Chapter 312 Tax Abatement Consulting

A tax abatement is 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. Tax abatements are an economic development tool available to cities, counties and special districts to attract new industries and to encourage the retention and development of existing businesses through property tax exemptions or reductions. School districts may not enter into abatement agreements.

Local governments often use property tax abatements to attract new industry and commercial enterprises and to encourage the retention and development of existing businesses. Incorporated cities, counties and special districts are allowed to enter into tax abatement agreements. School districts cannot enter tax abatement agreements. While tax abatements are short-lived, they can have a significant future impact.

A Chapter 312 Abatement exempts all or part of a value increase in your property tax for up to 10 years

25%

% of ALL active 312/313 agreements that KEA has
negotiated or managed for our clients

Chapter 312 Abatement Process

Tax Code Chapter 312 governs reinvestment zones and tax abatements. This chapter enables property taxing entities, excluding school districts, to curb the property taxes assessed on tangible personal property or real property due to the improvements or repairs to the property. Only the property located within a reinvestment zone qualifies for a tax abatement agreement. Hence, a tax abatement agreement is an agreement limiting the increase in the value of the property taxes due to improvements or repairs to real property. Such agreements are limited to ten (10) years.

Guidelines and Criteria

Each taxing unit that wants to consider tax abatement proposals must adopt guidelines and criteria for the creation of a reinvestment zone and must hold a public hearing. This is the first step in the process of the abatement process.

Zone Designation

After the hearing has taken place and the guidelines and criteria have been adopted, the taxing unit may designate a reinvestment zone. Designation of an area as an enterprise zone under Chapter 2303 constitutes the designation of an area as a reinvestment zone without further hearing or other procedural requirements by the local taxing unit.

Resolution

Each taxing unit that wants to consider tax abatements must also adopt a resolution indicating its intent to participate in tax abatement. The resolution must be adopted by a majority vote of the taxing unit’s governing body.

Tax Abatement Agreement

After the designation of the reinvestment zone, the governing body of a taxing unit may enter into a tax abatement agreement under this chapter if it finds that the terms of the agreement and the property subject to the agreement meet the applicable guidelines and criteria adopted by the governing body under this section.

Public Hearing

7 days’ written notice of the public hearing must be given to the officer of each of the other taxing units that have jurisdiction. At the public hearing, the governing body must find that the improvements sought would benefit the zone after the expiration.

Written Notice

A taxing unit’s intent to enter into a tax abatement agreement must be delivered to the presiding officer of each of the other taxing units in which the property is located at least seven days before the abatement is granted. The other taxing units may enter into an abatement agreement or choose not to provide an abatement.

What is the difference between a Chapter 313 agreement and Chapter 312 abatement?

A 313 school value limitation is a limitation on a portion of your property tax. A 312 abatement is an abatement on a portion of your property tax. In Texas, your property tax payment is segmented and paid out to different jurisdictions. For example, you may pay $1,000,000 in property tax, but that number may be broken into:

County – .55%

Hospital – .37%

ISD – 1.6%

Road – .06%

Water – .02%

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