LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 13 HLS 201ES 33
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 30, 2020 3:59 PM Author: WRIGHT
Dept./Agy.: Economic Development
Subject: Enterprise Zone Program Analyst: Greg Albrecht
TAX CREDITS EN DECREASE GF RV See Note Page 1 of 1
Authorizes certain retail businesses to participate in the Enterprise Zone incentive (Item #18)
Present law allows five-year contracts to provide a choice of a sales tax rebate on construction and equipment expenditures
or a refundable credit of 1.5% of qualifying capital expenditures, and one-time tax credits of $1,000 or $3,500 per
participating job, with both options capped at $100,000 per participating job. Participating jobs must exceed the median job
count of the business in the state, and not exist in the enterprise prior to the contract effective date. Businesses classified as
retail trade, restaurants & bars, and accommodations are not eligible for the program. Advance notification filings are
allowed up to July 1, 2021.
Proposed law allows businesses classified as retail trade, restaurants & bars, and accommodations, that have no more than
50 employees nationwide including affiliates, into the program with advance notification filings from July 1, 2020 to
December 31, 2021. Eligibility to earn benefits terminates after June 30, 2023.
The program as a whole is extended to allow advance notification filings up to July 1, 2026. Effective July 1, 2020.
EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. INCREASE INCREASE INCREASE INCREASE INCREASE
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 ($5,150,000) ($15,300,000) ($22,725,000) ($25,075,000) ($68,250,000)
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 ($5,150,000) ($15,300,000) ($22,725,000) ($25,075,000) ($68,250,000)
EXPENDITURE EXPLANATION
Extension of the existing program will require the continuation of current resources devoted to program administration. The
expansion of the eligibility of the program to retail trade, restaurants & bars, and accommodations businesses will result in
additional applications within the next year and one-half. The workload increase could be material, in that LED would have
the additional qualifying determination of employee count, nationwide including affiliates. Depending on the number of
applications under the bill’s parameters additional resources may be required to administer the program expansion.
REVENUE EXPLANATION
The bill has two basic fiscal effects. The first is related to the extension of the program as a whole, without regard to the
expansion of eligibility for its benefits. Program costs have come down by approximately one-half after various changes
implemented in recent years, and now appears to range near $25 million per year of credit and rebate realizations. Allowing
the program to stop accepting participation as of July 1, 2021 would result in a gradual phase-down of annual revenue costs
over a roughly five year period. Extension of the current program would prevent this from occurring. The annual dollar
distribution of this phase-down is based on the Dept’s assessment of the historical lag time between entry into the program
and benefit claims, resulting in cumulative annual revenue losses relative to the baseline that would occur of: 0% or $0 in
FY21, 20% or -$5M in FY22, 60% or -$15M in FY23, 90% or -$22.5M in FY24, and 100% or -$25M in FY25.
The second effect is related to the expansion of eligibility for program benefits to retail trade, restaurants & bars, and
accommodations. Without a maximum employee count limitation, the Dept. of Economic Development estimated that, based
on previous participation of the retail trade and accommodations sectors (restaurants & bars have not previously been
allowed in the program) as well as subsequent program changes capping the benefits at $100,000 per participating job, the
expansion of eligibility and the 1.5 year window available for these firms to apply for participation as they ramp back up
from significantly reduced activity resulting from the Covid-19 pandemic event would increase program credit and rebate
benefit costs by a total of $7.5 million. Limiting the program expansion to firms with not more than 50 employees
nationwide, including affiliates, is likely to significantly reduce potential new participation. That likelihood is acknowledged by
utilizing only 10% of the initial analysis estimate. Historically, benefit claims lag entry into the program, and the Dept.
estimates a distribution of new benefit claims as 0% in FY21, 20% in FY22 (-$150,000), 40% in FY23 (-$300,000), 30% in
FY24 (-$225,000), and 10% FY25 (-$75,000). Based on historical claims, much of this program cost is likely to be the
investment credit component (~70+%) rather than the jobs credit. The new inclusion of restaurants & bars works to
increase the state’s cost exposure beyond the estimates here. The combination of these two effects are contained in the
table above as: FY21 $0, FY22 -$5.150M, FY23 -$15.3M, FY24 -$22.725M, FY25 $25.075M.
Uncertainty as to the specific annual magnitude and timing of both effects of the bill should be acknowledged. Program benefit
realizations can vary materially from year-to-year depending upon the particular participants moving through the program. In addition,
the extent of participation of retail trade, restaurants & bars, and accommodations businesses as they return operations toward pre-
pandemic levels over the next year and one-half is highly uncertain.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
John D. Carpenter
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Legislative Fiscal Officer
or a Net Fee Decrease {S}


Statutes affected:
HB13 Original: 51:1787(B)(3)
HB13 Engrossed: 51:1787(B)(3)
HB13 Enrolled: 51:1787(B)(3)
HB13 Act 28: 51:1787(B)(3)