Texas’ new tax break program ramps up with $2 billion
It’s been two months since Texas put a new business attraction tool in place to stoke investment with the promise of tax breaks.
Two applications have been filed for Chapter 403 property tax abatements with the Texas Comptroller’s office — one from low-carbon jet fuel company Summit Next Gen LLC and another from aerospace manufacturer Bell Textron, Inc., a Fort Worth-based subsidiary of Textron Inc.
The new program gives eligible companies incentives to build or expand facilities across the state if a project meets certain minimum investment and job requirements.
It’s a similar structure to Chapter 313, the legislation that ended in 2022 and rankled many. Opponents of that tax break program argued it robbed the state’s education system since tax abatements were tied to school property taxes. The program’s backers countered that expensive projects wouldn’t be viable for companies without tax breaks, causing Texas to lose jobs and eroding its competitive edge in wooing investments.
Chapter 403 went into effect on Jan. 1 and imposed more stringent parameters for eligibility, while also dulling incentives of its Chapter 313 predecessor.
While manufacturing, electrical generation, natural resources, research and development and critical infrastructure might potentially earn tax breaks, green energy projects no longer can. Instead of companies being granted 100% school tax abatements, they can now only get up to 50% of real property value abated or 75% of real property value if the project is located within an opportunity zone for the 10-year duration of the program.
The new legislation, part of the Texas Jobs, Energy, Technology, and Innovation Act and signed into by Gov. Greg Abbott with House Bill 5, also includes mandated public hearings and claw-back provisions.
The first application received by the state came from Summit Next Gen LLC in mid-february. The company, focused on reducing carbon emissions in the aviation industry, intends to build the largest facility of its kind in North America to manufacture and refine sustainable aviation fuel, according to its application. Located in Harris County, Summit Next Gen is working with Galena Park Independent School District on its Chapter 403 application.
The project would create an estimated 75 direct operations jobs with average annual salaries of $188,500. The company would invest more than $1.66 billion during construction running through 2026. Summit Next Gen’s primary argument for its need for incentives is that it would be far less costly to build this same facility in Louisiana.
Bell’s application, which was filed Feb. 27, shows a collaboration with Northwest Independent School District for a potential advanced aerospace manufacturing facility in a Denton County pocket of Fort Worth. Bell is seeking to add space to an existing empty building at 15100 North Beach St., with plans for about $429 million in overall investment between real estate and equipment.
In its application, Bell commits to creating at least 75 jobs with average wages of $69,784, though it notes that the “multi-phased project” could create more than 411 jobs paying average wages of $85,000. It also said the company’s investment could be north of $600 million by the end of the 10-year incentive period.
Bell said Texas’ property taxes are higher than the two other finalist locations, which it didn’t identify. It said that the tax breaks would provide the project with “meaningful operating cost savings making the Texas location more competitive for this project.”
Texas went an entire year without the school tax abatement tool in its economic incentives arsenal, and it’s difficult to determine whether the lack of a program like Chapter 403 had an impact. Proponents of such a program believed companies wouldn’t even put Texas on a shortlist without that potential tool.
Yet incentives programs and grants from cities, counties and the Texas Enterprise Fund were still functional during the period and continue to be important now.
Bell’s proposed project, for instance, lists a property tax abatement of 80% for 10 years from Denton County, along with an 85% property tax abatement from the city of Fort Worth. Bell’s application also shows it plans to request more than $2.6 million from the Texas Enterprise Fund, and a potential grant of $1 million from the city of Fort Worth is under review.
On Friday, Gov. Abbott announced that Texas claimed the Governor’s Cup distinction from Site Selection magazine for the 12th year in a row, signifying the greatest number of new corporate facilities being built and expanded.
“There’s no state in America that has such a prolific environment of economic development professionals than the State of Texas,” Abbott said during a press conference.
Dallas-fort Worth ranked as second most active among other metros in the nation.
Dallas-based Site Selection Group has tabulated in its nationwide monthly economic incentive market reports this year $2.2 billion in total economic incentives awards with $22.8 billion in capital investment for January 2024 and $1 billion in total economic incentive awards and $10.1 billion in capital investment for February.
Two Texas deals contributed to the sums — a 250job project in Abilene tied to Petrosmith and a 600-job project in San Antonio for Rackspace.