News and Insights

Enterprise Zone Law Changes Reflect New Texas Economy

Tax Development Aug 21, 2001

At the close of the 77th Texas Legislative Session, Governor Rick Perry signed into law House Bill 2686, with new updated tax incentives for Texas businesses. These new incentives more than double the sales tax refund for job creation and transformed the current franchise tax deduction to a franchise tax credit taken below the line.

At the request of Jim Solis, Chairman of the Texas House of Representatives Economic Development Committee, Karin Richmond, Manager, Business Incentives Services, assisted the Committee in its deliberations to adopt new legislation for the enterprise zone statute. " We have long recognized the importance of the Enterprise Zone Program in our state, but it needed a lot of work to bring the program up to a level playing field with other state programs designed to attract business and industry. Karin is the person most knowledgeable in the field and I knew I could count on her to redesign and retool the program," stated Chairman Solis.

The legislative changes include:

1. Reducing the number of jobs created or retained by a business from 625 to 250 for maximizing the total amount of sales tax refunds allowed by law which is $1.25 million per business project;
2. Increasing the sales tax refund from $2000 to $5000 per job created or retained;
3. Adding consumable expenses and taxable services to the list of qualified purchases for refunds;
4. Substituting a job creation and capital investment franchise tax credit at 25% of the new wages and 7.5% of the new capital invested in an enterprise zone for the current franchise tax deduction; and,
5. Allowing the new franchise credits to be taken all in the year they were earned rather than over 5 years.

This legislation takes effect September 1, 2001 for businesses that are designated Enterprise Zone Projects by the Texas Department of Economic Development. Only 80 businesses will be eligible to receive these benefits for the next two years.

If you would like a copy of the bill or have any questions about the bill, please contact Mr. G. Brint Ryan, Managing Principal of Ryan & Company, at 972.934.0022. Mr. Ryan can also be reached via e-mail.