Incentives - Strong support

Here’s a rundown of incentives opportunities in Texas, through federal, state, and local programs.



LOCAL INCENTIVES 

Freeport Exemption: Property tax exemption offered by cities, school districts, and counties, or all three. It applies to various types of property detained in Texas for no more than 175 days, to be transported out of state. Goods must be in Texas for assembling, storing, manufacturing, repair, maintenance, processing, or fabricating purposes.

Pollution Control and Renewable Energy: A property tax exemption is available for property used for pollution control, and exemptions and deductions are available for renewable energy initiatives.

Value Limitation and Tax Credits: An appraised value limitation may be extended to a taxpayer who agrees to build or install property and create jobs in exchange for an eight-year limitation on the taxable value of the property. The value limitation applies to the local school district maintenance and operations tax (M&O) portion of the property tax and a tax credit. Projects must be located in a reinvestment zone or enterprise zone.

Enterprise Zone: A state-local partnership that allows businesses to apply for state sales and use tax refunds on qualified expenditures. The tool is intended to promote job creation and private investment in economically distressed areas of the state. The level and amount of the refund is related to the capital investment and jobs created. A local community must nominate a project as an Enterprise project. Texas law limits the number of zones created in an area.

Tax Increment Financing District: A tool that local governments can use to publicly finance needed improvements to infrastructure and buildings within a designated area known as a reinvestment zone. The cost of improvements to the reinvestment zone is repaid by the future tax revenues of each taxing unit that levies taxes against the property.

Tax Abatements: A local agreement between a taxpayer and a taxing unit that exempts all or part of the increase in the value of the real property and/or tangible personal property from taxation for a period not to exceed 10 years. More details can be found under the tax code, Chapter 312.

Chapter 380/381 Agreements: Allow municipalities and counties to offer grants and loans for economic development, or a variety of other economic incentives.

 

Type A and B Economic Development Corporations: Cities located within a county of fewer than 500,000 residents can form economic development corporations and institute a sales tax, if the new combined tax doesn’t exceed 2 percent. Some cities in more populated counties may also participate under certain conditions. Type A is generally for industrial and manufacturing, while Type B is for quality-of-life projects. Voters must approve the creation of a Type A or Type B tax.

STATE INCENTIVES

Texas Enterprise Fund: The largest “deal-closing” fund of its kind in the nation, the TEF is a cash grant used as a financial incentive tool for projects that offer significant projected job creation and capital investment, and where a single Texas site is competing with another viable out-of-state option. Approved projects apply for state sales-and-use tax refunds on qualified expenditures. The refund is related to the capital investment and jobs created. A legislative committee currently is reviewing the future of the fund.

Texas Emerging Technology Fund: Created by the Texas Legislature to fund universities and emerging technologies. Categories of funding include commercialization, research, and acquisition of research talent to state universities. 

Manufacturing Exemptions: Exemption from state sales-and-use tax for taxpayers who manufacture, fabricate, or process tangible property for sale. It generally applies to tangible personal property involved in the manufacturing process.

Natural Gas and Electricity: Manufacturing companies may be exempt from paying state sales-and-use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property.

Data Center Incentives: This relatively new incentive allows data centers that meet certain conditions on or after Sept. 1, 2013, to qualify for an exemption on state sales-and-use tax on certain items necessary and essential to the data center operation.

Research and Development: Companies can choose a state sales tax exemption for property purchased, stored, or used by a person engaged in qualified research or a franchise tax credit. The R&D tax credit took effect on Jan. 1, 2014. Local communities can also consider providing a sales tax exemption for R&D using tools such as a Chapter 380 agreement.

FEDERAL INCENTIVES

 

Foreign Trade Zones: A restricted-access site located in or near a U.S. Customs Service port of entry that provides users, such as importers, manufacturers, and distributors, with cost-saving benefits.