In Texas, economic development efforts occur at all levels. School districts, municipalities, counties, specifically-designated zones, and the state all offer different tools and incentives to assist small businesses. To find out what is available, start by contacting the local chamber of commerce and/or economic development centers in the area(s) that you are interested in. Local chambers have information on funding and incentives available to attract new and expanded industries to their respective area.
Local incentives funded by Type A and Type B sales tax
Municipalities may offer financial incentives made possible by local sales and use tax allotments dedicated to economic development (Type A and Type B sales tax). Financing of this type requires the parties to enter into a performance agreement. *See Local Government Code Chapters 504 and 505.
Property Tax Abatements
Property tax abatements can be offered by cities, counties, and special districts pursuant to tax abatement agreements (not available from school districts).
*Note: in addition to real property, tax abatement agreements may also abate all or part of the value of tangible personal property (e.g. inventory or supplies). *See Texas Tax Code Chapter 312.
For more information, please visit the Texas Comptroller’s website and to view the Texas Comptroller’s Registry of Reinvestment zones and ad valorem tax abatements.
Freeport exemptions can be offered by a school district, county, and municipality to exempt tangible personal property from ad valorem taxation. Freeport property is exempt if it is property that is detained in Texas for 175 days or less. 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. For details, please view Article 8, Sec. 1-j of the Texas Constitution.
If you are a small business and are currently paying property tax on inventory that you store for less than 175 days, contact your local chamber of commerce to find out about how your community can choose to exempt inventory from taxation.
Goods-in-Transit exemptions can be offered by a school district, county, and municipality to exempt inventory from ad valorem taxation. The Goods-in-Transit exemption is applied to goods traveling inside the state. It is only available for goods stored at locations owned by someone other than the owner of the goods themselves. If you are a small business and are currently paying property tax on inventory that you store for less than 175 days prior to shipping it within Texas, contact your local chamber of commerce to find out about how your community can choose to exempt inventory from taxation.
Chapter 380/381 Economic Development Agreements
The Local Government Code authorizes both municipalities and counties to offer incentives that will promote economic development on items such as commercial and retail projects.
Texas Economic Development Act
(“Ch. 313 Limitation on Appraised Value of Ad Valorem Taxation”):
Chapter 313 incentives give school districts the authority to enter into an agreement with a corporation or limited liability company that limits the appraised value of property for the maintenance and operations portion of school district property tax.