November 19, 2020

Fiscal Notes: Chapter 313 Agreements – Trading Tax Limitations for Development

(AUSTIN) — In the recently released November edition of Fiscal Notes, the Comptroller’s office examines the 2001 Texas Economic Development Act, created to give Texas a competitive edge in business location decisions and codified as Chapter 313 of the Texas Tax Code.

Chapter 313 allows school districts to temporarily limit a property’s appraised value to encourage business investment within their borders. The property owner agrees to create a certain number of permanent, full-time jobs, called “qualifying jobs,” and to build or install property in the school district. In exchange, the maintenance and operations portion of the property’s taxable value is capped at a certain amount for 10 years.

“Chapter 313 is complex and at times controversial,” Texas Comptroller Glenn Hegar said. “Under current state law, the chapter will expire on Dec. 31, 2022. Since the program will almost certainly be fiercely debated in the next legislative session, we think now is the time for a detailed look at this law and the industries it has benefited.”

The Texas Comptroller’s office must approve all Chapter 313 agreements, and all applicants must meet the following criteria:

• within 25 years, the project proposed must be reasonably likely to generate enough tax revenue to offset the property tax revenue lost as a result of the agreement; and
• the agreement must be a determining factor in the applicant’s decision to invest capital and build the project in Texas.

Fiscal Notes furthers the Comptroller’s constitutional responsibility to monitor the state’s economy and estimate state government revenues. It has been published since 1975, featuring in-depth analysis concerning state finances and original research by subject-matter experts in the Comptroller’s office.

For questions about how our agency functions are continuing during the outbreak, visit our COVID-19 News page or our Virtual Field Office. Fiscal Notes is available online and can be received by subscribing via the Comptroller's website.