The state of Texas has a robust system of tax incentives available to local communities to lure businesses. Critics call it corporate welfare. The following article focuses on the Texas Economic Development Plan - which is also known as Chapter 313, which is where it can be found in the Tax Code.
The story concerns the efforts of business leaders to develop attract liquified natural gas exporters to the valley.
- Click here for the article.
The story concerns the efforts of business leaders to develop attract liquified natural gas exporters to the valley.
- Click here for the article.
Property taxes are the largest source of funding for Texas public schools, and big industrial projects can add lots of new money to the school system quickly. Annova’s LNG terminal alone would be worth more than the tax base of one-quarter of Texas school districts. Companies pay most of their tax bill to the local school districts. For certain big projects, though, districts can forgive most of that sum using the Texas Economic Development Act, a 15-year-old program that’s often known by its place in the tax code, Chapter 313. That program actually makes it worthwhile for school districts to give away millions in tax revenue.
Under the law, if a school district grants a tax break for a desirable new project, the state is obliged to cover the difference. The cost of the deal comes out of the state budget. In its application to Point Isabel ISD, Annova said its terminal would be valued at $1.4 billion, but wanted the school district to pretend for the next 10 years that it was worth just $25 million. The tax break, Annova told the district, would be “a key component” in its decision to build. In fact, as local activists learned, the whole point of the Chapter 313 program was to lure business to Texas that might go elsewhere. If the school board rejected Annova’s deal, maybe the company really would pack up and leave. The school board vote, then, wasn’t going to be just another sternly worded resolution — it could be, locals hoped, the Achilles’ heel that could kill the project for good.
Residents knew they had momentum on their side, having won over so many other local officials. But as they had recently learned, schools hardly ever say no to a Chapter 313 deal. No district had ever rejected one this big. In fact, the program is built to encourage schools to give away the state’s money. Schools have no incentive to reject a deal, and often gain millions by handing out tax breaks.
For more:
- What is the Texas Economic Development Act?
- Tax Code. Title 3. Subtitle B. Chapter 313.
- Texas Ahead: Tax Code Chapter 313 — Value Limitation and Tax Credits.
- TTARA: Questions and Answers About the Texas EconomicDevelopment Act: Tax Code Chapter 313.
