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:
Any local government that collects ad valorem tax can grant an abatement, but typically only a city or county can grant the first abatement on a particular property.
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Yes, but while they are in effect, they can only be amended or repealed with a three-fourths vote by the taxing unit's governing body.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.
The chief appraiser is required to report guidelines and criteria governing tax abatement agreements. School districts may not enter into tax abatement agreements on or after Sept 1, 2001 so they should not be reporting any guidelines and criteria or an abatement resolution unless it is for agreements executed before Sept 1, 2001.
312.002(c) suggests that the guidelines last only two years unless new ones are approved. If an abatement is given during the validly existing guidelines, then the abatement is valid regardless. This is confirmed in 312.203 when discussing the expiration of reinvestment zones. The last sentence provides, “The expiration of the designation does not affect an existing tax abatement agreement made under this subchapter.”
The governing body of a city or a county can designate an area as a reinvestment zone.
After holding a public hearing and finding the area meets statutory requirements, a city or county designates a reinvestment zone by ordinance or order.
A city can designate a reinvestment zone within the city limits, in the city's extraterritorial jurisdiction or both. A county can designate a reinvestment zone within the county, but only outside city limits.
No. A reinvestment zone can be as large as the city or county or as small as one property. Cities and counties can designate multiple reinvestment zones in different sections of their jurisdictions.
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.
It must describe the boundaries of the zone and the eligibility of the zone for residential tax abatement or commercial-industrial tax abatement.
Yes, if it is in the city's ETJ.
A zone that has been designated for tax abatements expires five years after the date of the designation.
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 –
A Chapter 378 agreement can abate municipal taxes on property in the Neighborhood Empowerment Zone (“NEZ”). It is different from a Chapter 312 agreement. Chapter 378 NEZ agreements and agreements under Chapter 312 share a couple of similarities, which are: NEZ agreements have the same 10-year duration limit as Chapter 312 agreements and when the municipality adopts a NEZ, the resolution must include a finding that the requirements under Section 312.202 as applied to the NEZ are satisfied. The short answer to this question: the Chapter 312 reporting requirement to the CPA does not apply to this NEZ agreement
Once a reinvestment zone is designated, the governing body of a city or county may enter into a tax abatement agreement with the property owners for a period not to exceed 10 years. Once the agreement is approved by the governing body at a regularly scheduled meeting, it may be executed after notice to other taxing units.
At least 30 days public notice of the meeting on the approval of a tax abatement agreement is required. The notice should be given in the manner prescribed by the Open Meetings Act. Among other requirements, the notice must contain: 1) the property owner's name and the applicant's name in the agreement; 2) the name and location of the reinvestment zone subject to the agreement; 3) a general description of the nature of the improvements or repairs in the agreement and 4) the estimated cost of the improvements or repairs.
The governing body must convene at a regularly scheduled meeting (i.e. open to the public) to vote on approving a tax abatement agreement. By an affirmative majority vote, the governing body may approve a tax abatement agreement upon finding that the agreement terms and property meet the applicable guidelines and criteria governing tax abatement agreements.
Once guidelines and criteria have been adopted, the governing body of a city or county may designate an area as a reinvestment zone after a public hearing.
A seven-day newspaper notice of the public hearing is required, in addition to a seven-day written notice to other taxing units in the proposed area before a public hearing may be conducted. The newspaper must be in general circulation in the city or county. Notice to the other taxing units is presumed delivered when properly addressed to the appropriate presiding officer for each taxing unit and placed in the mail or sent via registered or certified mail with a return receipt received.
The governing body of a city or county conducts the public hearing to determine whether the area for designation qualifies as a reinvestment zone. At the hearing, interested persons are entitled to speak and present evidence for or against the designation of the reinvestment zone.
Before the designation of a reinvestment zone, a city or county must first establish guidelines and criteria governing tax abatement agreements, which must be available for both new and existing facilities/structures. The governing body of a taxing unit must hold a public hearing regarding the proposed guidelines at which the public is given the opportunity to be heard. The guidelines and criteria are effective two years from adoption and can be changed with a three-fourths vote of the governing body. A taxing unit with a website must post the adopted guidelines and criteria online.
If the proposed agreement is changed during the 7 days leading up to the meeting, there won’t be sufficient time to send a copy of that agreement to the taxing units. It’s the intent of the statute that municipalities/counties send taxing units where the property is location notice of the municipality/county’s intention to enter into an agreement and a copy of the proposed agreement (i.e. the agreement that will be considered for approval at the meeting.) in accordance with Section 312.2041(a).
Yes. It is covered in Subchapter C. Tax Abatement in County Reinvestment Zone, Section 312.402(a-2), which provides that “[t}he execution, duration, and other terms of an agreement entered into under this section are governed by the provisions of Sections 312.204, 312.205, and 312.211 applicable to a municipality. Section 312.2041 applies to an agreement entered into under this section in the same manner as that section applies to an agreement entered into under Section 312.204 or 312.211.”
A local government can abate:
No. Abatements cannot be granted on property owned or leased by a member of the city council, the zoning board, or the city's planning board or a member of the county commissioners court.
Each year of an abatement agreement, a local government can abate up to 100 percent of the property value minus the value of the property the year the agreement was executed.
A property can be abated up to 10 years per agreement.
Only if the new agreement is for new improvements that will be made to the property.
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 firstname.lastname@example.org:
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 email@example.com. Additional information can be obtained by submitting a written request to firstname.lastname@example.org.
Chief appraisers of Central Appraisal Districts in Texas.
Use Form 50-278 to submit the three annual reports required following the expiration of a tax abatement agreement under Tax Code § 312.005(a-1).
To file the first annual report, Form 50-278 is due one year after the expiration of the tax abatement agreement.
For each of the first three tax years after the expiration of a tax abatement agreement, Form 50-278 must be filed.
An early submission of Form 50-278 won't be considered. In accordance with the statute, the chief appraiser must file the form when it is due.
Yes. Form 50-278 is currently a pdf form that can be downloaded and filled out and submitted to the Comptroller.
No. File Form 50-278 for each tax abatement agreement expiring on or after September 1, 2020.
Report the preceding year's appraised value if the current year's appraised value is not available at the time Form 50-278 is filed.
Form 50-278 allows multiple properties associated with a tax abatement agreement to be included in one submission. To add another property to the form, select “Yes” to the last question, which asks whether there are additional properties/lots associated with the agreement, and then input your answers to the questions for that property. Continue to answer “Yes” to the last question until you have added all properties associated with the agreement.
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 844-519-5672, ext. 6-9231.
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.