STATE INCENTIVESOrange County EDC
“Texas cities are clearly the place to be in terms of job creation, wealth formation and overall growth.”Forbes
TEXAS ENTERPRISE FUND
If you’re seriously considering Texas and opportunities in some other state, the Texas Enterprise Fund (TEF) might help you make your decision. The fund is a cash grant used as a financial incentive tool for projects that offer significant projected job creation and capital investment and where a single Texas site is competing with another viable out-of-state option.
TEF grant recipients are contractually obligated to fulfill the terms of their job creation agreements with the State of Texas. To be eligible, a project must meet the following criteria:
- Competition with another state for the project must exist and the business must not have already made a location decision.
- Projected new job creation must be significant – past recipients have typically created more than 75 jobs in urban areas or more than 25 in rural areas.
- The new positions must be high-paying jobs – above the average wage of the county where the project would be located.
- Capital investment by the company must be significant.
- A significant rate of return on the public dollars being invested in the project must be demonstrated.
- The project must have community involvement from the city, county, and/or school district, primarily in the form of local economic incentive offers.
- The applicant must be a well-established, financially sound business.
- The applicant’s business sector must be an advanced industry that could potentially locate in another state or country.
- The Governor, Lieutenant Governor, and the Speaker of the House must unanimously agree to support the use of TEF for each specific project.
The Governor’s University Research Initiative (GURI) was enacted in 2015 by the 84th Legislature with a goal to bring the best and brightest distinguished researchers in the world to Texas. This program is a matching grant program to assist eligible institutions of higher education in recruiting distinguished researchers. The GURI grant program is operated within the Office of the Governor (“OOG”) in the Economic Development and Tourism Division.
The Texas Capital Fund Infrastructure Program (TCFIP) provides financial resources to non-entitlement communities for public infrastructure projects needed to assist businesses. Communities can use TCFIP grants in the amount of $50,000 to $1.5 million to build 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 program is only available to non-entitlement city or county governments. Projects are evaluated by using a scoring system based on community need, jobs and economic impact. TCFIP is administered through the Texas Department of Agriculture.
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 renovation) 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 $1,500,000. No interest is charged on the loan amount. The program is only available to non-entitlement city or county governments. Projects are evaluated by using a scoring system based on community need, jobs and economic impact.
The Texas Economic Development Act provides a ten-year limitation on the taxable value of the property extended to a taxpayer who agrees to build or install property and create jobs. The value limitation applies to the local school district maintenance and operations tax (M&O) portion of the property tax and varies by school district. To participate, the company must apply to the effective school district. Value Limitation Tax Credits are administered through the Comptroller of Public Accounts.
Goods en Route
A freeport exemption is a property tax exemption. A community may choose to offer the freeport exemption for various types of goods that are detained in Texas for a short period of time. Freeport property includes goods, wares, merchandise, ores, and certain aircraft and aircraft parts. Freeport property qualifies for an exemption from ad valorem taxation only if it has been detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing, or fabricating. For certain aircraft parts, a community, by official action, may extend the deadline to 730 days. For detailed information, please visit Texas Constitution Article 8, Section 1-J. The freeport exemption is administered through the Comptroller of Public Accounts.
Equipment for a Cleaner Environment
The pollution control incentive results from a Texas constitutional amendment approved in 1993. The incentive provides an exemption from property taxation for pollution control equipment. Compliance with environmental mandates through capital investments do not result in an increase in a facility’s property taxes. To qualify, a facility must first receive a determination from the Texas Commission on Environmental Quality (TCEQ) that the property to receive the exemption is used wholly or partly for preventing, monitoring, controlling or reducing air, water or land pollution.
Texas is a leading producer and consumer of alternative, renewable energy. Various tax exemptions, franchise tax exemptions and franchise tax deductions are available for renewable energy equipment and systems. Renewable energy encompasses solar, wind, ethanol and biodiesel energy. Several incentive programs apply:
- A franchise tax exemption is available to manufacturers, sellers or installers of solar energy devices. 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 percent from the company’s income. Wind energy can qualify under the term “solar energy” for the exemption and deduction.
- Texas property tax code permits a 100 percent 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 to fund energy retrofits in public buildings. The “LoanSTAR” program is targeted to state agencies, school districts, higher education, local governments and hospitals for financed energy retrofits that pay for themselves in energy cost savings over time.
Detailed information on a variety of renewable energy exemptions and deductions is available on the State Energy Conservation Office website.
Texas Assists Manufacturing
Manufacturing Exemptions provide state sales and use tax exemptions to taxpayers who manufacture, fabricate or process tangible property for sale. The exemption generally applies to tangible personal property that becomes an ingredient or component of an item manufactured for sale, as well as taxable services performed on a manufactured product to make it more marketable. Natural gas/electricity exemptions require a “predominant use study” that shows that at least 50 percent of the electricity or natural gas consumed by the business is used directly in the manufacturing process. Manufacturing exemptions are administered by the State Comptroller of Public Accounts. For information about applying for these exemptions and a full explanation of what is and is not exempt, visit the Comptroller’s website.
Data, R&D and Relocation
Texas is ideally positioned for data center operations. The state is centrally located and has access to talented, experienced high tech workers. A data center exemption applies to state sales and use tax on certain items necessary and essential to the operation of a qualified data center. The exemption is for state sales tax only. Local sales taxes are due on purchases of these qualifying items. Qualification requirements and full details are available from the Comptroller of Public Accounts.
Companies engaged in research and development activities can receive reductions in either applicable sales tax or franchise tax (not both). Certain qualifications apply. The R&D tax credit is administered through the Comptroller of Public Accounts. For more detailed information, click here.
A taxable entity may deduct relocation costs incurred in relocating the taxable entity’s main relocation costs incurred in relocating the taxable entity’s main office or other principal place of business to the State of Texas from another state or country. Certain qualifications apply. The deduction may not reduce apportioned margin below zero, and no carryover of unused deduction is allowed. For additional information, please click here:
Skills Development Fund
The Skills Development Fund is administered through the Texas Workforce Commission. A business, consortium of businesses, or trade union identifies a training need, and then partners with a public community or technical college to fill its specific needs. Businesses work with college partners to submit proposals, develop curricula, and conduct training.
The Skills Development Fund pays for the training, the college administers the grant, and businesses create new jobs and improve the skills of their current workers. A business, consortium of businesses, or trade union identifies a training need, and then partners with a public community or technical college to fill its specific needs. Businesses work with college partners to submit proposals, develop curricula, and conduct training.