America's Property Tax Advisor

Texas Chapter 313 Property Tax Breaks
Set to Expire

BY FOY MITCHELL, DALLAS, NOVEMBER 2021

Section 313 of the Texas Economic Development Act is set to expire at the end of 2022 so lawmakers either have to renew it or let it lapse.

 

The decades-old law was designed to lure companies to Texas with property tax breaks. Critics say the program has been abused and is unfair to many Texas schools.

 

If the law is extended, it will probably be amended to ensure compliance with legislative intent.

 

Background

 

The Texas Legislature created Chapter 313 to offer property tax breaks to major companies that locate new facilities in the state. Since then, oil refineries, petrochemical factories and others have enjoyed breaks on their property taxes thanks to the program.

 

According to the most recent report on Chapter 313 from the Texas Comptroller, 222 school districts in the state have a total of 509 agreements with companies through the program. That’s less than 20% of all Texas school districts. The districts that have 313 deals encompass about 5% of K-12 students in the state.

 

Problems Identified

 

Chapter 313 allows school districts to temporarily limit a property’s appraised value to encourage business development. But the property owner has to create a certain number of permanent, full-time jobs. State Senator Paul Bettencourt says the program has seen some serious abuses over the years, even telling Inside Texas Politics that some companies have taken advantage of it and created only one job.

 

“Doing it wrong doesn’t make anybody happy except the people that get money, they get a windfall and produce one job and that’s not what the program’s about,” Bettencourt said. “If we’re not going to have responsible use of the economic development funds, we’re not going to have a program.”

 

In exchange for the tax incentive, corporations pay fees directly to local school districts to make up for their share of the lost property tax revenue. These fees lie outside of the traditional school finance system, which requires property-wealthier districts to share some of their tax revenue with poorer districts. The state can’t redistribute excess funds from 313 agreements to districts more in need of money.

 

According to an analysis conducted by Nate Jensen, a government professor at the University of Texas at Austin, an estimated 85% of the firms with 313 agreements would have constructed facilities in Texas regardless of the tax break, even though the law requires a company to show that it needs the incentive to move to the state.