Property Tax Abatement

Disclaimer:

This information should not be construed as, and is not a substitute for, legal advice.

Taxpayers and taxing units are urged to consult the Attorney General’s Economic Development Handbook and their own legal counsel for any questions or interpretations of economic development laws.

Tax Programs/Incentives
Resources

Local Property Tax Information

Economic Development Handbook (PDF posted by Office of Attorney General, 2013)

Statutes Governing Reinvestment Zones and Tax Abatements

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For questions, contact the Comptroller's Economic Development & Analysis Division at econ.dev@cpa.state.tx.us or call 1-800-531-5441 ext. 3-4679 (in Austin: 512-463-4679).

Property Tax Abatement Act, Tax Code Chapter 312 Overview

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. 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.

There is a 5-step process by which a taxing unit can establish tax abatement agreements. The statutes governing tax abatements are located in chapter 312 of the Texas Tax Code.

  1. Guidelines and Criteria: 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.
  2. Resolution: Each taxing unit that wants to consider tax abatements must also adopt a resolution indicating its intent to participate in tax abatement. The resolution must be adopted at an open meeting by a majority vote of the taxing unit's governing body.
  3. Public Hearing: Seven days' written notice of the public 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 circulation 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.
  4. Designate a Reinvestment Zone: After the hearing has taken place and the guidelines and criteria have been adopted, the taxing unit may, by official action, designate a reinvestment zone. Designation of an area as an enterprise zone under Chapter 2303, Government Code constitutes designation of an area as a reinvestment zone without further hearing or other procedural requirements by the local taxing unit.
  5. Tax Abatement Agreement: After the designation of the reinvestment zone, the governing body of a taxing unit may enter into a tax abatement agreement under this chapter if 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.
  6. Written notice: of a taxing unit's intent to enter into a tax abatement agreement must be delivered to the presiding officer of each of the other taxing units in which the property is located at least seven days before the abatement is granted. The other taxing units may enter into an abatement agreement or choose not to provide an abatement. There is no penalty for choosing not to provide an abatement.