jobs subsequently loses its designation as
a strategic investment area, enterprise zone, or readjustment zone, if
applicable. 

SECTION 10.  Amends Section 171.754, Tax Code, to authorize a corporation
that has been designated as an enterprise project or as a defense
readjustment project, subject to Section 171.755, to claim the entire
credit earned during an accounting period against the taxes imposed for the
corresponding reporting period.  Makes a conforming change. 

SECTION 11.  Amends Section 171.801, Tax Code, to define "defense
readjustment project " and redefine "qualified capital investment."      

SECTION 12.  Amends Section 171.802(c), Tax Code, to make a conforming
change.   

SECTION 13.  Amends Section 171.804, Tax Code, to authorize a corporation
that has been designated as an enterprise project or as a defense
readjustment project, subject to Section 171.805, to claim the entire
credit earned during an accounting period against the taxes imposed for the
corresponding reporting period.  Makes a conforming change. 

SECTION 14.  Repealer:  Sections 171.1015, 171.1016, and 171.805(c), Tax
Code. 

SECTION 15.  Effective date: September 1, 2001, except as provided by this
section.   

 _Provides that the changes in law made by this Act apply only to an
enterprise project or defense readjustment project designated by the Texas
Department of Economic Development as such a project on or after September
1, 2001.  Provides that an  enterprise project or defense readjustment
project designated before that date is governed by the law in effect on the
date it was designated, and that law is continued in effect for that
purpose. 

 _Provides that Sections 6, 7, and 8 of this Act apply to wages paid on or
after the effective date of this Act.  Provides that wages paid before the
effective date of this Act are governed by the law in effect when the wages
were paid and that law is continued in effect for that purpose.   

 _Provides that Sections 11-17 of this Act take effect January 1, 2002, and
apply to a report originally due on or after that date. 

 _Provides that the change in law made by this Act does not affect taxes
imposed before the effective date of this Act, and the former law is
continued in effect for purposes of the liability for and collection of
those taxes.