The purpose of the zones is to provide flexibility to experiment with government, particularly related to integrating "innovative technologies." These technologies can include blockchain, autonomous technology, the Internet of Things, robotics, artificial intelligence, wireless technology, biometrics, and renewable resources.
The zones would have to be created on at least 50,000 acres of currently unincorporated, unoccupied land, which is owned or purchased by the company. Also, prior to applying for the Innovation Zone status, company applicants are required to make a $250 million investment in the land. And the company must commit to spending another $1 billion over the following ten years.
What this means:
If the bill becomes law, this would give significant freedom for Innovation Zones to try new tax and fee systems for services at a local level. Nevada does not have a state income tax, which could allow these zones to form overall low-tax jurisdictions. It could also allow some experimentation with easing licensing requirements, since the legislation allows the zone to license businesses, but does not require it— although required state licensing would be unaffected.
Even policing and courts would fall under the responsibility of the zone, which would certainly be an interesting development, since innovations in these areas are few and far between.
Of course, the legislation has not even passed yet. And even if it does, it will be a long time before we see any actual Innovation Zones spring up.
Still, it's an encouraging development to see state governments developing plans for "Special Economic Zone" type arrangements. These have been successful in bringing business, innovation, and wealth to areas which suspend typical taxes and regulations in favor of free market principles (China has had particular success with this strategy.)
As usual, the weak point comes down to federal taxes and regulations, which would remain unchanged in the zones.