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Property Tax Economic Development Programs

Value Limitation & Tax Credits

Chapter 313, Tax Code

An appraised value limitation is an agreement in which a taxpayer agrees to build or install property and create jobs in exchange for an eight-year limitation on the taxable property value for school district maintenance and operations tax (M&O) purposes. The minimum limitation varies by school district. The application for a limitation on the appraised value for M&O purposes is submitted directly to the school district and may require an application fee, which is established by each school district.
View application forms #50-296 and #50-300 for School Districts - Economic Development Act.

To qualify for a tax credit, a separate application must be submitted before September 1 of the third year of a ten-year period. The credit is for the M&O taxes paid over the limitation amount in the first two years. The school district’s tax collector must credit the overage in equal parts over the last seven years of the agreement, but the credit may not exceed 50 percent of the total taxes paid on the qualified property for a given year. Any eligible amount not credited in the seven-year period must be credited over the next three years, but not to exceed the total taxes paid on the qualified property.
View further details about the Appraised Value Limitation and Tax Credit.

Tax Abatement Act

Chapter 312, Tax Code

A tax abatement is an 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. School districts may not enter into abatement agreements. Each taxing unit that wants to consider tax abatement proposals must adopt guidelines and criteria for the creation of a reinvestment zone and must hold a public hearing. After these steps are complete, the taxing unit may, by official action, designate a zone.

Seven days’ written notice of the hearing must be given to the presiding officer of each of the other taxing units that has taxing jurisdiction over real property within the zone. Notice of the hearing must also be published at least seven days before the hearing in a newspaper of general circula•tion in the city. At the public hearing on the reinvestment zone, the governing body must find that the improvements sought are feasible and would benefit the zone after the expiration of the agreement, and the zone meets one of the applicable criteria for reinvestment zones.

The governing body of a taxing unit may not enter into a tax abatement agreement under this chapter unless it finds that the terms of the agreement and the property subject to the agreement meet the applicable guidelines and criteria adopted by the governing body under this section.

More Resources:

• Reinvestment Zone For Tax Abatement Registry
• Tax Abatement Agreement Policy
• Property Tax Forms for Abatement Registry & Refund for Economic Development

Tax Increment Financing

Chapter 311, Tax Code

Tax increment financing (TIF) is a tool that local governments can use to publicly finance needed structural improvements and enhanced infrastructure within a reinvestment zone.

A reinvestment zone can be initiated by petition of the affected property owners, or a municipality or county can initiate a reinvestment zone without the need for a petition. Restrictions on the creation of a reinvestment zone include:

• No more than 10 percent of the property may be used for residential purposes (does not apply if the district is created by a petition of the landowners).
• May not contain property that cumulatively would exceed 15 percent of the total appraised property value within the city and its industrial districts.
• May not create or change the boundaries of an existing zone if the zone would contain more than 15 percent of the total appraised value of real property taxable by a county or school district.

Learn more about Tax Increment Financing Registry.

Economic Development Refund

Sections 111.301-111.304, Tax Code

Sections 111.301 to 111.304 of the Tax Code provide for state tax refunds to qualified property owners who entered into property tax abatement agreements after January1, 1996 with a city or county, but not a school district. Property owners with tax abatement agreements entered into on or before January 1, 1996 are not eligible for these state refunds. They are also not eligible if their property is subject to an appraised value limitation, as discussed above.

To be eligible for a refund, a property owner must have established a new business in a reinvestment zone or expanded or modernized an existing business located in the zone. Since entering into a city or county abatement agreement, the property owner must have increased the business’s payroll by at least $3 million, specific to its property in Texas. Or, the owner must have increased the abated property’s ap•praised value by at least $4 million.

Property owners must submit a refund application to the Comptroller’s office before August 1 of the year following the property tax year. A property owner’s potential refund equals the school property taxes paid by the owner in that tax year. The maximum refund is the lesser of the school taxes paid or the amount of net sales and use tax and net franchise tax paid for the tax year. The total for all refunds collectively may not exceed $10 million.

More Resources

• Texas Administrative Code: Rule §9.105 Tax Refund for Economic Development
• Property Tax Forms for Abatement Registry & Refund for Economic Development

The Freeport Exemption

Section 11.251, Tax Code

The freeport exemption includes a total exemption for personal property, excluding petroleum products, which is detained in this state for a temporary period (175 days or fewer) for assembling, storing, manufacturing, processing or fabrication purposes.

When this exemption was enacted in 1989, taxing units had the authority to continue to tax or exempt freeport property by taking an official action. Once a unit decides to exempt freeport property, it may not rescind the exemption.  Applications for freeport exemptions must be filed with the county appraisal district, and the chief appraiser will compute the exemption, if any.
View Taxing Units That Tax Freeport Property, as Reported in 2004.

For additional information, contact the Comptroller’s Property Tax Division toll free at (800) 252-9121, or in Austin at (512) 305-9999.