LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 25, 2001
TO: Honorable James E. "Pete" Laney, Speaker of the House,
House of Representatives
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
Passed 2nd House
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2686, As Passed 2nd House: positive impact of $2,340,000 *
* through the biennium ending August 31, 2003. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $780,000 *
* 2003 1,560,000 *
* 2004 (2,700,000) *
* 2005 (2,400,000) *
* 2006 3,900,000 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) to *
* General Revenue Fund *
* 0001 *
* 2002 $780,000 *
* 2003 1,560,000 *
* 2004 (2,700,000) *
* 2005 (2,400,000) *
* 2006 3,900,000 *
*****************************************************
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, by the Comptroller's
office, in three areas. The first area relates to sales tax refunds.
The new provisions in Article 1 only would apply to projects designated
on or after September 1, 2001. This estimate assumes that no significant
refunds would be paid in fiscal 2002-2003 as a result of the bill. For
fiscal 2004 and 2005, 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. Projects would continue
to be capped at a maximum of $250,000 per year and a lifetime total of
$1,250,000. The provisions of Article 2 would restore existing rules for
sales tax rebates for fiscal 2006 and after.
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 credit provisions would be September 1, 2003, the bill
would allow a project designated after September 1, 2001 to begin
establishing credits on the date it was designated. This estimate is
based on the amount of investment and jobs related to projects as
reported to TDED and an estimate of the credits that those activities
would generate. Article 2 would repeal the credit provisions for reports
filed after January 1, 2005 and revert to current law.
The final area of fiscal impact relates to the repeal of the deduction
from taxable capital and earned surplus for enterprise and defense
projects. Projects designated after September 1, 2001, which are
eligible for the credits, would not be eligible for the deduction from
taxable capital and taxable earned surplus that is allowed under current
law. Article 2 would not reinstate these deductions.
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, BR