(a) Introduction. Pursuant to the authority granted by the Defense Economic Readjustment Zone Act, Texas Government Code, Chapter 2310, and the Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, as amended, the Economic Development and Tourism Office in the Office of the Governor (Office) prescribes the following sections regarding practice and procedure before the Office in the administration and implementation of the Readjustment Zone Program.     
      (b) Purpose. It is the purpose of the Defense Economic Readjustment Zone Act to establish a process to identify areas impacted by defense base closure, downsizing, or realignment and to provide local and state regulatory and tax incentives to encourage businesses to locate or expand in these areas. The purpose of these sections is to provide standards of eligibility and procedures for applications for designating qualified areas as readjustment zones and for designating qualified businesses as readjustment projects.     
      (c) Definition of terms. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:      
        (1) Act--The Defense Economic Readjustment Zone Act, Texas Government Code, Chapter 2310.       
        (2) Administrative authority--An administrative body that may be delegated responsibilities by the readjustment zone governing body. The administrative authority must:                  (A) be composed of 3, 5, 7, 9, 11, or 15 members;                   (B) be a viable and responsive body generally representative of all public or private entities that have a stake in the development of the zone; and                   (C) if the readjustment zone includes private residences, include:                      (i) an elected official representing readjustment zone residents and businesses; or                       (ii) at least two readjustment zone residents.           
        (3) Adversely affected defense dependent community--A municipality or county is an adversely affected defense-dependent community if the Office determines that:                  (A) the municipality or county requires assistance because of:                      (i) the proposed or actual establishment, realignment, or closure of a defense facility;                       (ii) 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;                       (iii) a publicly announced planned major reduction in Department of Defense spending that would directly and adversely affect the municipality or county; or                       (iv) 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                     (B) 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 subparagraph (A) of this paragraph is finally approved and the date that the event is to be substantially completed, a direct loss of:                      (i) 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;                       (ii) 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                       (iii) 1.0% of the civilian jobs in the municipality or county.           
        (4) Applicant--The municipality, county or combination of municipalities or counties filing an application with the Office for designation of a readjustment zone or nominating a business for designation as a readjustment project or a business filing for certification as a qualified business.       
        (5) Application--An application, including supporting and supplemental instruments and documentation, for designation of a readjustment zone or readjustment project or for certification by the Office or local governing body as a qualified business under the Act and this chapter.       
        (6) Day--The period of time between 8:00 a.m. and 5:00 p.m. Central Standard Time on any day other than a Saturday, Sunday, or state or federal holiday.       
        (7) Defense worker--                  (A) an employee of the United States Department of Defense, including a member of the armed forces and a government civilian worker;                   (B) an employee of a government agency or private business, or an entity providing a department of defense related function, who is employed on a defense facility;                   (C) an employee of a business that provides direct services or products to the Department of Defense and whose job is directly dependent on defense expenditures; or                   (D) an employee or private contractor employed by the United States Department of Energy working on a defense or Department of Energy facility in support of a Department of Defense related project.         
        (8) Defense worker job--A Department of Defense authorized permanent position or a position held or occupied by one or more defense workers for more than 12 months.       
        (9) Extraterritorial jurisdiction--Territory in the extraterritorial jurisdiction of a municipality that is considered to be in the jurisdiction of the municipality as defined by Local Government Code, Chapter 42.       
        (10) Governing body--The governing body of a municipality or county that has applied to have an area within its jurisdiction designated as a readjustment zone.       
        (11) New permanent job--A new employment position created by a qualified business as described by Texas Government Code, §2310.302, 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 Texas Government Code, §2310.306.         
        (12) Nominating body--The governing body of a municipality or county, or a combination of the governing bodies of municipalities or counties, that nominates and applies for designation of an area as a readjustment zone.       
        (13) Office--The Economic Development and Tourism Office in the Office of the Governor.       
        (14) Qualified business--A person is a qualified business if the Office, 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:                  (A) 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                   (B) at least 25% of the person's new employees in the readjustment zone are:                      (i) residents of the governing jurisdiction;                       (ii) economically disadvantaged individuals, as defined by Government Code, §2310.402(c); or                       (iii) dislocated defense workers.           
        (15) Qualified employee--A person who:                  (A) works for a qualified business; and                   (B) performs at least 50% of the person's service for the business in the readjustment zone.         
        (16) Qualified property--Any one or more of the following:                  (A) tangible personal property located in the zone that was acquired by the taxpayer not earlier than the 90th day before the date of designation of the area as a readjustment zone or readjustment project, as applicable, and was or will be used predominantly by the taxpayer in the active conduct of a trade or business;                   (B) real property located in a zone that:                      (i) was acquired by the taxpayer no earlier than the 90th day before the date of designation of the readjustment zone or readjustment project, as applicable, and used predominantly by the taxpayer in the active conduct of a trade or business; or                       (ii) was the principal residence of the taxpayer on the date of the sale or exchange; or                     (C) interest in a corporation, partnership, or other entity if, for the most recent taxable year of the entity ending before the date or sale or exchange the entity was a qualified business.         
        (17) Readjustment project--A person designated by the Office as a readjustment project under Texas Government Code, Chapter 2310.       
        (18) Readjustment zone--An area designated as a readjustment zone under Government Code, Chapter 2310.       
        (19) Retained job--A job that existed with a business prior to designation as a readjustment project or certification as a qualified business that has provided employment to a qualified employee of at least 1,820 hours annually and that is intended to be an employment position retained during the period the business is designated a readjustment project or certified as a qualified business in accordance with Texas Tax Code, §151.4291.       
        (20) Staff--The staff of the Office.       
      (d) Amendment and suspension of rules. These sections may be amended by the executive director at any time in accordance with the Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, as amended. The executive director may suspend or waive a section, not statutorily imposed, in whole or in part, upon the showing of good cause or when, at the discretion of the executive director, the particular facts or circumstances render such waiver of the section appropriate in a given instance.     
      (e) Written communication with the Office. Applications and other written communications to the Office should be addressed to the attention of the Texas Defense Economic Readjustment Zone Program, Economic Development and Tourism Office, Office of the Governor, P.O. Box 12428, Austin, Texas 78711-2428.     
     Source Note:        The provisions of this §175.1 adopted to be effective September 15, 1997, 22 TexReg 8961; amended to be effective August 5, 2012, 37 TexReg 5729