Tax increment financing (TIF) is method local governments can use to pay for improvements that will draw private investment to an area. Tax increment financing redirects property tax in a geographic area designated as a Tax Increment Reinvestment Zone (TIRZ) to pay for improvements in the zone. Tax Code Chapter 311 governs tax increment financing.
A TIRZ project jumpstarts development to generate new tax revenue. The benefits of a TIRZ include:
Future tax revenues from each participating taxing unit are used to pay for the cost of improvements to an area. When the improvements result in additional property tax revenue, this revenue is referred to as the tax increment.
Each taxing unit determines what percentage of its tax increment, if any, it will commit to repay the cost of the financed improvements.
A county can designate by order a contiguous geographic area within its borders as a reinvestment zone. A municipality can designate by ordinance a contiguous or noncontiguous geographic area in its corporate limits as a reinvestment zone. A municipality also can designate a reinvestment zone in the city’s extraterritorial jurisdiction.
For additional information, contact the Data Analysis and Transparency Division via email or at 844-519-5672.