Home | State Tax Profiles | Tax Calendar | Locations | Client Connect Login

Texas Tax Incentives

by Foy Mitchell, Dallas, April 2021

Texas offers several incentive programs to encourage business investment and economic development. One of the most widely used is the 2001 Texas Economic Development Act, created to give Texas a competitive edge in business location decisions and codified as Chapter 313 of the Texas Tax Code.

 

How it Works

 

Chapter 313 allows school districts to temporarily limit a property’s appraised value to encourage business investment within their borders.

 

The property owner agrees to create a certain number of permanent, full-time jobs, and to build or install property in the school district. In exchange, the maintenance and operations (M&O) portion of the property’s taxable value is capped at a certain amount for 10 years.

 

Pro

 

Supporters of the program argue that Texas' high local property tax rates put the state at a disadvantage when competing for businesses making new investments. They say that without the 313 program, Texas cannot compete with other states for new business investment.

 

Supporters further point out that the Chapter 313 program is extremely transparent, and that even with Chapter 313 agreements, schools' tax bases are increased.

 

Con

 

Critics of the program argue that many of the projects receiving the abatement would have located to Texas for other reasons.

 

For example, the program's petrochemical projects locate in Texas largely because of the proximity to rich oil and gas shale plays along with access to deep-water ports and pipeline networks.

 

Two large liquefied natural gas projects are being built in Texas even after being refused Chapter 313 abatements by the local school district.

 

Will Chapter 313 be Extended?

 

Chapter 313 is set to expire if lawmakers don’t extend it during the 2021 legislative session. A bill to extend it failed in the 2019 session after it died in Senate committee.

 

Senate Bill 144 and House Bill 778 have been introduced to extend the program’s expiration date from December 31, 2022 to December 31, 2032.