Tax incentives for biomedical research facilities in Texas
4A
Cities are eligible to adopt if the local sales tax rate would
not exceed two percent.
Only applies to cities that are located within a county of less
than 500,000 or the city has a population of less than
50,000 and is located within two or more counties, one of
which is Bexar, Dallas, El Paso, Harris, Hidalgo, Tarrant,
or Travis or the city has a population of less than 50,000
and is within the San Antonio or Dallas Rapid Transit
Authority territorial limits but has not elected to become
part of the transit authority.
Participation in a rapid transit authority will not invalidate a
city's ability to adopt a 4A tax if the city would not be
put about its statutory cap for the local sales tax rate.
Limited to approved "projects" under Section 2(11)(A) of the
Act. The 77th Legislature amended the Act to include
research and development facilities in the definition of
project.1(1)
Additional project definitions that might be helpful include
educational facilities and job training facilities (subject
to certain limitations).
4B
Cities who are eligible to adopt the 4A tax are also eligible to
adopt the 4B tax. Other cities eligibility is confined to
cities located in county with a population of 500,000 or
more or the city has a population of 400,00 or more and is
located in more than one county.
The new combined rate cannot exceed 8.25 percent.
The 77th Legislature permitted economic development corporations
to use the 4B tax for research and development facilities.
May also use 4B funds for job training facilities and job
training classes.
There is a public hearing requirement and a sixty day right to
petition to object to the project by election.
Tax Abatements
Local government entities that may enter into a tax abatement
agreement include incorporated cities, counties, and
special agreements. Tax abatements by school districts are
governed by the Brimer Act (see below).
The lead party on the abatement agreement depends on the
location of the property subject to the tax abatement.
Cities are the lead party if the property is located within
the city limits. Either the city or county may serve as
the lead party if the property is within the city's
extraterritorial jurisdiction. The county serves as the
lead party is the property is located outside the city's
boundaries and extraterritorial jurisdiction.
Abatement agreements may not exceed 10 years.
Abatements must be condition of the owner making specific
improvements or repairs to the property.2(2) Only improvements
(1) 1Texas Revised Civil Statutes Article 5190.6, Section 2(11) (A) (as amended by Texas House Bill
1592, 77th Legislature, Regular Session (2001)).
(2) 2Tax Code section 312.204(a) (as amended by Texas House Bills 1448 and 3001 and Texas senate
Bills 985 and 1710, 77th Legislature, Regular Session (2001)).
may be exempted, not the real property's current value.
Taxing units may enter into abatement agreements with the owner
of a leasehold interest in real property.
Tangible personal property may also be abated in all or part in
the agreement. Personal property that was already on the
property before the abatement agreement may not be abated.
The agreement may not exceed 10 years.
Agreements can provide a declining annual percentage or abate
less than 100 percent yearly.
If a city adopts an agreement in its extra territorial
jurisdiction, the agreement takes effect upon the later
annexation of the property by the city.
Chapter 312 of the Tax Code provides six steps are necessary for
a taxing unit to enter into a tax abatement:
1. The taxing unit must adopt a resolution indicating
intent to participate in a tax abatement.
2. Taxing units must adopt abatement guidelines and
criteria.
3. Taxing units must hold a public hearing, with notice,
and the lead party must designate an area as a
"reinvestment zone.
4. The lead taxing unit intending to grant an abatement
must deliver written notice to all other taxing units in
which the party is located. The notice must include the
proposed agreement.
5. The taxing unit must adopt the abatement agreement by
majority vote of its governing body at its regularly
scheduled meeting.
6. Other taxing units may enter into abatement agreements
or may choose not to enter into them.
Brimer Act
Authorizes an owner of qualified property to apply to the
governing body of a school district in which the property
is located for a limitation on the appraised value for ad
valorem tax purposes of the person's qualified property.
School districts may designate a reinvestment zone when the area
is entirely within the school district's territory.
TIFs
Tax increment financing may only be initiated by cities
Chapter 311 of the Tax Code governs
Under TIFs, a taxing unit can choose to dedicate all, a portion
of, or none of the revenue from a reinvestment zone
attributable to the increase of property values due to
improvements.
TIFs may be initiated by property owners comprising of at least
50 percent of the appraised property value withing the
proposed zone or by the city council.
TIFs probably