HB 3143 and Chapter 312 Tax Abatement Agreements

Tax abatement agreements, commonly referred to as 312 agreements, are never easy tasks, and with the recent updates to Chapter 312 of the Texas Tax Code, the job hasn’t gotten any easier.

The most notable changes concern notice and public hearing requirements for the 312 agreements and the adoption or updating of the city’s current guidelines and criteria. These changes are somewhat ambiguous and have sparked numerous debates among municipal attorneys.

The 2019 legislative session enacted House Bill (HB) 3143, which contains additions to the notice requirements under section 312.207 titled “Approval by Governing Body.”

HB 3143 added subsection (c) which states that the public notice for a meeting where a City Council will consider a 312 agreement must contain: (1) the name of the property owner and the name of the applicant for the tax abatement agreement; (2)  the name and location of the reinvestment zone in which the property subject to the agreement is located; (3)  a general description of the nature of the improvements or repairs included in the agreement; and (4)  the estimated cost of the improvements or repairs. Subsection (d) was added to 312.207 to provide that notice for a meeting where a 312 agreement will be considered must be given in the same manner as required under the Open Meetings Act, except that the notice must be provided at least thirty days before the scheduled meeting where the abatement agreement will be considered.

Additionally, HB 3143 added subsections (c-1) and (c-2) to section 312.002 titled “Eligibility for a Taxing Unit to Participate in Tax Abatement.”

This section of Chapter 312 concerns the adoption, amendment, repealing, or reauthorizing of a municipality’s tax abatement agreement guidelines and criteria. These guidelines and criteria need to be adopted before an entity may enter into any 312 agreements, and they must be reauthorized every two years, which is nothing new for those familiar with Chapter 312.

However, what is new under (c-1), is the requirement for a public hearing before the governing body may adopt, amend, repeal, or reauthorize the guidelines and criteria for 312 agreements.

Subsection (c-2) was added as well and requires a municipality that maintains a website must post the most current version of the guidelines and criteria to the website.

These additions to Chapter 312 have caused split opinions among municipal attorneys.

One example of this split is whether a public hearing is required before a governing body may approve a 312 agreement. There is no language to be found under Chapter 312 that says a public hearing is required, but some city attorneys prefer to be more conservative and have their municipal clients hold a public hearing as a type of “belt and suspenders” approach. Others stick with the plain language in the statute and do not consider a public hearing for a tax abatement agreement to be required. Another example of the confusion these new subsections have caused is whether a public notice is required for the public hearing for guidelines and criteria under 312.002(c-1). Here again the statute says nothing about any additional notice requirements for 312.002(c-1), but those conservative attorneys out there insist their municipal clients post a 7 day notice similar to the notice required when creating or expanding a reinvestment zone. Both conservative approaches may seem unnecessary to some and an added measure of security to others.

As evidenced above, HB 3143 made an already tedious and arduous process even more so by adding additional requirements that must be adhered to. Hopefully, some of the confusion that these additions have created will be addressed at the current legislative session.

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