Chapter 312 Tax Abatement Extended by Texas Legislature

Texas Governor Greg Abbott has signed a bill into law that will extend the Texas Chapter 312 property tax abatement program for an additional 10 years. Governor Abbott signed HB 3143 into law which not only extends the life of the incentive but also brings new transparency to the program. With the Chapter 312 and Chapter 313 programs available to developers in Texas, the state has become one of the fastest rising solar developers in the country as well as actually leading the country in developed wind power (chart below). We have worked on hundreds of these agreements in the state and see this as a positive overall for developers.

What is the Chapter 312 Property Tax Abatement Program in Texas?

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. Chapter 312 of the Texas tax code created the ability for Texas jurisdictions to offer this incentive to developers. 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.

How Does HB3143 Change the Program? In 3 Ways

Extends The Life of the Program

With the 312 abatement program previously set to expire on September 1, 2019, this new bill signed into law extends the life of the Chapter 312 abatement program by 10 years until September 1, 2029.

Adds New Transparency Rules

Secondly, HB 3143 adds new requirements regarding public hearing and a notice period. Specifically, the bill states that before the governing body of a taxing unit may adopt, amend, repeal, or reauthorize guidelines and criteria, the body must hold a public hearing regarding the proposed adoption, amendment, repeal, or reauthorization at which members of the public are given the opportunity to be heard. The agreements that are being considered must be published at least 30 days before the scheduled meeting date. It must include the name of the owner, the name/location of the reinvestment zone where the property will be, the nature of the improvements or repairs covered by the proposed agreement, and the estimated cost of the improvements or repair. The bill also states that taxing units that have a website must post the current version of the guidelines of the tax abatement. All of these requirements above will apply to tax abatement agreements entered into on or after September 1, 2019.

A Report Delivered to the Comptroller

Third, HB3143 states that for the first 3 tax years after the abatement expiration, the chief appraiser must deliver to the comptroller a report containing the appraised value of the property that was the subject of the agreement. These requirements above will apply to tax abatement agreements entered into on or after September 1, 2019.