Texas Launches New Key Property Tax Incentive—Jobs, Energy, Technology and Innovation Act

In Texas, the Jobs, Energy, Technology and Innovation Act (JETI or Act)¹ was recently launched and is now accepting applications. This new Act replaced a prior program known as Section 313, thus being Texas’s newest statewide program available for eligible entities seeking minimization of property tax for eligible projects.

The JETI program allows for a 10-year school district maintenance and operations (M&O) tax appraised value limitation. The applicant must be in a targeted North American Industry Classification System (NAICS) code and meet certain job creation and investment minimums. These criteria vary by the population of the county. Because property tax rates in Texas are among the highest in the nation, this benefit can be particularly attractive. The JETI program can apply to new greenfield projects as well as a major investment in an expansion project at an existing site.

Targeted NAICS codes for the incentive include the following:

• Manufacturing facilities
• Dispatchable electric generation facilities
• Natural resource development facilities
• Research, development, or manufacturing facilities for high-tech infrastructure equipment or technology
• Construction or expansion of critical infrastructure

Minimum job creation and investment requirements for the JETI program are dependent on county population:

Any project that qualifies receives a 50% discount of market value, regardless of geographic location, or a 75% discount for the 10-year period if the project is in a qualified Opportunity Zone.

The Texas Comptroller began accepting applications on January 18, 2024, and since this date, there has been additional clarification on details with how the program works. Because this is a brand-new program, continuing guidance is expected.

Additional key application requirements and considerations include the following:

• A comprehensive Economic Impact Analysis is required, detailing all projected direct and indirect tax and economic impacts over the construction period, the 10-year benefit period. The analysis must also include a summary of the consequences for the following 25 years after the 10-year benefit period elapses, totaling a 35-year study.
  • Note the benefit period does not begin until the project is complete, which starts the 10-year benefit period and the 35-year clock for purposes of economic impact projections.

• A performance bond is required upon execution of a completed agreement. The amount of the performance bond is equal to 10% of the projected tax benefit of the project. The bond acts as insurance to the granting body that the agreement terms will be met and remain in good standing for the 10-year benefit period.
  • An example of how the anticipated performance bond cost can be calculated is as follows:

*Based on estimated two-year renewal, thus for 10 years of the incentive would require five installment payments.

• Note that the projected benefit in terms of job creation and investment in many cases may be much higher than requirements outlined in an agreement.
• The applicant must commit to paying 110% of the average wage in the county in which the project will be located. The minimum wage threshold that must be met is categorized by NAICS code.
• A nonrefundable application fee in the amount of $30,000 payable to the local school district is due upon application submission to the Comptroller’s office.
• The incentive must be a “compelling factor” for deciding to build or expand in Texas. Any public announcement that the proposed project will take place before the agreement is in place will disqualify the project.

Timeline considerations include:

• Step 1: Contact the Comptroller’s Office
  • The application must first be reviewed by the Comptroller’s office for completeness.
  • The Comptroller’s office can request supplemental information from the applicant, potentially multiple times, before it deems the application complete.
  • As part of the application, proof of payment of the $30,000 nonrefundable fee to the independent school district (ISD) must be provided.
  • After the application is deemed complete, the Comptroller’s office will have up to 60 days from that point to make a recommendation to approve.

• Step 2: Governor’s Office
  • The Governor’s office has 30 days to decide if it’s agreeable to enter into an agreement with the applicant.
  • At the same time, the following is being considered by the ISD:
    • The ISD has 30 days to decide if its agreeable to enter into an agreement.
    • Within 30 days from the Comptroller’s recommendation, the ISD must hold a public hearing on the application.
    • A public notice of the hearing must be posted no later than 15 days before the hearing.

• Step 3: Notification of Approval
  • Governor’s office and ISD have seven days to inform applicant of their determination.

• Step 4: Finalization
  • Agreement is finalized.
  • Performance bond is issued concurrently with agreement execution.

The JETI program is complex and nuanced but is a very worthwhile incentive. Ryan’s Credits and Incentives tax experts are well versed in the program and can assist organizations considering a greenfield or expansion project within and outside of Texas in their consideration of and application to the program.

¹ House Bill 5 in 2023, 88^th Legislature, Regular Session.

TECHNICAL INFORMATION CONTACTS:

Allea Newbold
Principal
Ryan
813.371.0566
allea.newbold@ryan.com

Eric Kronlund
Senior Manager
Ryan
857.362.7522
eric.kronlund@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.