transparencyEconomic Development

Chapter 312 Reinvestment Zones and Abatements Executive Summary 2024Introduction

A property tax abatement, as allowed by Tax Code Chapter 312, is a local agreement between a taxpayer (typically a business) and a local taxing unit (such as a city, county or special purpose district) that exempts or abate from taxation all or part of the increase in the value of real property and/or tangible personal property. Tax abatements are used by local governments for three main purposes: (a) to attract businesses to come to the local community, (b) to encourage local businesses to grow and hire more people with good paying jobs, and (c) to encourage significant capital investment in the community.

On Sept. 1, 1997, the Comptroller’s office assumed responsibility for the state’s biennial Central Registry of Reinvestment Zones and Ad Valorem Tax Abatement Agreements from the Texas Department of Commerce, which was later abolished.

On June 11, 2001, the Texas Legislature required the Comptroller’s office to establish the state’s Central Registry of Reinvestment Zones and Tax Abatements.

As of 2012, the Comptroller’s office is statutorily required to submit a report to the governor and the Legislature every two years on the Central Registries of Reinvestment Zones for Tax Abatements, as required by Tax Code Section 312.005. Information about all reinvestment zones and abatements are publicly available in the following searchable databases: the Local Development Agreement, Reinvestment Zones, Abatement Agreements and the Post Abatement Reports.

Summary of Chapter 312 Reinvestment Zone and Property Tax Abatement Data Reported in Fiscal 2022-2023

The summary data for all charts, graphs and tables below reflect the newly created reinvestment zones during 2022 and 2023 as reported to the Comptroller’s office. Summary data can be found in the Central Registry of Reinvestment Zones and Ad Valorem Tax Abatement Agreements and the Central Registry of Tax Increment Reinvestment Zones under the View Reports heading.

Reinvestment Zones

Before granting a tax abatement, a local taxing unit must adopt a resolution indicating the intent to permit tax abatements, adopt tax abatement guidelines and criteria, and define an area as a reinvestment zone.

Most reinvestment zones are created by cities or counties. More zones were created by counties than by cities in fiscal 2022 and 2023. During this time frame, counties accounted for 38 or 61.2 percent of the 62 new zones. School districts create reinvestment zones infrequently because they are not allowed to participate in tax abatements (Exhibit 1).

These 62 new reinvestment zones encompass 26,565 acres. Zones created by counties account for 16,147 acres or 60.8 percent of all acreages in a new zone. Cities reported creating new reinvestment zones of nearly 10,316 acres or 38.8 percent of the total. The remaining balance of acreage in a new zone created by ISDs account for 102 acres or 0.4 percent (Exhibit 2).

Businesses Receiving Tax Abatements

Local governments regularly use property tax abatements to entice businesses and new industry and to encourage the development and retention of existing businesses. Taxing units either approach or are approached by businesses of differing types, industries and sizes to economically develop or improve different types of property.

There were a total of 75 new tax abatements reported for the two fiscal years: 45 tax abatements (60 percent) in fiscal 2022 and 30 tax abatements (40 percent) in fiscal 2023. Cities approved 36 tax abatements (48 percent) over the two years while counties adopted 39 tax abatements (52 percent) (Exhibit 3).

While most property tax abatements are granted for business development, it is not uncommon for residential property to receive tax abatement. In fiscal 2022 and 2023, cities and counties combined granted 72 tax abatements. Sixty-six (91.7 percent) of the tax abatements were for commercial or industrial purposes, and five (6.9 percent) were granted for residential development. There were no residential tax abatements reported by counties for either fiscal year (Exhibit 4).

Source: Texas Comptroller of Public Accounts

Forty-three businesses received tax abatements in fiscal 2022, and 29 businesses were granted tax abatement in fiscal 2023. In fiscal 2022, the most common purpose cited by local governments for granting property tax abatement was business expansion (18) followed closely by new business (17). Not reported (6) and business relocation (2) were the third and fourth most common purpose. The pattern was similar in fiscal 2023; however, new business exceeded the combined total for the three other purposes (Exhibit 5).

Source: Texas Comptroller of Public Accounts

Property tax abatement may be granted to any business, regardless of the number of employees. In fiscal 2022 and 2023, small and micro businesses received tax abatements in counties (23) at more than twice the rate of cities (11). For larger businesses the results were mixed. Medium-sized businesses were granted tax abatements in cities (10) at more than twice the rate of counties (4), and for large businesses the trend was reversed. Business size was not reported for 12 tax abatements (Exhibit 6).

Source: Texas Comptroller of Public Accounts
^*Based on number of employees.

Tax abatements may be granted for various types of property improvements. In both fiscal years for counties and cities, the most common tax abatements were for new construction (new facilities) and machinery. Less popular choices were renovations (six cities and four counties reported this type of improvement) and upgrades (two cities and one county reported this type of improvement) (Exhibit 7).

Source: Texas Comptroller of Public Accounts

Current Tax Abatement Status

The status of a tax abatement encompasses several things, such as the length or term of an abatement; whether the tax abatement has been modified; and whether the tax abatement remains active, inactive, expired or canceled.

Most tax abatements are assigned active and run their term without ever being modified. A modified tax abatement includes a change in the original tax abatement, such as changes in construction completion dates and purpose of the property and/or business. There are 573 active tax abatements in the Comptroller’s database. Most of these tax abatements (560 or 97.7 percent) have not been modified (nonmodified) for fiscal 2022 to 2023. Only 13, or 2.3 percent, were modified in fiscal 2022 to 2023 (Exhibit 8).

For the tax abatements reported in fiscal 2022 and 2023, 39 tax abatements (81.3 percent) had one or two participating taxing units. It is not uncommon for a tax abatement to have more than two taxing units participating, such as a special purpose district (SPD) or a junior college district. In fact, there were nine approved tax abatements involving three or four taxing units (18.7 percent).

Statute limits the length of a tax abatement to 10 years. However, the length or term may be shorter subject to the agreement between the lead taxing unit and the business. One such scenario might be the period of time while a developer builds or remodels a residential community and receives the benefits of a tax abatement. For the remaining years of the tax abatement, the properties are sold to homeowners allowing them to receive the balance of the tax abatement. Of the tax abatements reported for fiscal 2022 and 2023, 15 tax abatements, or 28.8 percent, had terms lasting nine or fewer years. Thirty-seven, or 71.2 percent, of the tax abatements were approved to last 10 years (Exhibit 9).

Source: Texas Comptroller of Public Accounts

Jobs, Payroll and Property Value Abated

Appraisal Districts must report the creation or retainment of full-time employees (FTEs) and payroll if it is an incentive included in the tax abatement agreement. If a business fails to meet its pledge regarding job and payroll requirements, then the local taxing unit(s) may claw back a portion or all the incentive given to the business as allowed by the tax abatement agreement. Exhibit 10 and Exhibit 11 provide payroll dollars and FTEs pledged by businesses in tax abatement agreements for fiscal 2022 to 2033.

As the TIRZ makes public project improvements over time, property values may increase. Specific reasons for the increased property values within the boundaries of the TIRZ may be a result of one or more of these reasons: abatements or other economic development incentives given to draw businesses to move within the TIRZ boundaries; public project improvements; zoning/rezoning properties; market growth; and/or inflation. These factors may combine to increase the captured appraised value of the property. This is the growth in the property’s value over time that is above the base value of the property when the TIRZ was created.

The report also captures data related to (a) the value of the parcel(s) of property to be abated at the time the tax abatement agreement is executed and (b) the projected estimated dollars abated potentially given to the business by the taxing units for each abated year, which can be viewed by the public to determine if it was economically feasible.

The combined payroll total for fiscal 2022 to 2031 was $1.6 billion. For fiscal 2022 to 2023, total payroll dollars pledged was $416.7 million, or 24.4 percent of the combined total. For fiscal 2024 to 2033, payroll dollars pledged diminish from the level pledged in fiscal 2022 to 2023 (Exhibit 10).

Source: Texas Comptroller of Public Accounts
Note: Combined payroll total for 2022 to 2031 is $1,612,561,049. Dollar amounts seen in the exhibit for each year have been rounded.

The total number of FTEs pledged or committed to by businesses agreeing to the terms of a tax abatement agreement with a taxing unit for fiscal 2022 to 2031 is 57,603. Fiscal 2022 to 2023 saw more than 16,000 pledged FTEs by businesses, or 27.2 percent of all combined pledged FTEs. Fiscal 2023 saw the largest number of pledged FTEs compared to any other fiscal year with more than 9,000. The next largest year of pledged FTEs is 2024 with 8,112 (Exhibit 11).

Source: Texas Comptroller of Public Accounts
Note: Total number of FTEs pledged or committed to for fiscal 2022 to 2031 is 57,603. Information captured is based on when local governments submitting a new abatement using eSystems.

At the time the new tax abatement is executed, the value of the parcel(s) of property to be abated is reported. More than $3.8 billion of property was subject to tax abatements in fiscal 2022 and 2023 combined. Most abated values came from counties at nearly $3.8 billion with an average of $81.9 million per abated property versus nearly $64.1 million for cities with an average of $6.4 million per abated property (Exhibit 12).

The new abatement online reporting tool captures the projected estimated dollars abated by the taxing units for each year. For 2022 to 2031, the combined total property value abated was nearly $101.5 billion. For fiscal 2022 to 2023, this total amounted to $20.9 billion, or 19.4 percent of the combined total. Fiscal 2024 to 2026 will see the largest abated values of $12.2 billion, $12.1 billion and $12.1 billion, respectively, or approximately 33.9 percent of the combined total (Exhibit 13).

Source: Texas Comptroller of Public Accounts
Note: Combined Total Property Value for all years is $101,498,602,203. The numbers above in the chart have been rounded.

Post Abatement and Post Abatement Values

Post abatement reports are required for three consecutive years, starting one year after the tax abatement expires (Tax Code Section 312.005(a-1)). Each piece of property receiving a tax abatement as a part of an agreement with the local taxing unit(s) is identified by a property account number as assigned by the Central Appraisal District (CAD). The account numbers track the value of the property over time. These account numbers enable the public and public policy officials to determine if such incentives are a worthwhile economic development tool.

There were 69 taxing units submitting a post abatement report for at least one of the three required reporting periods during fiscal 2022 and 2023, 53 cities (76.8 percent) and 16 counties (23.2 percent) (Exhibit 14).

Post abatement reports evaluate the types of property subject to an agreement. Of 244 post abatement reports submitted, 129 (52.8 percent) listed real property; 54 (22.1 percent) reported personal property; and 61 (25.1 percent) reported both real and personal property (Exhibit 15).

The property account numbers assigned by CADs are used to track property values over time. Tax abatements contribute to an increase of monetary value after a property has been abated, in comparison to before the agreement has been executed.

Exhibit 16 illustrates that the base values of properties abated at the time of the tax abatement’s execution in fiscal 2022 and 2023 were $862.5 million and $122.3 million, respectively. Yet, when looking at the final taxable value totals of those same properties several years removed from the date of executing the tax abatement was $2.3 billion and $2 billion, respectively. These 2022 and 2023 totals reflect a 172.2 percent increase in 2022 over the executed base value and a 1,581.9 percent increase over the executed base value.

Source: Texas Comptroller of Public Accounts

Note: The summary of tables, charts and graphs throughout this Biennial Report reflects the Comptroller’s best understanding of the tax abatement-related information as submitted by the local taxing units using the tax abatement forms. Some CADs may not have reported a reinvestment zone, tax abatement and/or post abatement because of (a) limited personnel or resources to make the submission, (b) lack of awareness of the legal requirement to make such a submission, (c) making a submission via mail that was lost or (d) data received by the Comptroller’s office many years ago via hard copy paper forms that had one or more fields left blank, thereby leaving fields in the electronic database incomplete.

Accessible Abatements Exhibits (Excel)