DMA Credits & Incentives Spotlight: “Texas Jobs, Energy, Technology, and Innovation Act”

Written by: Ian Smith

Recently, Texas lawmakers passed the “Texas Jobs, Energy, Technology, and Innovation Act” (HB 5). This bill is the replacement for Chapter 313, which expired at the end of 2022, and establishes a new economic development program intended to attract jobs and investment to Texas.

The program amends Chapter 403 of the Texas Government Code by adding provisions for property tax abatement agreements between a public school district and the owner of a new investment project (usually a company) proposing to construct an eligible project within the school district.

The economic development program will allow the school district to limit the taxable value school district maintenance and operation (M&O) property tax of the eligible property, used as part of the proposed project, in exchange for the investment and job creation associated with the project.

ELIGIBILITY

The primary purposes of this groundbreaking legislation include the intention to:

• Create new, high-paying permanent jobs and construction jobs in the state of Texas
• Provide a temporary and limited competitive economic incentive for attracting large-scale manufacturing projects
• Strengthen security and resource independence by encouraging infrastructure development
• Strengthen Texas as a national and international leader in new and innovative technologies
• Encourage energy and water infrastructure development, including new and expanded dispatchable electric facilities

The project owner must be within a specific industry, including, but not limited to:

• Advanced manufacturing
• Dispatchable electric energy
• Development of natural resources
• Research, development, or manufacturing of high-tech equipment or technology
• Construct or expand critical infrastructure

The project owner must commit to a certain number of net new jobs, affiliated payroll, and capital investment to the state of Texas. Jobs and capital investment thresholds are primarily based on the size of the Texas county and if the project location is in a reinvestment zone or enterprise zone.

After the date the project agreement is entered into, eligible property is considered either:

• A new building or an expansion of an existing building (including a permanent, nonremovable component of a building) that is located in an area designated as a reinvestment zone under Chapter 311 or 312, Tax Code, or as an enterprise zone under Chapter 2303 of Government Code, at the time the agreement pertaining to the project is entered into
• Tangible personal property excluding inventory

To qualify for this program, the project owner may not be investing in a project to:

• Construct or expand a new or existing no-dispatchable electric generation facility
• Construct or expand a new or existing electric energy storage facility

Read the latest Texas Legislative Update here.

The Act is to take effect January 1, 2024 but requires the Comptroller to adopt rules and develop forms and materials by September 1, 2023, or as soon practical thereafter.

Oftentimes, local and state governments look to encourage and support business investments within their area of influence through a variety of economic development tools such as tax credits, grants, loans, and abatements, among other methods. DMA’s tax credits and incentives team is here to support your business when making those tough investment decisions—whether it’s in your workforce, existing locations, or new locations.