A tax abatement is an agreement between a local government and a property owner to exempt part of the taxes owed in return for improvements to the property. Abatements are governed by Tax Code, Chapter 312. Local taxing units can use abatements to attract development to their jurisdictions.
Tax abatements reduce the cost to property owners of new development. This can help new businesses move to the region or help existing businesses expand. In return, the local government gets increased property values that will raise the tax base and, possibly, provide new jobs.
While tax abatements are short-lived, they can have a significant future impact:
Abatements can be granted for taxable real property, personal property or both.
Yes. Each taxing unit must pass a resolution stating its intention to grant abatements and establish guidelines and criteria that will govern the abatement agreements. Abatements can only be granted for property within a reinvestment zone.
Yes. Any appraisal district that includes a tax abatement reinvestment zone or abated property must submit reports about the zone and the abatement agreements to the Texas Comptroller of Public Accounts.
The taxing unit should include:
They are effective for two years from the date they are adopted. After they expire, the taxing unit will have to readopt them or adopt new guidelines and criteria if the taxing unit wishes to continue to grant abatements.
Yes, but while they are in effect, they can only be amended or repealed with a three-fourths vote by the taxing unit's governing body. After they have expired, the taxing unit can adopt different guidelines and criteria.
A city or county must find that designating an area as a reinvestment zone would:
Cities must also find that the improvements sought are feasible and practical and would benefit the land included in the zone and the municipality after a tax agreement expires.
Yes, if it is in the city's ETJ.
Yes, a zone may be renewed for another five years each time it expires.
Yes, the Comptroller requires all taxing units to properly name a reinvestment zone or enterprise zone in the correct format. This format applies to all taxing jurisdictions that create a new reinvestment zone.
As a government agency, when the Comptroller is explicitly tasked with performing a task under the statute, by law, we have the powers necessary to carry out those duties. Here, the Comptroller is charged with administering Chapter 312 and also preparing reports to the legislature and governor, which necessarily involves identifying the various reinvestment zones.
The reinvestment zone naming conventions provided on the CPA website and in our PowerPoint and Webinar presentation online were created to allow us to administer Chapter 312 pursuant to Section 312.005.
First, local taxing units need to identify what locality or subdivision the zone is in, because often an enterprise zone encompasses nearly a whole community. Sometimes there are multiple cities in a county with an enterprise zone. If the zone is anticipated to have only one single business in it which is anticipated in receiving in abatement and no other businesses, then the name of the zone could include the name of the business as seen in the list of examples below.
The second way to differentiate between the two – is to indicate if the zone is a Reinvestment Zone (RZ) or an Enterprise Zone (EZ). Chapter 312, identifies Enterprise Zones as a different type of reinvestment zone, but a reinvestment zone nonetheless.
Third, if the zone is a reinvestment zone, then the next element to include in the name is the “zone number” if there are two or more zones in a given community/taxing unit, which is to be in numerical order such as Reinvestment Zone 1 and Reinvestment Zone 2. Ordinance numbers or dates ARE NOT to be included in the name of the zone.
Fourth, if the zone is in an enterprise, then a tract number and block number is necessary to identify where the business that received the abatement is located in within the enterprise zone. The cities or counties with an enterprise zone should have the tract and block numbers. If you don’t have the tract and block number, then these can be found on the Governor’s website seen above. Tract and block numbers are based on federal census numbers for certain areas and are typically good for a 10 year period until the census is done again every decennial period (every 10 years), thereby changing the tract and block numbers and boundaries.
Here are some examples of how to properly name a reinvestment zone –
The city or county has to post notice of a public hearing in a newspaper in general circulation in the city or county at least seven days before the hearing. The city or county also has to deliver notice of the hearing to the presiding officer of every other taxing unit that has jurisdiction over the property at least seven days before the hearing.
A local government can abate:
A local government must send written notice to the presiding officer of the governing body of every other taxing unit that taxes the property. The notice must include a copy of the proposed abatement agreement and be sent at least seven days before the agreement is executed.
To be effective, a tax abatement agreement must be written and it must be approved by majority vote of the members of the governing body of the taxing unit at a regular meeting.
The abatement typically begins on Jan. 1 of the year after it is executed unless the agreement stipulates a later start date.SEC. 312.2041, SEC. 312.207, SEC. 312.007
A tax abatement agreement must:
A tax abatement agreement may also include:
All the agreements made in a zone must have the same terms for value abated and duration. Different reinvestment zones can have different terms.
Any taxing unit, except a school district, that has jurisdiction over a property can grant an abatement. If the property is:
If the county commissioners court sets the tax rate for another taxing unit, the court can offer an abatement on behalf of that taxing unit for a property the county has already abated.SEC. 312.204, SEC. 312.206
No. Once a city or county grants an abatement, another taxing unit can offer an abatement to the property owner with the same or different terms.
Yes. Any time before the abatement expires, the local government can modify the terms of the agreement, assign it to a new owner of the property or cancel the agreement entirely.
Yes. If the property owner fails to make the agreed upon improvements, the taxing unit can recapture tax lost because of the abatement. If the agreement includes the required provision, a taxing unit can also recapture taxes if the property owner fails to create an agreed upon number of new jobs or fails to meet any other provision of the agreement.
The chief appraiser of each appraisal district that appraises property for a taxing unit that has designated a reinvestment zone or executed a tax abatement must report information about the zone and the abatement to the Comptroller.
The chief appraiser must electronically submit the following to the Comptroller at email@example.com:
The forms and supporting documentation are due before July 1 of the year following the designation of the zone or the execution or amendment of the agreement.
The Comptroller compiles the information about reinvestment zones and abatements and submits a report to the Legislature and the governor before each legislative session. The Comptroller also keeps a registry of reinvestment zones and abatement agreements.
Information about reinvestment zones and tax abatements is available in the Biennial Registries of Reinvestment Zones for Tax Abatements and Tax Increment Financing. The Comptroller's Data Analysis and Transparency Division can answer questions by phone at 800-531-5441 ext. 5-0664 or by email at firstname.lastname@example.org. Additional information can be obtained by submitting a written request to email@example.com.
Yes. The Comptroller does offer guidance and technical assistance to city's interested in tax increment finance.
For additional information, contact the Data Analysis and Transparency Division via email or at 800-531-5441, ext. 3-4679, or 512-463-4679.
This information should not be construed as, and is not a substitute for, legal advice.
Property owners and school districts are urged to consult the Attorney General's Economic Development Handbook and their own legal counsel for any questions or interpretations of economic development laws.
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