In exchange for the appraised value limitation and tax credit, the property owner must enter into an agreement with the school district to create a specific number of jobs and build or install specified types of real and personal property worth a certain amount. The agreement must specify what is expected of each party, including the terms and conditions required by law, and provisions to protect the school district from possible revenue losses.
To qualify, the property must be in a reinvestment zone and must be devoted to manufacturing, research and development, a clean coal project, as defined by Section 5.001, Water Code, an advanced clean energy project, as defined by Section 382.003, Health and Safety Code, renewable energy electric generation, electric power generation using integrated gasification combined cycle technology, nuclear electric power generation, a computer center used primarily in connection to one of the other categories, or a Texas Priority Project.
A school district board may only approve for a value limitation qualified property that is located in an area designated as a reinvestment zone under Tax Code Chapter 311 or 312, or as an enterprise zone under Government Code Chapter 2303, by the county commissioners court and the governing body of each municipality, provided that all the qualified property is located on land falling within this designated zone.
A school board also may designate an area that is entirely within the territory of the school district as a reinvestment zone under Tax Code Section 312.0025. The board must find that designating and granting a limitation on appraised value under Chapter 313, Subchapter B or C, for property located in the reinvestment zone, is reasonably likely to:
The school board may seek the recommendation of the county commissioner's court and the governing body of each municipality that has territory in the school district before designating an area as a reinvestment zone.
Most applicants have a qualifying time period starting the date that the school district approves an application, and ending at the end of the second complete tax year following that date. The applicant must make the required minimum investment during the qualifying time period. Nuclear power plants and advanced clean energy projects have longer qualifying time periods.
The law defines two overlapping classes of property — "qualified investment" and "qualified property" — that are used for different purposes in the value limitation process.
During the qualifying time period, the applicant must build or install qualified investment that exceeds a specified amount in order to receive an appraised value limitation. Qualified investment is defined as certain types of tangible personal property and buildings, not including land or any investment made before or after the qualifying time period.
Qualified property is property that may receive a value limitation—generally starting in the third complete tax year of an agreement. Qualified property includes the land (if owned by the qualified property owner), and most of any new improvements made after the application review start date (date the application is determined to be complete by the Comptroller). Property added after end of the qualifying time period may be qualified property if it has been specifically described in the application and limitation agreement.
The required minimum qualified investment and the minimum amount of the value limitation vary according to whether a school district is considered a so-called rural district (subject to Subchapter C), or a non-rural district (subject to Subchapter B), and according to the amount of taxable property value in the school district.
The Texas Economic Development Act categorizes districts subject to Subchapter C in five categories based on the amount of taxable industrial property in the school district. It categorizes school districts subject to Subchapter B in five separate categories based on the total amount of taxable property in the school district. As the amount of taxable property increases from category to category, the minimum required investment and the minimum amount of value limitation increases.
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.