Statewide NewsTaxes & SpendingTexas Speaker Hints at Replacement for Expiring Corporate Property Tax Incentive

The tax break program expires at the end of this year after a renewal effort failed during the 87th legislative session.
February 3, 2022
The Texas legislature may yet breathe new life into the state’s sunsetting tax break incentive program when it reconvenes next year. 

This week, House Speaker Dade Phelan (R-Beaumont) signaled that a Chapter 313  replacement program will be on the agenda next session.

The death date for the Chapter 313 property tax abatement program lies ahead at the end of 2022. After some quarreling, the state legislature decided not to renew the corporate tax break after reforms could not be agreed upon.

Speaking to the Texas Oil and Gas Association’s Ad Valorem Tax Conference, Phelan unveiled some of the House leadership’s tax agenda when it reconvenes next year. 

“The [Texas legislature] continues to prioritize [and] work on providing property tax relief, improving the appraisal system, and developing a program to replace Chapter 313, a crucial incentive program to attract businesses to Texas,” he tweeted afterward summarizing the speech.

The Texan Tumbler

From the end of the regular session in May through December 1, 2021, 57 new agreements were submitted to the Texas Comptroller, which tracks the deals between companies and local school districts. Since then, 15 more have been submitted.

A vast majority are from renewable generation companies such as wind and solar farms.

Most of the agreements do not meet the state’s established minimum job creation threshold of 25 in urban and suburban areas and 10 in rural areas, a requirement that the school districts usually waive.

Back in December, these new agreements were collectively worth $24 billion in the first year and an average of $21.4 billion over the agreements’ 10-year lifespan — which has since climbed with the new agreements.

Sen. Lois Kolkhorst (R-Brenham), who played a bigger role than most legislators in killing the program’s renewal last session, said last year Chapter 313 had “run amok” and needed to be restarted “with an absolute clean slate.”

She cited transparency issues and a “departure from [the program’s] original purpose.”

Part of the transparency issue is the low quality of the data used to evaluate it. Last November, Comptroller Glenn Hegar proposed a change in the protocol, chiefly tracking year-by-year property valuation data rather than the 10 and 30-year projections that often turn out drastically wrong because of the unpredictability of appraisals and tax rate adoptions.

This drew a guttural reaction from entities like the Houston Chronicle and the progressive think tank Every Texan who opposed the program’s renewal. Last week, the comptroller’s office withdrew support for the proposal and said the information will continue to be available.

Proponents of the program argue it’s imperative to attract businesses to the state, one example being the $17 billion capital investment Samsung announced for a microchip manufacturing plant in Taylor. It comes with a $670 million first-year Chapter 313 abatement along with numerous other tax breaks and state grants.

Being House speaker, Phelan’s support for a replacement is a boon to those who wish to see Chapter 313’s return after it expires on December 31, 2022. But the senate is where the renewal perished last year, and so any renewed effort will have to hurdle that obstacle.


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Brad Johnson

Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.

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