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In Texas, Chapter 313 of the Texas Tax Code referred to a program that provided temporary property tax abatements to encourage economic development through investments in certain industries, such as manufacturing and renewable energy. The program aimed to attract new businesses or expansions of existing businesses by offering a reduction in property taxes for a specified period in exchange for creating jobs and making substantial capital investments. This program was retired in 2022 and has since been replaced with a different program that excludes renewable energy. The current incentives available for renewable energy projects are the Chapter 312 and Chapter 380/381 programs. We have secured in excess of 1,000 abatements in Texas in the last 10 years for companies.

In return for the assessed value restriction and tax credit through the Chapter 313 value limitation program, property owners are obligated to establish a contractual agreement with the school district. This agreement entails the creation of a specific number of job opportunities and the construction or installation of designated real and personal property valued at a predetermined threshold. The terms of engagement for both parties must be clearly outlined, encompassing legal requisites and provisions safeguarding the school district from potential revenue deficits.

To be eligible for this arrangement, the property in question must be situated within a reinvestment zone and allocated for purposes such as manufacturing, research and development, clean coal initiatives, advanced clean energy ventures, renewable energy electric generation, integrated gasification combined cycle technology for electric power generation, nuclear electric power generation, a primary computer center linked primarily to one of the aforementioned categories, or a Texas Priority Project.

Reinvestment Zones

Approval for a value restriction on qualified property is solely permissible if the property is situated within an area designated as a reinvestment zone according to the provisions of Tax Code Chapter 311 or 312, or is categorized as an enterprise zone under Government Code Chapter 2303. This designation is established by the county commissioners court and the governing body of each municipality, given that all qualifying property falls within this designated zone.

Furthermore, a school district board retains the authority to label an area wholly contained within the district’s territory as a reinvestment zone under Tax Code Section 312.0025. This decision requires a determination that designating the reinvestment zone for the purpose of appraised value limitation, as outlined in Chapter 313, Subchapter B or C, is reasonably expected to:

1. Foster the expansion of primary employment within the zone, or
2. Attract substantial investments that would benefit both the property within the reinvestment zone and the school district, contributing to the economic growth of the region in which the district operates.

Before designating an area as a reinvestment zone, the school board has the option to seek recommendations from the county commissioner’s court and the governing bodies of municipalities within the school district’s jurisdiction.

Qualification Period

For most applicants, the qualification period commences from the date of approval of the application by the school district and concludes at the conclusion of the second full tax year following said approval. During this qualifying period, the applicant must make the specified minimum investment. It is worth noting that nuclear power plants and advanced clean energy projects have extended qualifying periods.

Property Categories

The legal framework defines two interconnected classes of property: “qualified investment” and “qualified property.” These categories serve distinct roles within the value limitation process.

Throughout the qualification period, the applicant is obligated to construct or install qualified investments exceeding a predetermined value in order to be eligible for an appraised value limitation. Qualified investment encompasses specific categories of tangible personal property and buildings, excluding land and investments made prior to or after the qualification period.

Qualified property pertains to property that can receive a value limitation, generally commencing in the third full tax year of the agreement. This includes the land (when owned by the qualified property owner) and most new improvements initiated after the application review’s inception (the date when the Comptroller deems the application complete). Any property added beyond the qualification period may qualify if explicitly described in the application and limitation agreement.

Minimum Qualified Investment

The stipulated minimum qualified investment and value limitation minimum vary based on whether the school district is categorized as a rural district (subject to Subchapter C) or a non-rural district (subject to Subchapter B), and are influenced by the amount of taxable property value within the district.

The Texas Economic Development Act classifies districts subject to Subchapter C into five categories based on the level of taxable industrial property within the district. Similarly, school districts subject to Subchapter B are segmented into five distinct categories based on the overall taxable property value. As the taxable property value escalates across categories, the obligatory minimum investment and value limitation minimum increase accordingly.