The Texas Jobs, Energy, Technology, and Innovation Act
The Texas Economic Development Act, or Chapter 313 of the Texas Tax Code was created by the Texas Legislature in 2001 to attract large-scale businesses and high-paying jobs. This was accomplished by providing an incentive program to capital-intensive businesses (e.g., manufacturers) which limited the appraised value of business property for the purposes of local school district property taxes. After multiple renewals, these Chapter 313 incentive programs expired – by law – on December 31, 2022. (Chapter 313 agreements entered in 2022 will be grandfathered into the program.)
Chapter 313 was the only program that allowed school district taxes to be abated in order to attract new businesses. Even with school district property rates making up approximately half of the total property tax burden in Texas, both businesses and school districts benefited. In exchange for participation in the program, businesses would pay fees directly to local school districts to recoup the lost property tax revenue.
Having lost Chapter 313, the 88th Legislature sought to find a replacement.
HB 5 created the “Texas Jobs, Energy, Technology, and Innovation Act,” which attempts to address many of the criticisms of Chapter 313, placing significant oversight on agreements made under the new law. Similar to Chapter 313, the Texas Jobs, Energy, Technology, and Innovation Act (“TJETIA”) is meant to create new, high-paying permanent jobs and encourage large-scale economic development, encouraging state-wide energy and water infrastructure development, new and innovative technological advancement, and advanced manufacturing industry sectors critical to national defense and health care.
Projects eligible for the TJETIA incentive program would include projects to construct or expand new or existing manufacturing or utility service facilities; facilities related to the development of natural resources; facilities engaged in the research, development, or manufacture of high-tech equipment or technology; or, critical infrastructure. The TJETIA specifically excludes many electric energy storage facilities and other renewable energy projects deemed non-dispatchable sources of electricity (e.g. solar and wind power).
The project must also be located on eligible property. TJETIA defines this as property consisting of a new building or expansion of an existing building that is constructed after the date of the TJETIA agreement and which is located in an area designated as a reinvestment or enterprise zone. Eligible property may also be tangible personal property but not inventory.
While Chapter 313 provided comparatively little oversight to incentive agreements made under it, the TJETIA requires an extensive application process and a multi-level review and approval process.
Chapter 313 required that a proposed incentive agreement be submitted to the comptroller prior to execution, with the comptroller then performing an economic analysis and the Texas Education Agency determining the effect of the proposed agreement. No later than the 90th day after its receipt of the application and accompanying proposed agreement, the comptroller was required to issue a certificate for a limitation on the appraised value of the property or to provide the submitting school district a written explanation of the comptroller’s decision not to issue such a certificate.
In contrast, the TJETIA requires both the comptroller and the governor to review and approve a TJETIA project application – all within a 90-day window – before the school district may take any action regarding an application and proposed incentive agreement. Also, rather than the comptroller performing an economic analysis, the TJETIA requires that the applicant – not necessarily a school district – include an economic benefit statement with its detailed application.
With stricter project requirements, a more detailed application and review process, and specifically outlined project expectations, TJETIA seems to be a more evolved version of the Chapter 313 program. The TJETIA allows the comptroller to make certain decisions in its application of the TJETIA’s requirements, but as of the date of publication, the Texas Comptroller of Public Accounts doesn’t seem to have launched its TJETIA webpage just yet, but the whole text of the TJETIA can be found here.
Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice.
