DISCLAIMER: The material contained in this Summary of State Incentives is provided for informational purposes only and cannot be construed as a commitment. Assumptions are based on creating jobs and providing a capital investment. Total jobs and capital investment have been included as eligible costs for the various incentive programs available. However, actual jobs and capital investment may vary from the assumptions made due to final determination of program eligibility and site location.
Texas Enterprise Fund
The 78th Texas Legislature established the Texas Enterprise Fund to provide financial resources to help strengthen the state’s economy. The Governor, Lieutenant Governor, and the Speaker of the House must unanimously agree to support the use of the Texas Enterprise Fund for each specific project. Projects that are considered for Enterprise Fund support must demonstrate a project’s worthiness, maximize the benefit to the State of Texas and realize a significant rate of return of the public dollars being used for economic development in Texas. Capital investment, job creation, wages generated, financial strength of the applicant, applicant’s business history, analysis of the relevant business sector, and federal and local government and private sector financial support of a project will all be significant factors in approving the use of the Enterprise Fund.
The $200 million Texas Emerging Technology Program is designed to help Texas create jobs and grow the economy over the long-term by expediting the development and commercialization of new technologies and attracting and creating jobs in technology fields that will form the backbone of our economy.
The program will work through partnerships between the state, institutions of higher education and private industry to focus greater attention on the research, development and commercialization of emerging technology. The Emerging Technology Program is dedicated to three areas:
1. Regional Centers of Innovation and Commercialization (RCICs)
These centers will become concentrated with applied R&D activities, be incubators (including specialized workforce training) for startup firms and encourage expansion of existing companies resulting from commercializing their developments.
2. Matching grant funds
Applied technology research and development projects that accelerate commercialization into production and have a demonstrated ability to receive or have received federal grants or non-state grants may apply for matching dollars from the Emerging Technology Fund. Grants such as Small Business Innovation Research grants, Small Business Technology Transfer grants, etc.
3. Attracting research talent
The state will help Texas public universities attract highly renowned research teams from universities and institutions in other states.
Texas Enterprise Zone
Under the statewide cap of 105 projects per biennium, a community with less than 250,000 in population may have up to four enterprise projects. A community with 250,000 in population or greater may have up to six enterprise projects. Upon a community designating a business as an enterprise project, and upon that project’s designation being approved by the state, the business would be eligible for the following incentives:
State Sales and Use Tax refunds:
Beginning September 1, 2007 an enterprise project is eligible for a refund for all state sales and use taxes paid and used at the qualified business site. The total amount of any refund will continue to be predicated on investment amount and number of jobs created/retained. The refund can be an amount ranging from a minimum of $2,500 per job to a maximum of $7,500 per job as follows:
1. If project investment amount is greater than $40,000 and less than $400,000, then refund amount is $2,500 per job up to a maximum of 10 jobs created/retained;
2. If project investment amount is equal to or greater than $400,000 and less than $1,000,000, then refund amount is $2,500 per job up to a maximum of 25 jobs created/retained;
3. If project investment amount is equal to or greater than $1,000,000 and less than $5,000,000, then refund amount is $2,500 per job up to a maximum of 125 jobs created/retained;
4. If project investment amount is equal to or greater than $5,000,000 and less than $150,000,000, then refund amount is $2,500 per job up to a maximum of 500 jobs created/retained;
5. If project investment amount is equal to or greater than $150,000,000 and less $250,000,000, then refund amount is $5,000 per job up to a maximum of 500 jobs created/retained;
6. If project investment amount is equal to or greater than $250,000,000, then refund amount is $7,500 per job up to a maximum of 500 jobs created/retained;Receipts for purchases of building materials and machinery and equipment and payroll information are required to be retained as part of the audit process.
(Note: All contracts should separate the costs for building materials and/or equipment from the costs of labor and services in order to be eligible.)The refund for sales and use tax must be for all eligible items for use at the qualified business site.
Texas Capital Fund Infrastructure
The Texas Capital Fund Infrastructure Program is an economic development tool designed to provide financial resources to non-entitlement communities.
Funds from this program can be utilized for public infrastructure (water, sewer, roads, etc.) needed to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons. The minimum award is $50,000 and the maximum is $1 million. The award may not exceed 50 percent of the total project cost.
The Texas Department of Agriculture administers the Texas Capital Fund Program.
State Sales & Use Tax Exemptions
Leased or purchased machinery, equipment, replacement parts, and accessories that have a useful life of more than six months, and that are used or consumed in the manufacturing, processing, fabricating, or repairing of tangible personal property for ultimate sale, are exempt from state and local sales and use tax. Texas businesses are exempt from paying state sales and use tax on labor for constructing new facilities. Texas businesses are exempt from paying state sales and use tax on the purchase of machinery exclusively used in processing, packing, or marketing agricultural products by the original producer at a location operated by the original producer.
• Natural Gas & Electricity
Texas companies are exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property. The company must complete a “predominant use study” that shows that at least 50 percent of the electricity or natural gas consumed by the business directly causes a physical change to a product.
Texas Capital Fund Real Estate Development
The Texas Capital Fund Real Estate Development Program is designed to provide financial resources to non-entitlement communities. Funds must be used for real estate development (acquisitions, construction and/or rehabilitation) to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons.
This program encourages business development and expansions located in non-entitlement communities. The minimum award is $50,000 and the maximum is $1 million. The award may not exceed fifty percent (50%) of the total project cost. Funds are provided with no interest accruing and with payments based on a 20-year amortization schedule. Total Texas Capital Fund participation from both Infrastructure program and Real Estate Development program may not exceed $1 million.
The Texas Department of Agriculture administers the Texas Capital Fund Program.
House Bill 621 of the 80th Texas Legislature amends the Tax Code and the Government Code to add an exemption from ad valorem taxation for goods-in-transit.To qualify for the exemption, personal property used for assembling, storing, manufacturing, processing, or fabricating purposes would have to be acquired in Texas or imported into Texas and stored at a Texas location in which the owner of the goods does not have a direct or indirect ownership interest.
The goods-in-transit would have to be transported to another location in Texas or out of state no later than 175 days after the property was acquired in or imported into the state.
Oil and gas and their immediate derivatives, aircraft, and dealer's special inventories would not qualify for the exemption.
Pollution Control Equipment Incentive
A Texas constitutional amendment providing an exemption from property taxation for pollution control was approved in 1993. The intent was to ensure that compliance with environmental mandates, through capital investments, did not result in an increase in a facility’s property taxes.
A facility must first receive a determination from the Texas Commission on Environment Quality (TCEQ) that property is for pollution control purposes. That positive use determination is then provided to the local appraisal district, which must accept the TCEQ’s decision and grant the property an exemption from property taxes.
To be eligible for a positive use determination, the property must have been purchased, acquired, constructed, installed, replaced, or reconstructed after January 1, 1994 to meet or exceed federal, state, or local environmental laws, rules, or regulations.
Renewable Energy Incentives
Wind and Solar Energy Tax Exemptions and Deductions
Tax Code Section 171.056 extends a franchise tax exemption to manufacturers, sellers, or installers of solar energy devices.
• Solar Energy Incentives
• Wind Energy Incentives
• Ethanol Incentives
• Biodiesel Incentives
The state also permits a corporate deduction from the state’s franchise tax for renewable energy sources. Business owners may deduct the cost of the system from the company’s taxable capital or deduct 10% from the company’s income. Wind energy qualifies under the term “solar energy” for the exemption and deduction under Sections 171.056 and 171.107.
For more information on the tax exemption, visit the State Energy Conservation Office website, or contact the Comptroller of Public Accounts.
Texas property tax code permits a 100% exemption on the appraised value of solar, wind or biomass energy devices installed or constructed for the production and use of energy on-site. See Texas property tax Form 50-123, “Exemption Application for Solar or Wind-Powered Energy Devices” to claim this exemption.
Texas also offers a loan program for eligible efficiency technologies. The LoanSTAR Revolving Loan program is available to schools, hospitals and local governments. The low interest loans are capped at a $5 million maximum and are required to meet certain technical guidelines including a detailed energy assessment report.
Texas Economic Development Act
In 2001, the 77th Texas Legislature enacted House Bill 1200 creating Tax Code Chapter 313, Texas Economic Development Act, to encourage large scale manufacturing, research and development, renewable energy, nuclear and integrated gasification combined cycle electric generation facilities capital investment projects in the State of Texas.
The law requires companies to invest a specified amount of money to qualify for a tax credit and an eight year limitation on the appraised value of a property for the maintenance and operations portion of the school district property tax. The local school district must elect to participate in order for the Company to recognize this benefit.
The qualifying investment amount is determined on a sliding scale that begins at $100 million for large urban areas and $30 million for rural areas. The qualifying investment amount is reduced for areas with a lower tax base.
Moving Image Industry
In 2007, the 81st Texas Legislature enacted House Bill 1634 establishing the Moving Image Industry Incentive Program. Under the legislation, grants to promote industry growth in Texas can be made to applicant production companies.
The incentive is available in the form of a production grant equal to 5% of in-state spending, including wages paid to Texas residents. Grants are available upon project completion to features, television programs, television commercials and video games. Both live action and animated projects are eligible.
The maximum grant amounts available after September 1, 2007 are:
• $2 million for features;
• $2.5 million for television programs (for episodic series, $2.5 million per season);
• $200,000 for a commercial, series of commercials or music videos; and
• $250,000 for video games.
Available for review at the Texas Film Commission website are the specific eligibility qualifications for projects including investment thresholds, employment requirements and content. Specific incentive enhancements related to underused areas are provided.