economy Economic Development

Property Tax Abatement ActChapter 312 Overview

A tax abatement is a local agreement between a taxpayer and a taxing unit that exempts increases in the value of the property from taxation for up to 10 years.

Tax abatements are an economic development tool available to cities, counties and special districts to attract new industries and to encourage the retention and development of existing businesses through property tax exemptions or reductions.

School districts may not enter into abatement agreements.

Benefits

While tax abatements are short-lived, they can have a significant future impact:

• Tax abatements reduce unemployment. A new business creates jobs. People employed by the business may use their income to build homes and buy goods and services, cars and other personal necessities.
• They strengthen other businesses. Established businesses benefit when a new business opens. The increase in patrons allows other businesses to grow by investing in capital improvements and hiring new employees.
• They increase tax revenue. When an abatement is offered, a city still benefits from increased tax revenues. Employees of a new business spend their money at local stores (which boosts sales tax receipts) and often build new homes (which increases property tax receipts). These things occur without the need to increase tax rates.
• Tax receipts continue to grow long term after the abatement expires. Once a business is well-established within a community, the improvements and facilities that are added can be taxed. The tax rate and revenue from developed property is higher than on undeveloped property. This creates a long-term source of revenue for local government entities.
• They provide a flexible economic development tool. Abatements can be viewed as a flexible option compared with other economic development tools as infrastructure improvements or risky building ventures could become fixed costs. Without the abatement, it may be financially unfeasible for retailers to build on a certain area, due to features like underground pipelines, stormwater storage or floodplain.

Learn More

• Chapter 312 Abatements and Reinvestment Zone Webinar
• The Tax Abatement Act

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