By: Blanco S.B. No. 1211

A BILL TO BE ENTITLED

AN ACT

relating to defense economic readjustment zones.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. This Act shall be known as the Texas Defense, Aerospace, and Manufacturing Jobs Act.

SECTION 2. Section 2310.001, Government Code, is amended by amending Subdivision (7) and adding Subdivision (8) to read as follows:

(7) "Readjustment zone" means a municipality or county [an area] designated as a defense economic readjustment zone under this chapter.

(8) "Veteran" has the meaning assigned by Section 2308.251.

SECTION 3. Section 2310.002, Government Code, is amended to read as follows:

Sec. 2310.002. JURISDICTION OF MUNICIPALITY OR COUNTY. (a) For the purposes of this chapter, territory in the extraterritorial jurisdiction of a municipality is considered to be in the jurisdiction of the municipality.

(b) Notwithstanding Subsection (a):

(1) the governing body of a county may apply to the bank for designation as a defense readjustment project a project or activity of a qualified business that is located within the jurisdiction of a municipality located in the county;

(2) the governing body of a municipality may apply to the bank for designation as a defense readjustment project a project or activity of a qualified business that is located within the jurisdiction of the municipality; or

(3) the governing body of a county may apply to the bank for designation as a defense readjustment project a project or activity of a qualified business that is located in an unincorporated area within the jurisdiction of the county.

(c) Before a county makes an application as provided by Subsection (b)(1), the applying county must enter into an interlocal agreement with the municipality that has jurisdiction of the territory in which the project or activity described by Subsection (b)(1) will be located. The interlocal agreement must specify that either the applying county or the municipality that has jurisdiction of the territory in which the project or activity described by Subsection (b)(1) will be located is the governmental body having administration authority under Section 2310.201 and that both the applying county and municipality approve the application. For purposes of this subsection, a county during any biennium may use the maximum number of designations the county is permitted under Section 2310.306(e) within the territory described by this subsection.

SECTION 4. Section 2310.051(b), Government Code, is amended to read as follows:

(b) The bank shall establish criteria and procedures [for designating a qualified area as a readjustment zone and] for designating a defense readjustment project.

SECTION 5. Section 2310.101, Government Code, is amended to read as follows:

Sec. 2310.101. [CRITERIA FOR] READJUSTMENT ZONE DESIGNATION. (a) A municipality or county automatically qualifies for designation [To be designated] as a readjustment zone if the municipality or county is a defense-dependent community as described by Section 2310.102 or has established a spaceport development corporation in the municipality or county [an area must:

[(1) have a continuous boundary;

[(2) be at least one square mile but not larger than 20 square miles, excluding lakes, waterways, and transportation arteries, of the municipality, county, or combination of municipalities or counties nominating the area as a readjustment zone;

[(3) be located in an adversely affected defense-dependent community;

[(4) have at least 50 percent of its area located in an existing or former United States Department of Defense facility; and

[(5) be nominated as a readjustment zone by an ordinance or order adopted by the nominating body].

(b) A municipality or county designated as [An area is not prohibited from being included in] a readjustment zone under this section is not prohibited from having an area of the municipality or county [because the area is] also included in an enterprise zone designated under Chapter 2303.

SECTION 6. Section 2310.102, Government Code, is amended to read as follows:

Sec. 2310.102. [ADVERSELY AFFECTED] DEFENSE-DEPENDENT COMMUNITY. A municipality or county is a [an adversely affected] defense-dependent community if, as applicable, the municipality or county encompasses any part of a federally owned or operated military installation or mission that is functioning on or after May 19, 1997 [the bank determines that:

[(1) the municipality or county requires assistance because of:

[(A) the proposed or actual establishment, realignment, or closure of a defense facility;

[(B) the cancellation or termination of a United States Department of Defense contract or the failure of the department of defense to proceed with an approved major weapon system program;

[(C) a publicly announced planned major reduction in department of defense spending that would directly and adversely affect the municipality or county; or

[(D) the closure or a significant reduction of the operations of a defense facility as the result of a merger, acquisition, or consolidation of a defense contractor operating the facility; and

[(2) the municipality or county is expected to experience, during the period between the beginning of the federal fiscal year during which an event described by Subdivision (1) is finally approved and the date that the event is to be substantially completed, a direct loss of:

[(A) 2,500 or more defense worker jobs in any area of the municipality or county that is located in an urbanized area of a metropolitan statistical area;

[(B) 1,000 or more defense worker jobs in any area of the municipality or county that is not located in an urbanized area of a metropolitan statistical area; or

[(C) one percent of the civilian jobs in the municipality or county].

SECTION 7. Section 2310.109, Government Code, is amended to read as follows:

Sec. 2310.109. PERIOD OF DESIGNATION. A [An area may be designated as a] readjustment zone [for a maximum of seven years. A] designation remains in effect indefinitely so long as the municipality or county, as applicable, continues to qualify for designation as a readjustment zone under this chapter [until September 1 of the final year of the designation].

SECTION 8. Section 2310.111(a), Government Code, is amended to read as follows:

(a) The bank may remove the designation of an area designated as a readjustment zone before September 1, 2023, if:

(1) the area no longer meets the criteria for designation under this chapter, as this chapter existed on January 1, 2023, or by rule of the office adopted under this chapter before September 1, 2023; or

(2) the bank determines that the governing body of the readjustment zone has not complied with commitments made in the ordinance or order nominating the area as a readjustment zone before September 1, 2023.

SECTION 9. Section 2310.201, Government Code, is amended to read as follows:

Sec. 2310.201. ADMINISTRATION BY GOVERNING BODY. (a) The governing body of a readjustment zone is the governing body of the municipality or county[, or the governing bodies of the combination of municipalities or counties, that applied to have the area] designated as a readjustment zone.

(b) The governing body with administration authority over a defense readjustment project for which a designation is sought under Section 2310.002(b)(1) is determined under the terms of an interlocal agreement required by Section 2310.002(c).

(c) The governing body with administrative authority over a defense readjustment project for which a designation is sought under Section 2310.002(b)(2) or (3) is the governing body of the municipality or county, as applicable, applying to the bank for that designation.

SECTION 10. Section 2310.204(c), Government Code, is amended to read as follows:

(c) The report must include for the year preceding the date of the report:

(1) a list of local incentives for community development available in the zone;

(2) the use of local incentives [for which the governing body provided in the ordinance or order nominating the readjustment zone] and the effect of those incentives on revenue;

(3) the number of businesses assisted, located, and retained in the zone since its designation due to the existence of the readjustment zone;

(4) a summary of all industrial revenue bonds issued to finance projects located in the zone; and

(5) a description of all efforts made to attain revitalization goals for the zone.

SECTION 11. Section 2310.301, Government Code, is amended to read as follows:

Sec. 2310.301. DEFINITIONS [DEFINITION]. In this subchapter:

(1) "New[, "new] permanent job" means a new employment position created by a qualified business as described by Section 2310.302 that:

(A) [(1)] has provided at least 1,820 hours of employment a year to a qualified employee; and

(B) [(2)] is intended to exist during the period that the qualified business is designated as a defense readjustment project under Section 2310.306.

(2) "Retained job" means a job that:

(A) existed with a qualified business on the 91st day before the date the business's project or activity is designated as a defense readjustment project;

(B) has provided and will continue to provide employment to a qualified employee of at least 1,820 hours a year; and

(C) will be or has been an employment position for the longer of:

(i) the duration of the project's designation period; or

(ii) three years after the expiration date of the claim period for receipt of a state benefit authorized by this chapter.

SECTION 12. Section 2310.302(a), Government Code, is amended to read as follows:

(a) A person is a qualified business if the bank, for the purpose of state benefits under this chapter, or the governing body of a readjustment zone, for the purpose of local benefits, certifies that:

(1) the person is engaged in or has provided substantial commitment to initiate the active conduct of a trade or business in the readjustment zone; [and]

(2) at least 50 [25] percent of the person's [new] employees in the readjustment zone are:

(A) residents of the governing jurisdiction;

(B) economically disadvantaged individuals, as defined by Section 2303.402(c); [or]

(C) dislocated defense workers; or

(D) veterans; and

(3) the person:

(A) either:

(i) has a United States Department of Defense contract; or

(ii) as determined by the Texas Military Preparedness Commission:

(a) furthers the mission of the readjustment zone's military installation; or

(b) adds military value to the readjustment zone's military installation or community; or

(B) is related to the defense, aerospace, or advanced manufacturing industry.

SECTION 13. Section 2310.303, Government Code, is amended to read as follows:

Sec. 2310.303. PROHIBITION ON QUALIFIED BUSINESS CERTIFICATION; LIMIT ON DEFENSE READJUSTMENT PROJECT DESIGNATIONS. If the bank determines that the governing body of a readjustment zone is not complying with this chapter, the bank shall prohibit the certification of a qualified business in the zone until the bank determines that the governing body is complying with this chapter. The bank may not designate more than 21 [two] defense readjustment projects during any biennium [in a single readjustment zone].

SECTION 14. Section 2310.305(b), Government Code, is amended to read as follows:

(b) An application must:

(1) describe the procedures and efforts of the governmental entity or entities [that applied to have the area designated as a readjustment zone] to facilitate and encourage participation by and negotiation among affected entities in the zone in which the qualified business is located;

(2) contain an economic analysis of the plans of the qualified business for expansion, revitalization, or other activity in the readjustment zone, including:

(A) the number of anticipated new permanent jobs the business will create during the designation period presented in the form of a tabular listing of:

(i) the classification titles of those jobs; and

(ii) the number of jobs and salary range for each classification title;

(B) the anticipated number of permanent jobs the business will retain during the designation period presented in the form of a tabular listing of:

(i) the classification titles of those jobs; and

(ii) the number of jobs and salary range for each classification title;

(C) the amount of investment to be made in the zone; [and]

(D) other information the bank requires;

(E) the number of employment positions in existence at the qualified business site on the 91st day before the application deadline; and

(F) if the application is for a double or triple jumbo defense readjustment project, as defined by Section 2310.307, an indication of which level of designation is being sought; and

(3) describe the local effort made by the governmental entity or entities [that applied to have the area designated as a readjustment zone], the administrative authority, if one exists, the qualified business, and other affected entities to develop and revitalize the zone.

SECTION 15. Section 2310.306, Government Code, is amended by amending Subsection (a) and adding Subsections (d-1), (e), (f), and (g) to read as follows:

(a) The bank may designate a qualified business as a defense readjustment project only if [the bank determines that]:

(1) the bank determines that:

(A) the business is a qualified business under Section 2310.302 that is located in or has made a substantial commitment to locate in a defense readjustment zone;

(B) [(2)] the governing body of the readjustment zone making the application has demonstrated that a high level of cooperation exists among public, private, and neighborhood entities in the zone; and

(C) [(3)] the designation will contribute significantly to the achievement of the plans of the governing body making the application for development and revitalization of the zone; or

(2) if the qualified business is seeking job retention benefits, the business has clearly demonstrated that:

(A) the permanent employees of the business will be permanently laid off;

(B) the business will close down permanently;

(C) the business will relocate out of state;

(D) the business is able to employ individuals in accordance with Section 2310.302; or

(E) the business facility has been legitimately destroyed or substantially impaired because of fire, flood, tornado, hurricane, or any other natural disaster and that at least 60 percent of the capital investment is being spent to repair damages resulting from the disaster.

(d-1) The office may not designate multiple concurrent defense readjustment projects to a qualified business located in a readjustment zone.

(e) Subject to Subsection (f), the maximum number of defense readjustment projects that the bank may designate for each readjustment zone during any biennium is:

(1) one, if the readjustment zone is a municipality or county with a population of less than 500,000; or

(2) three, if the readjustment zone is a municipality or county with a population of 500,000 or more.

(f) The bank may only designate a maximum number of three defense readjustment projects in one county during any biennium, which includes a designated defense readjustment project in a municipality in the county, regardless of whether the governing body of the county or a municipality in the county applied for the designation.

(g) An approved designation as a double jumbo defense readjustment project, as defined by Section 2310.307, counts as two project designations against both the bank for purposes of Subsections (e) and (f) and the number of defense readjustment project designations allowed statewide per biennium under Section 2310.303. An approved designation as a triple jumbo defense readjustment project, as defined by Section 2310.307, counts as three project designations against both the bank for purposes of Subsections (e) and (f) and the number of defense readjustment project designations allowed statewide per biennium under Section 2310.303.

SECTION 16. Section 2310.307, Government Code, is amended to read as follows:

Sec. 2310.307. ALLOCATION OF JOBS ELIGIBLE FOR TAX REFUND. (a) The [When the bank designates a business as a defense readjustment project, the] bank shall allocate to a defense readjustment [the] project the maximum number of new permanent jobs or retained jobs eligible based on the amount of capital investment made in the project, the project's designation level, and the refund per job with a maximum refund to be included in a computation of a tax refund for the project.

(b) A capital investment in a project of:

(1) $1,000,000 to $4,999,999.99 will result in a refund of up to $2,500 per job with a maximum refund of $312,500 for the creation or retention of 150 jobs;

(2) $5,000,000 or more will result in a refund of up to $2,500 per job with a maximum refund of $1,250,000 for the creation or retention of 500 jobs, except as provided by Subdivision (3) or (4);

(3) $150,000,000 to $249,999,999.99 will result in a refund of up to $5,000 per new permanent job with a maximum refund of $2,500,000 for the creation of 500 new permanent jobs if the bank designates the project as a double jumbo defense readjustment project; or

(4) $250,000,000 or more will result in a refund of up to $7,500 per new permanent job with a maximum refund of $3,750,000 for the creation of at least 500 new permanent jobs if the bank designates the project as a triple jumbo defense readjustment project.

(c) A defense readjustment project for which a commitment for a capital investment in the range amount and the creation of the number of new permanent jobs specified by Subsection (b)(3) is made is considered a "double jumbo defense readjustment project" if the project is so designated by the bank.

(d) A defense readjustment project for which a commitment for a capital investment in the range amount and the creation of the number of new permanent jobs specified by Subsection (b)(4) is made is considered a "triple jumbo defense readjustment project" if the project is so designated by the bank. [The number may not exceed 500 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 a defense readjustment project under Section 2310.305, whichever is less.]

SECTION 17. Subchapter E, Chapter 2310, Government Code, is amended by adding Section 2310.3071 to read as follows:

Sec. 2310.3071. MAXIMUM TAX REFUND. (a) In this section, "double jumbo defense readjustment project" and "triple jumbo defense readjustment project" have the meanings assigned by Section 2310.307.

(b) A defense readjustment project is eligible for a maximum refund of $250,000 in each state fiscal year.

(c) A double jumbo defense readjustment project is eligible for a maximum refund of $500,000 in each state fiscal year.

(d) A triple jumbo defense readjustment project is eligible for a maximum refund of $750,000 in each state fiscal year.

SECTION 18. Section 2310.308, Government Code, is amended to read as follows:

Sec. 2310.308. DURATION OF CERTAIN DESIGNATIONS. (a) The bank's designation of a qualified business as a defense readjustment project is effective until the fifth anniversary of the date on which the designation is made regardless of whether the readjustment zone in which the project is located expires before the fifth anniversary of the project.

(b) The bank may not designate a qualified business as a defense readjustment project for more than two consecutive designation periods described by Subsection (a).

SECTION 19. Section 2310.405(a), Government Code, is amended to read as follows:

(a) To encourage economic [the] development in the municipality [of areas designated as readjustment zones], the governing body of a municipality designated as a readjustment zone under this chapter, through a program, may refund its local sales and use taxes paid by a qualified business on all taxable items purchased for use at the qualified business site related to the project or activity[:

[(1) the purchase, lease, or rental of equipment or machinery for use in a readjustment zone;

[(2) the purchase of material for use in remodeling, rehabilitating, or constructing a structure in a readjustment zone;

[(3) labor for remodeling, rehabilitating, or constructing a structure in a readjustment zone; and

[(4) electricity and natural gas purchased and consumed in the normal course of business in the readjustment zone].

SECTION 20. Section 2310.409, Government Code, is amended to read as follows:

Sec. 2310.409. OTHER LOCAL INCENTIVES. (a) The governing body of a municipality or county that is the governing body of a readjustment zone may:

(1) defer compliance in the zone with the subdivision and development ordinances or rules, other than those relating to streets and roads or sewer or water services, of the municipality or county, as appropriate;

(2) [give priority to the zone for the receipt of:

[(A) community development block grant money;

[(B) industrial revenue bonds; or

[(C) funds received for job training;

[(3) adopt and implement a plan for police protection in the zone;

[(4)] amend the zoning ordinances of the municipality or county, as appropriate, to promote economic development in the zone;

(3) [(5)] establish permitting preferences for businesses in the zone;

(4) [(6)] establish simplified, accelerated, or other special permit procedures for businesses in the zone;

(5) [(7)] waive development fees for projects in the zone;

(6) [(8)] create a local readjustment zone fund for funding bonds or other programs or activities to develop or revitalize the zone;

(7) [(9)] for qualified businesses in the zone, reduce rates charged by:

(A) a utility owned by the municipality or county, as appropriate; or

(B) a cooperative corporation or utility owned by private investors, subject to the requirements of Subsection (b);

(8) [(10)] in issuing housing finance bonds, give priority to persons or projects in the zone;

(9) [(11)] in providing services, give priority to local economic development, educational, job training, or transportation programs that benefit the zone; or

(10) [(12)] sell real property owned by the municipality or county, as appropriate, and located in the readjustment zone in accordance with Section 2310.410.

(b) A reduction in utility rates under Subsection (a)(7)(B) [(a)(9)(B)] is subject to the agreement of the affected utility and the approval of the appropriate regulatory authority under Title 2, Utilities Code. The rates may be reduced up to but not more than five percent below the lowest rate allowable for that customer class. In making its determination under this section, the regulatory authority shall consider revitalization goals for the readjustment zone. In setting the rates of the utility the appropriate regulatory authority shall allow the utility to recover the amount of the reduction.

SECTION 21. Section 151.4291, Tax Code, is amended by amending Subsections (a), (b), (c), and (e) and adding Subsection (i) to read as follows:

(a) A defense readjustment project is eligible for a refund in the amount provided by this section of the taxes imposed by this chapter on purchases of all taxable items purchased for use at the qualified business site related to the project or activity[:

[(1) equipment or machinery sold to a defense readjustment project for use in a readjustment zone;

[(2) building materials sold to a defense readjustment project for use in remodeling, rehabilitating, or constructing a structure in a readjustment zone;

[(3) labor for remodeling, rehabilitating, or constructing a structure by a defense readjustment project in a readjustment zone; and

[(4) electricity and natural gas purchased and consumed in the normal course of business in the readjustment zone].

(b) Subject to the limitations provided by Subsection (c) [of this section], a defense readjustment project qualifies for a refund of taxes under this section based on the amount of capital investment made at the qualified business site, the project's designation level, and the refund per job with a maximum refund to be included in a computation of a tax refund for the project. A capital investment at the qualified business site of:

(1) $1,000,000 to $4,999,999.99 will result in a refund of up to $2,500 per job with a maximum refund of $312,500 for the creation or retention of 150 jobs;

(2) $5,000,000 or more will result in a refund of up to $2,500 per job with a maximum refund of $1,250,000 for the creation or retention of 500 jobs, except as provided by Subdivision (3) or (4);

(3) $150,000,000 to $249,999,999.99 will result in a refund of up to $5,000 per new permanent job with a maximum refund of $2,500,000 for the creation of 500 new permanent jobs if the Texas Economic Development Bank designates the project as a double jumbo defense readjustment project; or

(4) $250,000,000 or more will result in a refund of up to $7,500 per new permanent job with a maximum refund of $3,750,000 for the creation of at least 500 new permanent jobs if the Texas Economic Development Bank designates the project as a triple jumbo defense readjustment project [of $2,500 for each new permanent job or job that has been retained by the defense readjustment project for a qualified employee].

(c) The total amount of tax refund that a defense readjustment project may apply for in a state fiscal year may not exceed $250,000, at not more than $2,500 per job. The total amount of tax refund that a double jumbo defense readjustment project may apply for in a state fiscal year may not exceed $500,000, at not more than $5,000 per new permanent job. The total amount of tax refund that a triple jumbo defense readjustment project may apply for in a state fiscal year may not exceed $750,000, at not more than $7,500 per new permanent job. If a defense readjustment project, double jumbo defense readjustment project, or triple jumbo defense readjustment project qualifies in a state fiscal year for a refund of taxes in an amount in excess of the applicable limitation provided by this subsection, it may apply for a refund of those taxes in a subsequent year, subject to the applicable limitation for each year. The total amount that may be refunded to:

(1) a defense readjustment project under this section may not exceed the amount determined by multiplying $250,000 by the number of state fiscal years during which the defense readjustment project created or retained one or more jobs for qualified employees;

(2) a double jumbo defense readjustment project under this section may not exceed the amount determined by multiplying $500,000 by the number of state fiscal years during which the double jumbo defense readjustment project created one or more new permanent jobs for qualified employees; or

(3) a triple jumbo defense readjustment project under this section may not exceed the amount determined by multiplying $750,000 by the number of state fiscal years during which the triple jumbo defense readjustment project created one or more new permanent jobs for qualified employees. [If a defense readjustment project qualifies in a state fiscal year for a refund of taxes in an amount in excess of the limitation provided by this subsection, it may apply for a refund of those taxes in a subsequent year, subject to the $250,000 limitation for each year. However, a defense readjustment project may not apply for a refund under this section after the end of the state fiscal year immediately following the state fiscal year in which the defense readjustment project's designation as a defense readjustment project expires or is removed. The total amount that may be refunded to a defense readjustment project under this section may not exceed the amount determined by multiplying $250,000 by the number of state fiscal years during which the defense readjustment project created one or more jobs for qualified employees.]

(e) In this section:

(1) "Defense readjustment project" means a person designated by the Texas Economic Development Bank as a defense readjustment project under Chapter 2310, Government Code.

(2) "Readjustment zone" and "qualified employee" have the meanings assigned to those terms by Section 2310.001, Government Code.

(3) "New permanent job" means a new employment position created by a qualified business as described by Section 2310.302, Government Code, that:

(A) has provided at least 1,820 hours of employment a year to a qualified employee; and

(B) is intended to exist during the period that the qualified business is designated as a defense readjustment project under Chapter 2310, Government Code.

(4) "Retained job" has the meaning assigned by Section 2310.301, Government Code.

(5) "Double jumbo defense readjustment project" and "triple jumbo defense readjustment project" have the meanings assigned by Section 2310.307, Government Code.

(i) As provided by Subsection (c), a double jumbo defense readjustment project is eligible for a maximum refund of $500,000 and a triple jumbo defense readjustment project is eligible for a maximum refund of $750,000 in each state fiscal year.

SECTION 22. The following provisions of the Government Code are repealed:

(1) Section 2310.001(4);

(2) Section 2310.053(d);

(3) Section 2310.103;

(4) Section 2310.104;

(5) Section 2310.105;

(6) Section 2310.106;

(7) Section 2310.107;

(8) Section 2310.108;

(9) Section 2310.110; and

(10) Section 2310.407.

SECTION 23. The changes in law made by this Act to Chapter 2310, Government Code, apply only to an application for a designation of a project or activity under the defense economic readjustment zone program under Chapter 2310, Government Code, as amended by this Act, that is filed on or after the effective date of this Act. An application for designation of a project or activity under the defense economic readjustment zone program that is filed before the effective date of this Act is governed by the law in effect on the date the application was filed, and the former law is continued in effect for that purpose.

SECTION 24. The changes in law made by this Act to Section 151.4291, Tax Code, apply only to an application for a tax refund made on or after the effective date of this Act. An application for a tax refund made before the effective date of this Act is governed by the law in effect on the date the application was made, and the former law is continued in effect for that purpose.

SECTION 25. The comptroller of public accounts is required to implement the changes in law made by this Act only if the legislature appropriates money specifically for that purpose. If the legislature does not appropriate money specifically for that purpose, the comptroller may, but is not required to, implement this Act using other appropriations available for that purpose.

SECTION 26. This Act takes effect September 1, 2023.