LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 26, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1447  by Oliveira (Relating to a franchise tax credit
               for certain activities in defense economic readjustment
               zones.), Committee Report 1st House, Substituted
  
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*  No significant fiscal implication to the State is anticipated.        *
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The bill amends Section 171.721(1) of the Tax Code to expand the
definition of a strategic investment area (SIA) to include a defense
economic readjustment zone.

The bill takes effect January 1, 2002 and applies to tax reports
originally due on or after that date.  Qualified expenses incurred in a
SIA defense economic readjustment zone after the effective date of the
bill and claimed on a report due after January 1, 2002 would be eligible
for the tax credits.

The Texas Department of Economic Development (TDED) administers the
Defense Economic Readjustment Zone program and designates areas as zones.
There are five zones in the state:  two in San Antonio, and one each
in Lubbock, McGregor, and Beeville.

Criteria for designation include the requirement that at least half of
the zone be an existing or former Department of Defense facility, that
the area be at least one square mile but not larger than 20 square miles,
and that there be a direct loss of a certain number of defense worker
jobs.  The area designated as a defense economic readjustment zone would
have to meet existing SIA requirements (i.e., it would have to have above
state average unemployment and below state average per capita income) to
comply with the bill as written.

TDED does not maintain data about unemployment and income within each
zone, so it is not possible to determine whether any of the existing
defense economic readjustment zones also meet the SIA criteria.
Because the bill language states that a SIA defense economic
readjustment zone must have above state average unemployment and below
state average per capita income, a specific fiscal impact cannot be
determined.  However, given the geographical and procedural constraints
contained in the bill, the overall impact upon state revenues should not
be significant.
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, CT