LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 10, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2686 by Solis, Jim (Relating to tax incentives for
certain businesses located in enterprise zones, defense
readjustment zones, or strategic investment areas.), As
Engrossed
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2686, As Engrossed: negative impact of $(2,326,000) through the *
* biennium ending August 31, 2003. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 (2,326,000) *
* 2004 (3,138,000) *
* 2005 (4,153,000) *
* 2006 (4,418,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $0 *
* 2003 (2,326,000) *
* 2004 (3,138,000) *
* 2005 (4,153,000) *
* 2006 (4,418,000) *
*****************************************************
Fiscal Analysis
The bill would amend the Government Code and the Tax Code to make changes
to certain tax incentives provided for businesses located in enterprise
zones, defense readjustment zones, in some federally-designated areas, or
in a county with a spaceport.
The bill would take effect September 1, 2001, and it would apply to
projects certified by the Texas Department of Economic Development
(TDED) after that date, with some exceptions. Provisions in law as it
existed before the bill's effective date would apply to enterprise and
readjustment projects designated before September 1, 2001. The
franchise tax provisions relating to enterprise and readjustment
projects would take effect January 1, 2003 and apply to a report
originally due on or after that date.
Methodology
The fiscal impact of this bill was estimated in two areas by the
Comptroller's office. The first area relates to sales tax refunds. The
new provisions only would apply to projects designated on or after
September 1, 2001. This estimate assumes that no significant refunds
would be paid in fiscal 2002 as a result of the bill. For fiscal 2003,
there would be no significant fiscal impact from the sales tax refund
provisions because the Comptroller is directed not to make refunds for
the expanded list of items eligible for refund before September 1, 2003.
For fiscal years after 2003, the estimate is based on TDED data on the
number of jobs certified in the first and subsequent years of a project
and the number of new projects that could be designated (65 per
biennium). Data on the amount refunded by the Comptroller relative to
the maximum that could be refunded based on jobs certified were used to
estimate the amounts refunded to projects designated after September 1,
2001. Projects would continue to be capped at a maximum of $250,000 per
year and a lifetime total of $1,250,000.
The second area relates to the impact of the franchise tax credits for
jobs creation and capital investment that would be made available to
enterprise and readjustment projects. Although the effective date for
the franchise tax provisions would be January 1, 2003, the bill would
allow a project designated after January 1, 2001 to begin establishing
credits on the date it was designated. The credits established by a
project, however, could not be claimed on a report filed before January
1, 2003. This estimate is based on the amount of investment and jobs
related to projects as reported to TDED and an estimate of the credits
those activities would generate. Projects designated after September 1,
2001, which are eligible for the credits, would not be eligible for the
deduction from capital and taxable earned surplus allowed under current
law on reports filed after January 1, 2003.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 480 Department of Economic Development, 304
Comptroller of Public Accounts
LBB Staff: JK, SD, WP, BR