State of Texas Incentives
The State of Texas offers a number of funds and programs to encourage investment and job creation in the state. These programs are managed by the Governor’s Office of Economic Development & Tourism in Austin.
Texas Enterprise Fund
This fund is designed to stimulate the development of significant new industrial and commercial projects that will enhance the state’s economy. Projects must have strong economic impacts and provide an attractive rate of return to the public. Applications must disclose the amount of wages generated, financial strength of the company, business history, a business sector analysis, and local government and private support for the projects concerned. All applications require the approval of the Governor, Lieutenant Governor and Speaker of the Texas House of Representatives. Cities are limited in the number of enterprise projects being funded at any time. In the case of Houston, it is six (6) projects.
Companies developing approved enterprise projects are eligible for refunds of state sales taxes, currently 6.25% on purchase prices, paid for building materials, machinery and equipment, electricity, natural gas, consumed in the normal course of business depending on the amount of the investment and number of jobs created or retained as follows:
- For investments of $40,000 – $399,999, refunds are $2,500 per job up to 10 jobs.
- For investments of $400,000 – $999,999, refunds are $2,500 per job up to 25 jobs.
- For investments of $1,000,000 – $4,999,999, refunds are $2,500 per job up to 125 jobs.
- For investments of $5,000,000 – $149,999,999, refunds are $2,500 per job up to 500 jobs.
- For investments of $150,000,000 – $249,999,999, refunds are $5,000 per job up to 500 jobs.
- For investments of $250,000,000 or more, refunds are $7,500 per job up to 500 jobs.
State Sales and Use Tax Exemptions
Purchases of machinery, equipment, replacement parts and accessories that have useful lives of six (6) months or more and are used in manufacturing, processing, fabrication or repair are exempt of state and local sales taxes.
Texas businesses are exempt from paying state sales taxes on labor costs of constructing new facilities. Texas companies are exempt from state sales taxes on electricity and natural gas used in manufacturing, processing or fabricating personal property. (The company must complete a “predominant use” study that validates the fact that 50% or more of the electricity or gas used by the business effects physical changes to the products produced.)
Skills Development Fund
This program assists businesses and unions by financing customized job training programs. The objective of the program, administered by the Texas Workforce Commission, is to facilitate the creation of new jobs and upgrade the skills of workers on existing jobs. To be considered for grants, businesses and unions must partner with a community college or a technical college who make the grant applications. All training is conducted at the training facilities. Grants for single businesses are normally limited to $500,000.
On-the-Job and Customized Training
Many companies have employees whose skills do not justify paying them a self-sufficient wage. This program funds on-the-job training tailored to the needs of the employer to improve the skills of such employees and supplements their wages while doing so. The program is particularly useful when new procedures or technologies are being introduced. To qualify for the program, the local Houston Workforce Development Board must determine that prospective employee participants have not been earning a self sufficient wage. Eligible employers must also commit to retaining participants once they have completed their training programs.
Harris County Incentives
The International Management District is located within Harris County. Under a new program initiated in early 2010, Harris County offers a 10-year tax abatement of 50% of Harris County, Harris County Flood Control District, Port of Houston Authority and Harris County Hospital District property taxes to companies that invest at least $1,000,000 in an industrial building (excluding land) and create 25 or more jobs by the end of Year 3 of the project. The current tax rate for these taxing entities combined is $0.62998 per $100 appraised value, so 50% would be $0.31499/$00. As an example, a new 10,000 square foot (926 m2) office/warehouse building costing, say, $100/SF to construct – and appraised for tax purposes at that value – would yield $3,149.90 per year in ad valorem tax savings. To qualify for this incentive, the prospective building owner must have obtained a competitive quote on available tax abatements from one or more other counties. Approval of the Harris County tax abatement normally requires 90 days following receipt of application.
City of Houston Incentives
Houston offers several incentive programs of interest to prospective investors and users considering the portion of the IMD located within the City (eastern two-thirds) as their future business location.
Property Tax Abatement
Houston offers the same type of incentive to companies or developers of industrial buildings as Harris County. For investors contracting the construction of buildings with appraisal values of $1,000,000 or more and creating 25 or more jobs by Year 3, they are able to obtain reductions of 50% of their ad valorem taxes payable to the city. At current rates, this is 50% of $1.26873/$00, or $0.634365/$00. Using the same example as above, that translates to $6,343.65 per year for ten years, or $63,436.50 over that period.
Southwest Tax Increment Reinvestment
Over the years prior to 2007, Houston created twenty-one (21) tax increment reinvestment zones as permitted by State of Texas statutes. These zones allow City property tax receipts on incremental appraised values realized following the base year in which the zones are created to be used for infrastructure and other improvements to help support new private commercial development. The western most tip of the Southwest TIRZ extends west of Beltway 8 into the IMD between Bellaire and Beechnut. No infrastructure or other TIRZ funded improvements are currently planned for this relatively small area. However, there are several properties along the Beltway 8 service road south of Art Storey Park north of Beechnut that would be suitable for high density multi or mixed use development for which TIRZ related supporting infrastructure improvements could be considered.
Chapter 380 Agreements
Section 380.001 of the State of Texas Local Government Code allows Texas cities to make loans or grants of city funds to developers and investors, as well as provide certain city staff, facilities and services at minimum or no charge, to help stimulate certain types of real estate projects that are deemed to be urgently needed or highly desired. With the limitations placed on the creation of new TIRZs since 2006, Houston has chosen the Chapter 380 route to stimulate development of a large new HEB Supermarket on I-10 in the Houston Heights district and three low-rise condominium projects in the near northwest Houston, all outside the IMD. Chapter 380 agreements between the City of Houston and property owners or developers normally take the form of a public/private joint venture in which the city agrees to build, or loan the funds to build, infrastructure consisting of streets, sidewalks, utilities and street lighting to support private development of vacant land in designated land use(s). Capital amounts involved will vary considerably.
The International Management District’s primary incentives offered to prospective investors and businesses considering capital investments and business locations in the district are described in the other portals of this website. The district goes to considerable expense to provide a safe, secure and attractive business environment for its retailers, restaurateurs, office tenants and industrial companies, and supports many community organizations and activities to enhance quality of life for residents. The district also underwrites or obtains funding for infrastructure projects designed to improve mobility and the attractiveness of the district. All of these services and investments are over and above those provided by the City of Houston to all areas of the city.
Nevertheless, the district offers a very important additional incentive that is unique among all areas and cities in the Houston metropolitan area. Hawes Hill Calderon, a leading consulting firm that administers management districts, tax increment reinvestment zones and public improvement districts, has an Economic & Market Research Division with substantial professional experience in market and economic feasibility studies for businesses and real estate projects in the U.S., Europe and Asia. Should an interested investor or business contemplating a capital investment or business location in the International Management District wish to contract the Economic & Market Research Division of Hawes Hill Calderon to perform a market demand study for a real estate project being considered, or products or services that are proposed to be offered in the case of an industrial company, the IMD will reimburse the investor or companies 70% of all professional fees charged in connection with such a study if the organization concerned proceeds with a project or business domiciliation in the district. The IMD requires that the study be performed in accordance with rigorous standards to try to avoid any project or business failure that might result from a less thorough investigation as such a result would likely damage the reputation and standing of the district.
How to Contact Us
Interested investors and companies should contact:
Tel: (001) 713-595.1241
Fax: (001) 713-541.9906