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Appraised Value Limitation and Tax Credit

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Legislative Background

In 2007, the 80th Legislature enacted a bill that requires the Comptroller to prepare a biennial report on projects utilizing this provision of the statute. Read the 2010 Report of the Texas Economic Development Act.

In 2009, HB 3676 (81st Legislature) further amended the Act; see the section on "Recent Changes" below. Here is an unofficial version of Tax Code Chapter 313 (not prepared by Legislative Council) as it will read January 1, 2010. Most sections of HB 3676 became effective June 19, 2009. Sections of the bill going into effect January 1, 2010 are primarily those related to eligibility determination and internet posting requirements.

In 2001, the 77th Texas Legislature enacted House Bill 1200 creating Tax Code Chapter 313 (PDF, 93 KB), the Texas Economic Development Act. This Act allows school districts to attract new taxable property and create jobs by offering a tax credit and an eight-year limitation on the appraised value of a property for the maintenance and operations portion of the school district property tax. The property remains fully taxable for the purposes of any school district debt service tax.

Report due date reminder to companies and districts with limitation agreements:

Form 50-772 (Chapter 313 Annual Eligibility Report Form) should be submitted by an authorized representative of each company to the school district by May 15th of every year using information from the previous tax (calendar) year. School districts should review the submitted forms, and email PDF scans of the completed and signed forms to the Comptroller's office for posting on the Comptroller's website.

Please send forms or any questions to chapter313@cpa.state.tx.us .

Adopted Rules and Forms for Chapter 313
Posted June 4, 2010

IMPORTANT INFORMATION FOR SCHOOL DISTRICTS AND CHAPTER 313 AGREEMENT-HOLDERS

The Comptroller's office has submitted to the Texas Register the following adopted rules and forms for Tax Code Chapter 313 to implement changes to the chapter made by the 81st Legislature in HB 3676:

Adopted Rules and Forms for Chapter 313 — Published in Texas Register June 18, 2010

Chapter 313 Email Address: chapter313@cpa.state.tx.us

Chapter 313 Mailing Address:
Local Government Assistance & Economic Analysis
Texas Comptroller of Public Accounts
P.O. Box 13528
Austin, Texas 78711-3528

Requests for prior versions of Chapter 313 rules and forms may be sent to chapter313@cpa.state.tx.us.

Biennial School District Cost Data Request
Posted June 4, 2010

School districts are also requested to submit the Biennial School District Cost Data Request - 2010 (Excel, 40 KB) to the Comptroller's office by August 16th, indicating—for each project—actual and estimated property values, tax rates, payments in lieu of taxes, extraordinary educational expenses, and revenue protection payments. Because of delays in the rules development process, the deadline for the return of Forms 50-772 and 50-773 to the school district will be extended this year to July 15th. School districts will be required to forward Form 50-773 to the Comptroller's office by August 16th. Form 50-722 should be submitted to and retained by the school districts. School districts should forward a copy of Form 50-772 with any attachments to the Comptroller's office.

Questions about the forms may be sent to chapter313@cpa.state.tx.us.

Correspondence Letters
Posted June 4, 2010


Online Posting of Chapter 313 Agreement Documents
Posted January 22, 2010

The 2009 Legislature’s HB 3676 requires the Comptroller’s office to post certain documents related to Tax Code Chapter 313 value-limitation applications and agreements on its Web site. These documents are posted on the Comptroller's Texas Ahead Web site for Economic Development and Local Government Resources.
View postings of Tax Code Chapter 313 School Property Tax Limitation Agreement Documents


81st Legislature Changes to Chapter 313

During the 81st Legislative Session, several bills passed amending Chapter 313 of the Tax Code. House Bill 3676 made a number of changes to the chapter—most of them effective June 19, 2009 including:

  • Clarifying that lessees of, or other holders of possessory interest in, qualified property may apply for value limitations.
  • Amending the definition of qualifying time period to be the date the application is approved by the school board, rather than the beginning of the tax year following the year in which the board approved the application.
  • Amending the wage target for qualifying jobs for projects creating more than 1,000 jobs in a county to 110 percent of the county average weekly wage for all jobs, rather than 110 percent of the county average weekly wage for manufacturing jobs.
  • Amending the definition "County average weekly wage for manufacturing jobs" to a choice of two wage targets for qualifying jobs. One definition is the manufacturing wage in the county computed by the Texas Workforce Commission (TWC), based on the four most recent quarters of data available at the time an application is made to a school district. The second definition is the wage computed by TWC for manufacturing wages in the region based on the four most recent quarters of data available at the time an application is made to a school district. Presumably, the wage target required for the applicant would be the lesser of the two options, and would remain a fixed wage target for each project for the length of each agreement.
  • Adding "a computer center primarily used in connection with one or more" of the other eligibility criteria listed in 313.024(b) as an eligible project.
  • Requiring school districts to submit to the Comptroller copies of applications, agreements, and any economic analyses (or any revisions of those documents) within seven days of receipt. The Comptroller is required to post each document on the Comptroller Web site. Districts would be required to have links to the Comptroller Web site.
  • Lengthening the application review period from 121 days to 151 days, and the period of time for Comptroller review of the application from 61 days to 91 days.
  • Providing that, when the Comptroller recommends disapproval of an application, a district may only approve that application with at least a of two-thirds vote of the school board.
  • Requiring the Comptroller to determine whether the property described in the application meets the eligibility requirements of the chapter, and offer applicants the opportunity for a hearing on project eligibility.
  • Expanding the Comptroller's economic impact evaluation to include the impact a project would have on the state and individual units of government instead of the region. It also requires the economic impact evaluation to include tax and other revenue gains, direct or indirect, that would be realized as well as economic effects of the project, including the impact on jobs and income.
  • Requiring the Comptroller to designate applications and certain other documents related to value limitation applications and projects as "substantive" and post them within 15 days of their creation or receipt on the Comptroller Web site.
  • Allowing agreements to include a provision for payments from the owner to the school district for "extraordinary education-related expenses" related to the project.
  • Limiting "supplemental payments" from the project owner to the district to $100 per student per year for the duration of the project.
  • Specifying that if the owner of the project does not make the minimum qualified investment or create the "required" number of qualifying jobs, they lose the tax benefit in any year in which they were out of compliance.
  • Allowing school districts to be classified as "rural" (subject to Subchapter B) if the school district has territory in an area that was previously designated as a strategic investment area (SIA). Also deleting a section of current law that prevents school districts partially or wholly located within a metropolitan statistical area (MSA) from being classified as rural under the subchapter.
  • Repealing a section of law prohibiting school districts with Chapter 313 agreements from holding tax rate rollback elections in the two tax years following the approval of a value limitation application.
  • Specifying that the Comptroller shall not deduct from the school district value study the value of any Chapter 313 projects that are applied for after May 1, 2009, and not recommended by the Comptroller.

Reinvestment Zones

A school district board may only approve for a value limitation qualified property that is located in an area designated as a reinvestment zone under Tax Code Chapter 311 or 312, or as an enterprise zone under Government Code Chapter 2303, by the county commissioners court and the governing body of each municipality, provided that all the qualified property is located on land falling within this designated zone.

A school board also may designate an area that is entirely within the territory of the school district as a reinvestment zone under Tax Code Section 312.0025. The board must find that designating and granting a limitation on appraised value under Chapter 313, Subchapter B or C, for property located in the reinvestment zone, is reasonably likely to:

  1. contribute to the expansion of primary employment in the zone; or
  2. attract major investment in the zone that would benefit property in the reinvestment zone and the school district, and contribute to the economic development of the region of this state in which the school district is located.

The school board may seek the recommendation of the county commissioner’s court and the governing body of each municipality that has territory in the school district before designating an area as a reinvestment zone.

Property Requirements

In exchange for the appraised value limitation and tax credit, the property owner must enter into an agreement with the school district to create a specific number of jobs and build or install specified types of real and personal property worth a certain amount. The agreement must specify what is expected of each party, including the terms and conditions required by law, and provisions to protect the school district from possible revenue losses.

To qualify, the property must be in a reinvestment zone and must be devoted to manufacturing, research and development, a clean coal project, as defined by Section 5.001, Water Code, an advanced clean energy project, as defined by Section 382.003, Health and Safety Code, renewable energy electric generation, electric power generation using integrated gasification combined cycle technology, nuclear electric power generation, or a computer center used primarily in connection to one of the other categories.

Most applicants have a qualifying time period starting the date that the school district approves an application, and ending at the end of the second complete tax year following that date. The applicant must make the required minimum investment during the qualifying time period. In addition to the eight-year limitation, the applicant may apply to the school district for a tax credit for maintenance and operations taxes paid on property value in excess of the value limit during the two complete tax years of the qualifying time period. Nuclear power plants and advanced clean energy projects have longer qualifying time periods.

Property Classes

The law defines two overlapping classes of property — “qualified investment” and “qualified property” — that are used for different purposes in the value limitation process.

During the qualifying time period, the applicant must build or install qualified investment that exceeds a specified amount in order to receive an appraised value limitation. Qualified investment is defined as certain types of tangible personal property and buildings, not including land or any investment made before or after the qualifying time period.

Qualified property is property that may receive a value limitation—generally starting in the third complete tax year of an agreement. Qualified property includes the land (if owned by the qualified property owner), and most of any new improvements made after the date of application filing. Property added after end of the qualifying time period may be qualified property if it has been specifically described in the application and limitation agreement.

Qualified Investment Amount

The required minimum qualified investment and the minimum amount of the value limitation are, by statute, the same amount. They vary according to whether a school district is considered a so-called rural district (subject to Subchapter C), or a non-rural district (subject to Subchapter B), and according to the amount of taxable property value in the school district.

The Texas Economic Development Act categorizes districts subject to Subchapter C in five categories based on the amount of taxable industrial property in the school district. It categorizes school districts subject to Subchapter B in five separate categories based on the total amount of taxable property in the school district. As the amount of taxable property increases from category to category, the minimum required investment and the minimum amount of value limitation increases.

See the two charts below for the minimum required investment for Subchapter C and Subchapter B school districts.

Categorization of Non-Rural School Districts
Subchapter B, Chapter 313

Tax Code Section 313.022 categorizes school districts according to the taxable value of property in the district for the preceding tax year determined by the Texas Comptroller, as follows:

Category Taxable Value of Property
I $10 billion or more
II $1 billion or more but less than $10 billion
III $500 million or more but less than $1 billion
IV $100 million or more but less than $500 million
V Less than $100 million

Minimum Amounts of Qualified Investment

For each category of school district established by Section 313.022, the minimum amount of a qualified investment under Section 313.021(2)(A)(iv)(a) is as follows:

Category Minimum Qualified Investment
I $100 million
II $80 million
III $60 million
IV $40 million
V $20 million

Categorization of Rural School Districts
Subchapter C, Chapter 313

Tax Code Chapter 313, Subchapter C, applies only to a school district that has territory in a strategic investment area, as defined under Subchapter O, Chapter 171, Tax Code, immediately before that subchapter expired, or in a county: (1) that has a population of less than 50,000 and (2) in which, from 1990 to 2000, according to the federal decennial census, the population: (A) remained the same; (B) decreased; or (C) increased, but at a rate of not more than three percent per annum. View map of counties designated as SIAs at the end of 2007 (PDF).

For purposes of determining the required minimum amount of a qualified investment under Section 313.021(2)(A)(iv)(a) and the minimum amount of a limitation on appraised value under this subchapter, Section 313.052 categorizes school districts according to the taxable value of industrial property in the district for the preceding tax year as determined by the Comptroller, as follows:

Category Taxable Value of Industrial Property
I $200 million or more
II $90 million or more but less than $200 million
III $1 million or more but less than $90 million
IV $100,000 or more but less than $1 million
V Less than $100,000

Minimum Amounts of Qualified Investment

For each category of school district established by Section 313.052, the minimum amount of a qualified investment under Section 313.021(2)(A)(iv)(a) is as follows:

Category Minimum Qualified Investment
I $30 million
II $20 million
III $10 million
IV $5 million
V $1 million

Application Process

To obtain a limitation, a property owner must file a Comptroller-prescribed application form with the school district. The school district may choose not to consider the application. If the school district decides to consider the application, the school district must send a copy of the application to the Comptroller and the relevant appraisal district. The school district also must request that the Comptroller provide an economic impact analysis.

Upon receipt of the application, recent changes to the statue will require the Comptroller after January 1, 2010 to make a determination of the project’s eligibility under Chapter 313, notify the district of the determination, and provide a hearing and appeals process for applicants contesting the Comptroller’s decision.

The Comptroller is required to make a recommendation to the school district on whether to accept or reject the application, based on the criteria in the economic impact evaluation, or any other information available to the Comptroller. The school district may approve the application only if it finds that the information in the application is true and correct, finds that the applicant is eligible for the limitation, and determines that granting the application is in the best interest of the school district and this state. The Comptroller has up to 91 days to review an application after receiving it from the school district, and the school district has up to 151 days to act on it after receiving it from the applicant.

NOTE: While these new timelines do not create hard and fast deadlines for application filing with school districts, if the applicant desires the first complete year of the qualifying time period to begin in the next tax year, applicants must file a complete application early enough in any particular year to allow time for school district and Comptroller review.

See the timeline below for an overview of the sequence of events.

NOTE: NEW TIMELINE OF CHAPTER 313 LIMITATION AGREEMENT PROJECTS IS UNDER DEVELOPMENT. THE TIMELINE BELOW REFLECTS STATUTE BEFORE JUNE 19, 2009.

timeline

Appraisal District

When appraising a property owner’s qualified property subject to a limitation on appraised value under this Act, the chief appraiser shall determine the market value of the property and include both the market value and the limited value in the appraisal records.

Each year, the chief appraiser shall compile and send to the state a list of properties subject to a limitation on appraised value under Tax Code, Chapter 313.

Tax Credit

A property owner may receive a property tax credit for part of the maintenance and operations taxes paid to the school district for each complete tax year during the qualifying time period. The tax credit is an amount equal to the maintenance and operations levy during the first two complete tax years of the qualifying time period on the taxable value exceeding the limitation amount (even though the limitation does not take effect until the end of the qualifying time period, generally the third year). To be eligible for a tax credit, the owner must submit an application for tax credit to the school district to which the property taxes were paid. Applications for the tax credit may be filed any time after property taxes are finally paid for the last complete tax year of the qualifying time period. The owner must:

  1. file a completed Application for Tax Credit on Qualified Property (Form 50-300) or an alternative form that is authorized.
  2. attach tax receipts from the school tax collector that show full payment of school district property taxes on the qualified property for the applicable qualifying time period;
  3. include any other document or information that the Comptroller or the school district considers necessary for determining the applicant's eligibility for the tax credit or the amount of the tax credit.

The school district determines the owner's eligibility for a tax credit. If a school district determines that the owner is eligible for a tax credit and verifies the total tax credit, then the school district shall direct its tax collector to apply the tax credit against any taxes that the school district imposes on the qualified property as follows:

  1. apply one-seventh of the total tax credit for seven tax years beginning with the tax year that follows the tax year in which the application for tax credit was approved, and for six tax years thereafter;
  2. the maximum amount of tax credit that may be applied in each of the seven tax years may not exceed 50 percent of the total amount of school property taxes (maintenance and operations and debt service) imposed on the qualified property in that tax year;
  3. apply any tax credit that remains as a result of the application of the cap that is imposed by (B) above in the first three tax years that begin on or after the date on which the owner's eligibility for the appraised value limitation expires, but the maximum amount may not exceed the total amount of school property taxes imposed on the qualified property in each tax year. Any remaining tax credit that is not used expires.

No tax credit will be allowed for either the tax year in which the owner relocates the business outside the school district or the tax years thereafter.

If the Comptroller and a school district determine that a person who received a tax credit was either not eligible for the credit or received more credit than the person was entitled, then the school district shall impose an additional tax on the qualified property that is equal to the amount of tax credit that was erroneously taken, plus interest at an annual rate of 7 percent, calculated from the date on which the credit was issued.

A tax lien attaches to the qualified property in favor of the school district to secure payment of any additional tax and interest that are imposed and any penalties incurred. A person who is delinquent in the payment of an additional tax may not submit a subsequent application or receive a tax credit in a subsequent year.

After a school board approves a tax credit for a particular project, the school district subsequently files an application annually with the Texas Education Agency for reimbursement from the state for the tax credit the school district has approved and granted. [See Texas Education Code, Section 42.2515. “Additional State Aid for Ad Valorem Tax Credits under Texas Economic Development Act.” http://www.statutes.legis.state.tx.us/Docs/ED/pdf/ED.42.pdf. See also “Request for Additional State Aid for Ad Valorem Tax Credit” and “Template for Chapter 313, Economic Development Act, Estimate of Tax Credit Impact” on TEA School Finance Web Page under the heading of “Other Topics.”]

Property Value Study

If the Comptroller recommends in favor of an application, in the Comptroller’s Property Value Study (PVS), the Property Tax Assistance Division (PTAD) will deduct from a school district’s market value that portion of the market value of the property not fully taxable because the school district acted under Tax Code Chapter 313. The PVS includes a study of school taxable values for purposes of state funding.

If the Comptroller recommends against an application, and the school district subsequently approves it, the Comptroller will not deduct the value of the project from the school district value study.

School District Subject to Subchapter B or Subchapter C?

Tax Code Chapter 313 provides that the required number of qualifying jobs, amount of investment and the minimum amount of the value limitation vary according to whether the school district is considered rural (subject to Subchapter C) or non-rural (subject to Subchapter B), and according to the amount of taxable property value in the school district. Districts become subject to Subchapter C either because of their demographic characteristics (having territory in a county with population under 50, 000, and a county with less than a 3 percent annual growth rate between 1990 and 2000), or because the school district has territory in a county that was a Strategic Investment Area (SIA) as of 12-31-2008.

Find how each Texas school district is classified, and the minimum amount of value limitation and qualified investment.

NOTE: The "Minimum" column is both the minimum qualified investment AND the minimum limitation on appraised value.

NOTE: This article is intended only as a brief summary of the law. Readers should refer to the law and the rule for the actual details and requirements of the tax credit and appraised value limitation.

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