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Relating to defense economic readjustment zones.
Estimated Two-year Net Impact to General Revenue Related Funds for HB 390, Committee
Report 1st House, Substituted: a negative impact of ($24,400,000) through the biennium ending
August 31, 2021.
HB 390 would make counties and municipalities automatically eligible to be designated as a defense economic readjustment zone (DERZ) if it is adjacent to or encompasses any part of a federally-owned or operated military installation. This bill also removes the seven-year cap on the period of designation, and allows a municipality to claim the designation as long as the municipality continues to qualify for it. HB 390 also removes restrictions on the Texas Economic Development Bank, such as how many DERZs it can designate as well as how many new or retained jobs the Bank can allocate in a defense economic readjustment project.
Also, this bill would extend a defense readjustment project's eligibility for a refund of state sales and use taxes imposed on purchases of certain taxable items for use or consumption in a readjustment zone, to all taxable items purchased for use at the qualified business site related to the project or activity.
DERZs were originally created to help areas affected by closures or downsizing of military bases by providing tax incentives to attract businesses and encourage businesses to expand.
Texas Action recommends opposing HB 390 because it violates our principles of free markets and limited government. While well-intended, this bill allows for government interference in the free market by providing tax incentives to private businesses. The best economic model is one in which regulation is light, sensible, and transparent. Laws and regulations must be designed to foster fair and free competition without becoming a barrier to entry or granting special privileges.