How will the expiration of Tax Code Chapter 313 affect Texas?
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How will the expiration of Tax Code Chapter 313 affect Texas?
With Texas Tax Code Chapter 313 set to expire at the end of 2022, the
loss of this tax incentive has everyone asking how this change will affect
Texas long-term if lawmakers propose no solution when they reconvene the
next regular session in 2023. As we look ahead, the loss of this
lucrative tax incentive could significantly impact businesses
considering relocating within Texas’ borders and those debating
moving out of state. Read more to identify what Texas Tax Code
Chapter 313 is and its effect on Texas.
What is Tax Code Chapter 313?
In 2001, the Texas Legislature created the Texas Tax Code Chapter 313
(aka the Texas Economic Development Act), making a state tax incentive
program for certain large businesses to limit the appraised value on
their property for the local Texas public school district property
taxes. Initially set to expire in 2007, the program has been renewed
several times. Fast forward to 2013; the Texas Legislature reset the
program's expiration date to December 31, 2022.
How does Texas Tax Code 313 work?
Companies seeking a limitation submit an abatement application to
the school district where the project may be located. Then the school
district forwards the application to the Texas Comptroller for evaluation.
The school district may not grant final approval of the abatement without
Comptroller analysis and approval. For the 10 years of the tax benefit
period, reduced local school district revenues are substantially
replaced with state funds through the state public school finance
system—the Comptroller's office delegates to school districts the
responsibility to enforce provisions of the limitation agreements.
When does the Texas Tax Code 313 expire?
While the official expiration date is December 31, 2022, a critical
detail is worth mentioning. Texas Tax Code 313 is a 10-year deal,
meaning if you signed your contract for the tax incentive in 2015,
you have until 2025 to benefit from this tax break.
Does the expiration of the Texas Tax Code 313 affect my business?
If you currently benefit from the Texas Tax Code 313, the expiration
date of December 31, 2022, will have no effect. You will only be
impacted upon the completion of your 10-year deal. Who is it affecting?
The expiration of the Texas Tax Code 313 impacts potential future
industrial projects or expansions that see Texas as a viable location.
For example, suppose a business has been working on a deal to get a site
plan approved. In that case, if they don't get the approval before the
expiration date then they will not be able to capitalize on the tax break.
What are the long-term implications of ending Texas Tax Code 313 for Texas?
With states like Texas & Louisiana pulling back their industrial tax breaks, opportunities for states like North Carolina and South Carolina, who are actively marketing to industrial companies to create more manufacturing jobs, will become more attractive for new industrial projects. Arizona, Ohio, Michigan, and Kansas offer incentives as well which positions Texas as a less competitive state for new industrial development.
It will be interesting to see lawmakers' solutions when they reconvene the next regular session in 2023. Is Texas not going to have a program at all, or can we expect a variant program with available economic development dollars?
Could Texas be the next California?
If lawmakers don't create another tax exemption and take a similar approach to California, Texas may see slower economic development and less high paying jobs. Texas may not see various large corporations such as Tesla and Chevron relocate to the state in the future.
In Conclusion
With the Texas Tax Code Chapter 313 set to expire on December 31, 2022, the potential effects of this change will continue to be debated as being either good or bad. With the state set to lose a lucrative tax incentive and lawmakers not reconvening until the next regular session in 2023, it will be interesting to see how things shape up.
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Save money by turning your property tax liabilities into profits.
Capitalize on our experience and free up your time by entrusting J. Joseph property tax experts to leave no stone unturned to identify all opportunities to reduce your business's
property tax liabilities. Mitigate costly time wasted, penalties and interest, and over taxation. Identify if your business is eligible for a property tax reduction.
