Tax Incentives

  • Property Taxes

    The State of Texas has established several tax-related state and local economic development programs that provide support and incentives for companies that invest and expand their operations and workforces in Texas communities. Download an overview of these tax-related state and local programs (PDF).

    Limiting Taxes on Property

    The Texas Economic Development Act provides an ten-year limitation on the taxable value of the property extended to a taxpayer who agrees to build or install property and create jobs. The value limitation applies to the local school district maintenance and operations tax (M&O) portion of the property tax and varies by school district. To participate, the company must apply to the effective school district. Value Limitation Tax Credits are administered through the Comptroller of Public Accounts. 

    Goods En Route

    A freeport exemption is a property tax exemption. A community may choose to offer the freeport exemption for various types of goods that are detained in Texas for a short period of time. Freeport property includes goods, wares, merchandise, ores, and certain aircraft and aircraft parts. Freeport property qualifies for an exemption from ad valorem taxation only if it has been detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing, or fabricating.  For certain aircraft parts, a community, by official action, may extend the deadline to 730 days. The freeport exemption is administered through the Comptroller of Public Accounts.

  • Environment

    Equipment for a Cleaner Environment

    The pollution control incentive results from a Texas constitutional amendment approved in 1993. The incentive provides an exemption from property taxation for pollution control equipment. Compliance with environmental mandates through capital investments do not result in an increase in a facility's property taxes. To qualify, a facility must first receive a determination from the Texas Commission on Environmental Quality (TCEQ) that the property to receive the exemption is used wholly or partly for preventing, monitoring, controlling or reducing air, water or land pollution. 

    The Pollution Control Equipment Incentive is administered through the Texas Commission on Environmental Quality. For application information and materials, click here. You can also contact the TCEQ at Tax Relief for Pollution-Control Property, MC 110; P.O. Box 13087; Austin, Texas 78711-3087, e-mail: txrelief@tceq.texas.gov or call (512) 239-4900.

    Renewable Energy

    Texas is a leading producer and consumer of alternative, renewable energy. Various tax exemptions, franchise tax exemptions and franchise tax deductions are available for renewable energy equipment and systems. Renewable energy encompasses solar, wind, ethanol and biodiesel energy. Several incentive programs apply:

    • A franchise tax exemption is available to manufacturers, sellers or installers of solar energy devices. The state also permits a corporate deduction from the state's franchise tax for renewable energy sources. Business owners may deduct the cost of the system from the company's taxable capital or deduct 10 percent from the company's income. Wind energy can qualify under the term "solar energy" for the exemption and deduction.
    • Texas property tax code permits a 100 percent exemption on the appraised value of solar, wind or biomass energy devices installed or constructed for the production and use of energy on-site. See Texas property tax Form 50-123, "Exemption Application for Solar or Wind-Powered Energy Devices" to claim this exemption.
    • Texas also offers a loan program to fund energy retrofits in public buildings. The "LoanSTAR" program is targeted to state agencies, school districts, higher education, local governments and hospitals for financed energy retrofits that pay for themselves in energy cost savings over time. 

    Detailed information on a variety of renewable energy exemptions and deductions is available on the State Energy Conservation Office website.

  • Manufacturing

    Texas Assists Manufacturing

    Manufacturing Exemptions provide state sales and use tax exemptions to taxpayers who manufacture, fabricate or process tangible property for sale. The exemption generally applies to tangible personal property that becomes an ingredient or component of an item manufactured for sale, as well as taxable services performed on a manufactured product to make it more marketable. Natural gas/electricity exemptions require a "predominant use study" that shows that at least 50 percent of the electricity or natural gas consumed by the business is used directly in the manufacturing process. Manufacturing exemptions are administered by the State Comptroller of Public Accounts. For information about applying for these exemptions and a full explanation of what is and is not exempt, visit the Comptroller's website.

  • Data, R&D, and Relocation

    Accommodating Data

    Texas is ideally positioned for data center operations. The state is centrally located and has access to talented, experienced high tech workers. A data center exemption applies to state sales and use tax on certain items necessary and essential to the operation of a qualified data center. The exemption is for state sales tax only. Local sales taxes are due on purchases of these qualifying items. Qualification requirements and full details are available from the Comptroller of Public Accounts.

    Research & Development

    Companies engaged in research and development activities can receive reductions in either applicable sales tax or franchise tax (not both). Certain qualifications apply. The R&D tax credit is administered through the Comptroller of Public Accounts. For more detailed information, click here.

    Business Relocation

    A taxable entity may deduct relocation costs incurred in relocating the taxable entity’s main relocation costs incurred in relocating the taxable entity’s main office or other principal place of business to the State of Texas from another state or country. Certain qualifications apply. The deduction may not reduce apportioned margin below zero, and no carryover of unused deduction is allowed. For additional information, please click here: http://www.window.state.tx.us/taxinfo/taxforms/05-900.pdf

  • Base Closure Buffer

    Defense Economic Readjustment Zone Program (DERZ)

    The Defense Economic Readjustment Zone Program was created in 1997 by the 75th Texas Legislature as a tool for business recruitment and job creation in adversely impacted military communities. It is designed to provide assistance to Texas communities, businesses, and workers impacted by, or vulnerable to, the closure or realignment of military installations and the reduction of federal defense contracting expenditures.

    Local communities must nominate a company as a Defense Economic Readjustment Zone Project in order to be eligible to participate in the program. Qualified businesses designated as DERZ projects are eligible for a state sales and use tax refund on expenditures of qualifying items. Under DERZ, the level and amount of the tax refund is related to the sales and use tax paid on expenditures of qualifying items and the number of jobs created/retained at the site.

    Local communities participating in the program may offer benefits to participants under the DERZ program including but not limited to local property tax abatement, tax increment financing, one-stop permitting, and other incentives. The most common local incentives available in the DERZ communities are tax abatement, infrastructure improvements, and training programs.

    For more information, please contact the Economic Development Finance department within the Governor's Economic Development & Tourism Office at (512) 936-0100.  View the Defense Economic Readjustment Zone Program 2016 Annual Report.

    The Defense Economic Adjustment Assistance Grant Program (DEAAG)

    The Defense Economic Adjustment Assistance Grant Program (DEAAG)  is an infrastructure grant program designed to assist defense communities that have been positively or negatively impacted by a change in defense contracts or an announced change. Funding can also be used proactively to support installations in the event of a change or announced change by the Department of Defense. DEAAG funding is available to local municipalities, counties, defense base development authority, junior college districts and Texas State Technical College campuses, and regional planning commissions representing these communities. DEAAG funding is available to meet matching requirements for federal funding.

    Funding for negatively affected communities can be used for the purchase of Department of Defense property, new construction or rehabilitation of facilities in support of job creating projects and opportunities. Funding for positively affected communities can be used for infrastructure projects directly supporting the new military mission. Grants awarded may range from $50,000 to $2 million per project.

    For additional information regarding the Defense Economic Adjustment Assistance Grant Program please send a message to the Texas Military Preparedness Commission or visit their website.

    Texas Military Value Revolving Loan Fund

    Created by the 78th Legislature and signed into law by Governor Rick Perry, the Texas Military Value Revolving Loan Fund, or the “Revolving Loan Fund” as it has become known, is designed to:

    • Assist defense communities in enhancing the military value of a military facility in their area.
    • Provide financial assistance to defense communities for job creating economic development projects that minimize the negative effects of a defense base realignment or closure decision that occurred in 2005 or later.
    • Provide financial assistance to defense communities for an infrastructure project to accommodate new or expanded military missions resulting from a base realignment and closure decision that occurred in 2005 or later.

    The Revolving Loan Fund provides a low cost source of revenue to eligible communities who meet the application criteria. The minimum amount of a loan is $1,000,000 while the maximum amount of a loan is determined by the availability of funds and the creditworthiness of the applicant, State funding will be obtained through the sale of general obligation bonds. The State may provide up to 100% of the cost of the described project, dependent upon the creditworthiness of the applicant. For additional information regarding the Texas Military Value Revolving Loan Fund please contact the Texas Military Preparedness Commission at (512) 475-1475 or send us a message.

     

  • Texas Enterprise Zone Program

    Focused on a Region Ripe for Growth: The Texas Enterprise Zone Program

    The Texas Enterprise Zone Program is an economic development tool for local communities to partner with the State of Texas to promote job creation and significant private investment that will assist economically distressed areas of the state. Approved projects are eligible to apply for state sales and use tax refunds on qualified expenditures. The level and amount of refund is related to the capital investment and jobs created at the qualified business site. The Enterprise Zone Program is administered through the Governor's Economic Development Finance department and can be reached at (512) 936-0100.

    Enterprise Zone Program Designations (as of September 1, 2017)

    Sample of Texas Enterprise Zone Program Sales Tax Refunds

    Level of
    Capital Investment ($)
    Maximum Number of
    Jobs Allocated
    Maximum
    Total Refund ($)
    Maximum Refund
    per Job Allocation ($)
    40,000 – 399,999 10 25,000 2,500
    400,000 – 999,999 25 62,000 2,500
    1,000,000 – 4,999,999 125 312,500 2,500
    5,000,000 – 149,999,999 500 1,250,000 2,500
    Double Jumbo Project
    150,000,000 – 249,999,999
    500 2,500,000 5,000
    Triple Jumbo Project
    250,000,000 or more
    500 3,750,000 7,500

    Double and Triple Jumbo Projects may not have retained jobs for benefit. A triple jumbo enterprise project must create at least 500 jobs.

    The target community will file the TEZP application. Community representatives will complete some of the application requirements and your company will provide information as needed. Download and review the following documents:

    The following materials may also provide information about the general program:

    Texas Enterprise Zones: