The Texas Administrative Code 9.1058(c) states, "The Comptroller may promulgate guidelines for the administration of Tax Code, Chapter 313." Please refer to the following guidelines in addition to the Texas Administrative Code.
A number of applicants and school districts have requested that the agency consider changes to Form 50-286, 2014 Texas Economic Development Act Agreement (), which was adopted by rule in June 2014. In an effort to accommodate these requests, the agency adopted changes to 50-286 (now renamed Form 50-826 (PDF)) through the rule process, effective Jan. 24, 2016.
The agency had also been asked if applicants and districts that approve agreements on the 2014 Form Agreement would later be permitted to amend their agreements to incorporate changes that may be adopted through the rule making process.
The agency will, with prior approval, permit amendments to the 2014 Agreement (Form 50-286 dated January 2014), to allow applicants and districts to incorporate changes that were adopted in 2016. Requests to amend those agreements (executed using the January 2014 version) should propose exchanging entire sections (for example, amending the agreement to substitute the "new" section 2.5 language for the "old" section 2.5 language). The agency does not anticipate approving amendments that use language from different agreement versions within the same section. For certain sections, the agency may require amending multiple sections, due to re-ordering of the provisions or cross-references in the form agreement. The agency retains the ability to not approve agreement amendments that, due to the aggregate effect of the proposed changes, may violate statute, rules or guidelines in effect at the time of the request.
In order to facilitate requested changes in the future, the agency adopted the following amendment to 9.1052 (c) that permits changes to Form 50-826 (PDF) in special circumstances such as described above.
(c) In special circumstances, a school district may obtain prior approval in writing from the comptroller to use an application or agreement form that requires additional information, or sets out the required information in different language or sequence than that which this section requires.
If you have specific questions about obtaining comptroller approval to amend agreements, please contact the Chapter 313 staff.
Yes, Chapter 313 value limitation agreements are subject to Government Code, Section 2252.908.
In 2015, the 84th Legislature passed House Bill 1295 that states that governmental entities not enter into certain contracts with a business entity unless the business entity submits a disclosure of interested parties at the time it submits a signed contract to the governmental entity. This applies only to a contract that requires an action or vote by the governing body of the entity before it may be signed or has a value of at least $1 million. Given that §313.025(b) requires the governing body of the school district to approve an application to enter into an agreement, the disclosure requirement detailed in HB 1295 applies to all Chapter 313 agreements and amendments to Chapter 313 agreements executed on or after Jan. 1, 2016.
The Texas Ethics Commissions (TEC) adopted rules necessary to implement the law (Texas Administrative Code, Chapter 46), prescribed the disclosure of interested parties form, and posted a copy of the form on the commission's website (Form 1295 (PDF)). Visit the TEC website for more information on how to create or acknowledge a certificate.
Chapter 313 authorizes two types of payments from agreement holders as a part of a Chapter 313 agreement: revenue protection payments (313.027(f)(1)), and extraordinary educational expenses for a temporary increase in enrollment (313.027(f)(2)). Chapter 313 also recognizes, but expressly limits "supplemental payments" as additional payments that may be received by a school district as part of the consideration for the execution of a 313 agreement (313.027(i)).
Revenue protection language is required to be in the agreement and is described in 313.027(f)(1)"…to the extent necessary, include provisions for the protection of future school district revenues through the adjustment of the minimum valuations, the payment of revenue offsets, and other mechanisms agreed to by the property owner and the school district."
Provisions describing "extraordinary educational expenses" are described in 313.027(f)(2) "…the property owner will protect the school district in the event the district incurs extraordinary education-related expenses related to the project that are not directly funded in state aid formulas, including expenses for the purchase of portable classrooms and the hiring of additional personnel to accommodate a temporary increase in student enrollment attributable to the project" (emphasis added).
Any payment that is not for the protection of school district revenues or for extraordinary educational expenses falls into the category of supplemental payment. Chapter 313.027(i) reads:
313.027(i) A person and the school district may not enter into an agreement under which the person agrees to provide supplemental payments to a school district in an amount that exceeds an amount equal to $100 per student per year in average daily attendance, as defined by Section 42.005, Education Code, or for a period that exceeds the period beginning with the period described by Section 313.021(4) and ending with the period described by Section 313.104(2)(B) of this code. This limit does not apply to amounts described by Subsection (f)(1) or (2) of this section.
The Texas Administrative Code (T.A.C. 9.1054) requires that agreements include "a provision that separately states and explicitly identifies the amount, or the method for determining the amount, of any and all payments or transfers made to the school district or to any person or persons in any form if the payment or transfer of thing of value is provided in recognition of, anticipation of, or consideration for the agreement for limitation on appraised value made pursuant to Tax Code, §§313.027(f)(1), 313.027(f)(2), or 313.027(i)."
Further, the Chapter 313 application includes the following section:
Fees and Payments
Enclosed is proof of application fee paid to the school district. For the purpose of this question, "payments to the school district" include any and all payments or transfers of things of value made to the school district or to any person or persons in any form if such payment or transfer of thing of value being provided is in recognition of, anticipation of, or consideration for the agreement for limitation on appraised value.
Please answer only either A or B:
Will any "payments to the school district" that you may make in order to receive a property tax value limitation agreement result in payments that are not in compliance with Tax Code, 313.027(i)? __ Yes __ No
If "payments to the school district" will only be determined by a formula or methodology without a specific amount being specified, could such method result in "payments to the school district" that are not in compliance with Tax Code §313.027(i)? __ Yes __ No
Finally, the Biennial Cost Data Request Sheet completed by the district includes the following question:
Are you aware of any payments or transfer of things of value not included in the table above, made by the applicant or affiliate of the applicant, to the school district, any person or persons, organization or local governmental entity provided in recognition of, anticipation of, or consideration for the agreement for limitation on appraised value? Yes No (Circle one)
If "Yes," please describe and attach additional information as needed.
Applicants and school districts are required to document in the agreement anything of value that is required by the school district as a condition of the district approving a Chapter 313 agreement, and to include those amounts in the calculation of supplemental payments. This includes any requirement by the district that the applicant make payments or transfers of value to any party, not just the district, in return for approving the Chapter 313 agreement. Requiring a payment or transfer of value as a condition of approval of the Chapter 313 agreement and not disclosing that payment, or not including it in the calculation of the statutory maximum supplemental payment amount, is a violation of the Texas Administrative Code and is a material breach of contract that could lead to termination of the agreement. Additionally, since the application and reports are official government documents, knowingly providing incorrect data could be a violation of law.
It is the Comptroller's intent that the form agreement adopted under in 34 TAC 9.1052 not limit the legislature's authority to make changes that affect the terms of this agreement, such as changes related to compliance and verification requirements under the Act.
To communicate this clearly in the form agreement, the Comptroller will accept the following additional language in form agreements submitted for Comptroller review and approval:
"Act" means the Texas Economic Development Act set forth in Chapter 313 of the Texas Tax Code, including any statutory amendments that are applicable to Applicant."
No. The definition of Act applies to all references to sections of Chapter 313 of the Texas Tax Code unless such references are explicitly to sections of Chapter 313 as they existed as of a certain date.
Each certificate issued by the Comptroller under §313.025(d) will include information related to the expiration date of that certificate. Typically and historically, a certificate is valid for a year from the date the certificate was issued. However, if the proposed start of first complete tax year of the Qualifying Time Period (QTP) is within a year from the date the certificate was issued, the certificate will expire on Dec. 31 of that year.
For projects that do not defer the start of the QTP, Tax Code §313.021 defines the QTP as beginning on the date that the application for a limitation on appraised value is approved by the governing body of the school district (i.e. the date the board votes to approve to application and execute an agreement) plus two complete tax years that begins after date.
For example, if an agreement is anticipated to be executed in 2016 and the QTP has not been deferred, then 2016 would be considered the "stub" year and 2017 and 2018 would be the two complete tax years of the QTP. In this example, an agreement must be executed on or before Dec. 31, 2016. If the agreement is not executed until after Jan. 1, 2017, then 2017 becomes the "stub" year and 2018 and 2019 would be two complete tax years of the QTP. The certificate is no longer valid because the QTP must be modified and the limitation agreement would not conform to the application. To clarify that certain certificates are not valid beyond Dec. 31 of the current year, the Comptroller began explicitly including this date when required. If you have questions, please review the certificate for any special conditions including but not limited to the expiration date.
Please note that other changes to the information presented in the application may also invalidate the certificate. Contact the Comptroller's Office if you have questions.
No. Since the definition of the qualifying time period was statutorily revised in 2009, there is no annual deadline for application submission. Applications may be submitted year-round. (Updated June 2015)
Applications may be submitted at any time in the year, however, applicants should be mindful, that an application received by the Comptroller's office in the fall may not necessarily be processed before the end of the tax year.
School Districts that plan on entering into agreements that provide for 2017 as the first complete tax year of the qualifying time period or limitation should have an agency-designated complete application to the agency by September 1, 2016, in order to ensure that there is sufficient time to receive a certificate from the agency, have the proposed agreement reviewed and approved by the agency and obtain school board approval by December 31, 2016.
Applications submitted to the agency after September 1, 2015, or applications that are not designated as complete by the agency by that date, should provide for a first qualifying year beginning in 2017.
It is imperative that a school district carefully review any application it intends to forward to the agency to ensure the application is complete. Incomplete applications will result in deficiency letters being sent to the district, and additional time to review and resolve any deficiencies.
In the past, the agency has required that applications include a statement regarding "the ability of the applicant to locate or relocate in another state or another region of this state." The agency primarily relied on the findings by the school district regarding the applicant's statement. Under HB 3390, the statute requires that the agency make a determination and state in writing the basis for that determination. The agency intends to include additional guidance on this issue in the updated administrative code rules.
In preparation for the implementation of HB 3390, the agency is preparing to review, for example, any public documents that would indicate that the applicant had made the decision to locate at the project site prior to the application being submitted to the school district, whether the applicant has initiated construction prior to the application filing, and whether it is logistically possible for the project to locate in another location.
313.026(e) states "The applicant may submit information to the Comptroller that would provide a basis for an affirmative determination under Subsection (c)(2)." As the agency makes these determinations, the applicants will be asked to submit any information they would like considered, particularly information regarding the applicant's decision making process as it regards the decision to invest capital in the state versus other investment opportunities.
The school district has 150 days after the application review start date to consider the application. This deadline can be extended by agreement between the district and the applicant as long as the Comptroller is notified. Since the statute requires that school district must approve or disapprove the application before the 151st day, the Comptroller has concluded that an agreement to extend the deadline must occur before the 151st day after the application review start date.
The Comptroller has 90 days after the application review start date to review the application, conduct the economic impact analysis, and make a recommendation to the local school board. For a project where the applicant needs to make investments quickly for other business reasons, it is imperative that the application submitted to the district be as complete as possible.
Yes. Section 313.051(d) states that "Except as otherwise provided by this subchapter" the terms of Subchapter B apply. To eliminate the requirement as to the non-qualified wage standard, the statute would have to directly state that it is eliminating the non-qualifying wage standard (or create another non-qualifying wage standard) in order to "otherwise provide."
Yes. Section 313.027(f)(4) was not amended by HB 3390 and states that an agreement must "must provide for the termination of the agreement, the recapture of ad valorem tax revenue lost as a result of the agreement if the owner of the property fails to comply with the terms of the agreement, and payment of a penalty or interest, or both, on that recaptured ad valorem tax revenue." This provision applies to all terms of the agreement, including job and wage requirements.
Yes. The definition of qualifying job in TAC 9.051(30) of the rules proposed July 3, 2014 clarifies that jobs held by employees of contractors are qualifying jobs if those jobs meet certain criteria detailed in the rule. In previous rules (still in effect for many 3-digit projects), jobs held by employees of contractors count as "new jobs" in certain circumstances; qualifying jobs were, prior to Jan. 1, 2014, a subset of "new jobs." The proposed definition of qualifying job in the rules proposed July 3, 2014 is being added to simply consolidate the language of Tax Code 313.021(3) and long-standing Comptroller interpretation of that section.
On the 50-772A form (Chapter 313 Annual Eligibility Report Form) in Section 5A, Question #8 (applying to 3-digit projects), the applicant is asked to specify how many of the total number of qualifying jobs were held by employees of the agreement-holder, and how many were held by employees of contractors. On that same 50-772A form, in Section 5B (applying to 4-digit projects) only the total number of qualifying jobs is requested in Question #1. While future revisions to this section of this form may request this break-out of applicant employees and contractor employees, the only form currently requiring that break-out is the new 50-825 form (Job Creation Compliance Report for Texas Economic Development Act, Section 3, Question #2) promulgated to implement new Section 313.0276 added in HB 3390 in 2013.
While the portion of the 50-772 form applying to 4-digit projects, and the new 50-825 form both address information about qualifying jobs, the two forms serve different purposes. The 50-772 form is promulgated to assist school districts in their oversight and enforcement of the entire Tax Code chapter. The 50-825 form is limited in scope to implement only new Section 313.0276 — administered by the Comptroller's Office.
The Comptroller's office has concluded that the definition of "wage" for any particular limitation agreement depends on the dataset used to determine the minimum required wage for each qualifying job in that school district. For example, if an applicant's minimum required wage for each qualifying job is based on the average weekly wage for manufacturing jobs in the county as published by the Texas Workforce Commission, based on Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages (QCEW) data, then the definition of "wage" is that used for the collection of QCEW data. If the minimum required wage is based on regional wage data published by the Texas Workforce Commission based on Occupational Employment and Wages Survey (OES) data, then the definition of wage is that used for OES data collection. Definitions of what compensation is included in "wages" (employer contribution to retirement plans, health benefits, non-wage benefits, overtime, etc.) for each of these datasets may be found on the BLS website.
Qualified investment and qualified property are defined in Tax Code Sections 313.021(1) and (2), respectively. Every party to a property tax limitation agreement should read these statutory definitions closely and fully understand them. The two types of property are closely related and can overlap considerably, but they differ in significant ways.
Qualified investment includes certain types of tangible personal property placed in service during the qualifying time period, or a building or non-removable component of a building that houses the eligible tangible personal property and that is built or constructed during the qualifying time period. Qualified investment does not include land, or any investments made outside of the qualifying time period.
Qualified property is the property to which the property tax value limitation may be applied. It includes land (which will also be subject to the value as limited by the agreement), and may include certain investments made between the application review start date and the beginning of the qualifying time period. Furthermore, qualified property may include investments made after the end of the qualifying time period, as long as the property is eligible and fully described within the application and agreement.
The qualifying time period generally starts on the date the school board approves the application and executes the agreement. It usually includes the remainder of the year that the application is approved, as well as the following two complete tax years. For most projects, the qualifying time period can vary from two years to two-years-and-364 days, depending on the date of board approval. (The tax credit is based on taxable values and taxes paid during the two complete tax years of the qualifying time period. Tax years start on January 1st of each year.)
Two types of projects may have a longer qualifying time period. For a project used in connection with nuclear power generation, the qualifying time period may begin up to three years after the date the application is approved, and may be as long as seven complete tax years by agreement between the district and the applicant. Similarly, for a project used in connection with advanced clean energy, the qualifying time period may begin up to three years after the date the application is approved, and may be as long as five complete tax years.
Yes, subject to Comptroller rules. Although the beginning date may be deferred, the duration of the qualifying time period may not be lengthened.
If a school district elects to consider an application, then once the district determines that that application is complete, the district must provide a written notice to the applicant. The Comptroller's office is also required to provide a written notice to the applicant once they have determined that the received application is complete. The "application review start date" is the later date of either the date on which the school district issues its written notice or the date on which the Comptroller issues its written notice.
Tax Code Section 313.021(2) stipulates that any property constructed before the application review start date may not be included as qualified property, and therefore may not be subject to the value limitation. Additionally, any property existing on the project site before the application review start date must be fully described within the application and agreement in sufficient detail, so the local chief appraiser may clearly and easily distinguish that property from new investment in order for the new investment to be included as qualified property.
See also Property Requirements.
Applications that have been designated complete by the Comptroller's office by December 31, 2013 will be processed and governed under the statute as it existed when application was submitted. Applications that are not complete as of the effective date of HB 3390 (January 1, 2014) can't be processed under the previous law, and will need to be resubmitted subject to HB 3390.
Under existing Subchapter D, school districts may grant the tax credit, and then receive state aid under the school finance system in that amount. Districts submit an application for reimbursement of tax credits to Texas Education Agency, following rules in the Texas Administrative Code promulgated by TEA. While there may be changes in the process or forms due to HB 3390, TEA anticipates that it will continue to grant state aid to reimburse districts for tax credits granted under 313 agreements that are the result of applications that are filed with the Comptroller by January 1 and determined by the Comptroller to be complete when filed.
HB 3390 modifies the job and wage requirements for Chapter 313 effective January 1, 2014. Section 23 of HB 3390 provides that an agreement entered into on or after Jan. 1, 2013 "before the effective date of this act may condition eligibility for a limitation on appraised value" on compliance with the HB 3390 amended job requirements. To reserve the right to amend the contract related to the job related provisions of HB 3390, an agreement entered into on or after January 1, 2013, must contain a condition that the parties agree that they may amend the job related provisions once HB 3390 becomes effective. Such conditioning must occur "before the effective date of this act" (January 1, 2014). Conditioning language may be added in the original agreement, or may be amended into an agreement. Agreements or amendments should contain language that provides for the conditional requirements such as the example below.
This agreement is entered into after January 1, 2013, pursuant to an application filed under Chapter 313, Tax Code, before January 1, 2014, with the stated intent of amending this agreement after January 1, 2014, to amend the contractual commitments in this agreement related to new jobs as authorized by Section 23 of House Bill 3390 (83rd Regular).
The agency does not have the authority to make a favorable recommendation on an application that doesn't meet the job standards in place at the time of recommendation, and will not favorably recommend applications that do not meet current statute. Agreements may include the conditioning language, but should still obligate the parties according to current statute.
Parties to an agreement should include the condition in a timely manner, then amend the agreement after the new law takes effect to change the job related requirements in accordance with the statute at that time. Any amendments to agreements must be approved by CPA.
Section 23 applies to the provisions relating to new jobs, which include additional reporting and penalty provisions. Sections 313.021(2), 313.021(3)(E), 313.021(3)(F), 313.024(d), 313.024(d-2), 313.0276, 313.033, 313.051(b) all apply to jobs and should be considered.
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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