A Chapter 312 Tax Abatement is a local property tax exemption granted by a municipality or county to the owner of real property or tangible personal property located within a designated Reinvestment Zone. It is a temporary, contractual reduction of property taxes designed to encourage:
- New investment,
- Expansion or modernization of existing facilities,
- Retention or creation of primary employment,
- Redevelopment of underutilized or deteriorated property.
The process and requirements are governed by Chapter 312 of the Texas Tax Code.
Key Legal Elements (Per Statute)
1. Eligibility Requirements
- Only municipalities and counties that have:
- Adopted tax abatement guidelines and criteria (Sec. 312.002),
- Held a public hearing,
- Passed a resolution electing to participate, may grant abatements.
- School districts are prohibited from participating (Sec. 312.002(f)).
2. Reinvestment Zone Designation
- A taxing unit must:
- Hold a public hearing (Sec. 312.201(d) for municipalities, Sec. 312.401(b) for counties),
- Issue public notices,
- Officially designate the area as a Reinvestment Zone where the abatement will apply (Sec. 312.201, Sec. 312.401).
3. Tax Abatement Agreement
- An abatement is granted through a written agreement between the taxing unit and the property owner (Sec. 312.204 for municipalities, Sec. 312.402 for counties).
- The agreement may:
- Exempt all or a portion of the increased value of real property or new personal property.
- Last no more than 10 years (Sec. 312.204(a)).
- Agreements must include:
- A list of improvements (Sec. 312.205(a)(1)),
- Compliance requirements,
- Recapture provisions for failure to perform (Sec. 312.205(a)(4)).
4. Public Transparency & Notice
- All agreements require:
- 30-day public notice before the governing body vote (Sec. 312.207(d)),
- Compliance with the Texas Open Meetings Act (Chapter 551, Government Code) (Sec. 312.207(d)),
- Posting agreements online or via the Comptroller’s website (Sec. 312.008).
5. Approval Process
- Agreements must be approved by majority vote in a public meeting (Sec. 312.207).
6. Post-Agreement Compliance
- Property owners must:
- Annually certify compliance to the taxing unit (Sec. 312.205(a)(6)),
- Allow inspections.
- The taxing unit retains the right to:
- Cancel, modify, or recapture taxes for non-compliance (Sec. 312.205, Sec. 312.208).
7. State Reporting
- All reinvestment zones and tax abatement agreements must be reported to the Texas Comptroller, who compiles and reports this information to the Governor and Legislature every two years (Sec. 312.005).
Limitations & Special Provisions
- Wind-powered energy projects near military aviation facilities are not eligible (Sec. 312.0021).
- Abatements can be used to promote:
- Housing for military personnel (Sec. 312.204(g)),
- Brownfield redevelopment (Voluntary Cleanup Agreements) (Sec. 312.211).
Key Statutory References:
- Eligibility: Sec. 312.002
- Reinvestment Zone: Sec. 312.201 (municipal) / Sec. 312.401 (county)
- Abatement Agreement: Sec. 312.204, Sec. 312.205
- Public Notice: Sec. 312.207, Sec. 312.2041
- Compliance & Recapture: Sec. 312.205, Sec. 312.208
- State Reporting: Sec. 312.005
- Open Meetings Act Reference: Sec. 312.207(d) → Chapter 551, Government Code