SPOTLIGHT PROGRAMS

Texas Enterprise Fund (TEF): The fund is used as a “deal closing” incentive tool for projects that offer significant projected job creation and capital investment and where a single Texas site is competing with one or more viable out-of-state options. Award amounts are discretionary and determined based on a series of factors including the number of employees, average wage, industry, project location, etc. The level of capital investment plays a significant role in determining the maximum award for a project.  Applications must also have support from the Texas community it is considering in the form of an incentive offer. New job creation must exceed 75 full-time jobs in urban areas and 25 in rural areas. The total average wage must also exceed that of the county in which the project is located.

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TAX EXEMPTIONS

Sales and Use Tax Exemptions: Available to taxpayers who manufacture, fabricate, or process tangible property for sale; manufacturing companies are also exempt from paying state sales/use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property.‍

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Data Center Tax Exemption:  Data Center projects involving at least 100,000 square feet that result in the creation of at least 20 qualifying jobs and a capital investment of at least $200 million over a 5-year period can qualify for a 100% exemption on sales and use tax. This only applies to the 6.25% state sales and use tax.‍

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Sales Tax Exemption or Franchise Tax Credit for Qualified Research:  A person engaged in qualified research can claim either a sales and use tax exemption on the purchase, lease, rental, storage or use of depreciable tangible personal property directly used in qualified research, or a franchise tax credit based on qualified research expenses. The amount of the credit is 6.25% of the difference between the qualified research expense incurred in Texas and the base period.  The total credit cannot exceed 50% of franchise tax liability.

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DIRECT FINANCIAL ASSISTANCE

Texas Small and Rural Community Success Fund:  The program provides financing for qualified projects in Texas municipalities by allowing communities to leverage future sales tax revenues to support economic development projects that promote business expansion, recruitment, and exporting. The program is geared toward small, rural communities which may be unable to access traditional sources of infrastructure financing like municipal bonds. Loans range from $25,000 to $5 million and may be available for interim, long-term or gap financing.‍

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Product Development & Small Business Incubator Fund (PDSBI): Recipients are small businesses with a new or improved product being developed, produced and and/or commercialized in Texas or a small business incubator. Preferred industries include semiconductors, nanotechnology, biotechnology, and biomedicine along with businesses having high potential of success, job creation and retention in the state.

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JOB TRAINING

The Skills Development Fund: Discretionary grants may be provided to public community and technical colleges that develop customized job training programs for businesses that want to train new workers or upgrade the skills of existing employees. Administered by the Texas Workforce Commission, the average training costs reimbursed are $1,800 per trainee however, the actual benefit will depend on the project.  

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LOCAL INCENTIVES  

Type A & Type B Economic Development Corporations: Municipalities in Texas have the ability to form local economic development corporations (EDCs) funded through a levy of additional local sales tax on the municipality. EDCs can use the collected sales tax revenues for economic development purposes including grants and financing for infrastructure improvements, investment attraction and job creation grants, and other business attraction activities. Funding is at the discretion of the municipality.

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‍Local Chapter 380/381 Grant or Loan:  Local municipalities may provide grants or loans to eligible companies in return for the project meeting agreed upon performance benchmarks.

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‍Chapter 311 Tax Increment Reinvestment Zone (TRIZ): Chapter 311 allows municipalities to redirect ad valorem property taxes within a designated zone to finance public improvements. These taxes can then fund public infrastructure and other eligible improvements that will increase the assessed value of the area over time. This is typically done to support large, private development or investment.

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‍Chapter 212/312 Abatement: Under this chapter, all non-school district local taxing districts can choose to abate all or a portion of its millage rate over a 10-year period for both real and personal property.

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‍Texas Jobs, Energy, Technology and Innovation Act (Chapter 403): Tax incentive program available to projects related to energy, technology, and innovation as identified by the legislative oversight committee. The incentive includes a project abatement on: the taxable value for school district maintenance and operations (M&O) property tax purposes for ten years, 50% of the market value of the property for that tax year (and an additional 25% if the property is in a federal opportunity zone), and construction work in progress is valued at zero for M&O purposes during the construction period. Projects must meet certain job requirements determined by county population and must have an average annual wage to all employees that is greater than 110% of the average annual wage in the applicable industry sector.

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‍Freeport Exemption: Property tax exemptions are available for various types of goods that are detained in Texas for 175 days or less, which can be waived for certain goods.  The goods must be in Texas only for a limited purpose such as assembly, storage, manufacturing, processing or fabricating. This exemption is available in select areas only.‍

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Texas Enterprise Zone Program: State sales and use tax refund tool designed to promote investment in economically distressed portions of the state. Communities must nominate companies to receive enterprise zone designation. Companies must meet investment and job creation thresholds to receive refunds. The maximum amount of refund per qualified job varies from $2,500 to $7,500 and the maximum amount of potential refund varies from $625,000 to $3,750,000. Award totals depend on capital investment and job creation.

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Last Updated: July 2023