Chapter 312 Abatement

What is a tax abatement?

A tax abatement is an agreement between a local government and a property owner to exempt part of the taxes owed in return for improvements to the property in the state of Texas. Abatements are governed by Tax Code, Chapter 312. Local taxing units can use abatements to attract development to their jurisdictions.

 

What does Texas grant these tax abatements?

These tax abatements were put in place to create economic development in the state of Texas, and to bring in new business to different regions of the state. It is an agreement between a local government and a property owner to exempt part of the taxes owed in return for improvements to the property. Abatements are governed by Tax Code, Chapter 312. Local taxing units can use abatements to attract development to their jurisdictions.

 

How Does KE Andrews Help?

With more experience in navigating these cumbersome applications and over 30 years of meeting with County Commissioners, Judges, and Superintendents, we can manage the entire Chapter 312 application process from start to finish. This includes creating the economic budgets and modeling, meeting with the above parties, and securing your exemption or abatement. Not only that, we can manage the property tax valuation of your project and get a tremendous value in year 1 to help you lower your taxable value, or make it more valuable when selling before COD.

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

A Chapter 313 school value limitation is a limitation on a portion of your property tax. A Chapter 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%

A Chapter 312 Abatement will be granted only by a local government (such as a county), and most commonly the county portion of the above rates will be abated because it is the 2nd largest typically. The Chapter 313 differs in that it will limit your project’s taxable value on the ISD portion of the tax. Both have their benefits and are important in new projects in development.

REAL RESULTS

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

25%

Frequently Asked Questions about the Chapter 312 Abatement Application Process

Is the limitation value standard for all jurisdictions?

No, each jurisdiction sets its own limitation of value for new economic projects. For example, a Harris County limitation could be $40,000,000 whereas a smaller county such as Mitchell County could be $20,000,000.

 

Are there reporting requirements to stay in compliance with the limitation?

Yes. We manage this on behalf of our clients and is something that is required yearly. Any appraisal district that includes a tax abatement reinvestment zone or abated property must submit reports about the zone and the abatement agreements to the Texas Comptroller of Public Accounts.

 

How long is a property abated for?

A property can be abated up to 10 years per agreement.

 

Which entities can grant abatements?

Any taxing unit, except a school district, that has jurisdiction over a property can grant an abatement. If the property is:

  • in the city limits, the city must grant an abatement before another taxing unit is allowed;
  • outside the city limits and the city’s ETJ, the county must grant an abatement before any other taxing unit can; or
  • within the city’s ETJ, any taxing unit can grant an abatement first.

If the county commissioners court sets the tax rate for another taxing unit, the court can offer an abatement on behalf of that taxing unit for a property the county has already abated.

IDENTIFY - STRATEGIZE - NEGOTIATE

  • Chapter 312 Consulting
  • Chapter 313 Consulting
  • Property Tax Valuation
  • Purchase Price Allocation and Business Valuation
  • Due Diligence