Texas Incentives and Workforce Development Guide
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Texas Enterprise Fund: The 78th Texas Legislature established the Texas Enterprise Fund (TEF) to provide financial resources to help strengthen the state’s economy. The Governor, Lieutenant Governor, and the Speaker of the House must unanimously agree to support the use of TEF for each specific project.
Projects that are considered for TEF support must demonstrate a project’s worthiness, maximize the benefit to the state and realize a significant rate of return of the public dollars being used for economic development in Texas. Capital investment; job creation; wages generated; applicant’s financial strength; applicant’s business history; analysis of the relevant business sector; and federal and local government and private sector financial support of a project are all significant factors in approving the use of TEF.
The Texas Emerging Technology Fund (TETF) is a $485 million fund created by the Texas Legislature in 2005 at the governor’s request and reauthorized in 2007, 2009, 2011 and 2013. The mission of the TETF is to make Texas the best place in the nation to pursue the next great idea; give Texas an unparalleled advantage in the research, development and commercialization of emerging technologies; recruit the best scientists, researchers and innovators; and help startup companies get off the ground faster and attract high-tech jobs. TETF supports the following funding opportunities:
- Commercialization Awards: investments in university spin-off or university-related startup companies.
- Research Award Matching: funds create consortia which leverage the unique strengths of universities, federal government grant programs and industry.
- Acquisition of Research Superiority: grants to enable public institutions of higher education in Texas to recruit the best research talent in the world.
- Regional Centers for Innovation and Commercialization: grants to universities and not-for-profit organizations to support the Texas entrepreneurial ecosystem.
Skills Development Fund: An innovative program created to assist Texas public community and technical colleges finance customized job training for their local businesses. Grants are provided to help companies and labor unions form partnerships with local community colleges and technical schools to provide custom job training. Average training costs are $1,400 per trainee; grants for a single business may be limited to $500,000.
Self-Sufficiency Fund: A job-training program that is specifically designed for individuals that receive Temporary Assistance for Needy Families (TANF). The program links the business community with local educational institutions and is administered by the Texas Workforce Commission. The goal of the Fund is to assist TANF recipients to become independent of government financial assistance. The Fund makes grants available to eligible public colleges or to eligible private, nonprofit organizations to provide customized job training and training support services for specific employers.
Business Relocation Tax Exemption & Deduction
Effective January 1, 2014 House Bill 500 provides authorization for a company to deduct moving expenses from its apportioned margin while calculating its franchise liability. Companies must relocate their principle place of business from out of state into Texas to obtain the deduction. A taxable entity may deduct relocation costs incurred in relocating the taxable entity’s main office or other principal place of business to this state from another state if the business meets the criteria in Texas Tax Code Section 171.109(b). The taxable entity must take the deduction on the entity’s first annual report described by Rule 3.584(c) (1)(C)(i). The deduction may not reduce apportioned margin below zero, and no carryover of unused deduction is allowed.
The bill also makes permanent an exemption for businesses that gross less than $1 million in revenue while providing a $1 million deduction for businesses once they pass the gross receipts revenue threshold. The bill also amends the margin calculation accordingly for equity.
Texas Capital Fund Real Estate Development Program: Designed to provide financial resources to rural communities. Funds must be used for real estate development (acquisitions, construction and/or rehabilitation) to assist a business, which commits to create and/or retain permanent jobs, primarily for low- and moderate-income persons. This program encourages business development and expansions located in rural communities. The minimum award is $50,000 and the maximum is $750,000.
Industrial Revenue Bonds: Tax-Exempt Industrial Revenue Bonds are designed to provide tax-exempt financing to finance land and depreciable property for eligible industrial or manufacturing projects. The maximum bond amount is $10 million towards a $20 million project.
Texas Product/Business Funds: Provides financing to existing technology-focused companies that create products or do business within the state. Financing is done in the form of direct asset-based loans with a competitive variable interest rate tied to LIBOR. Loans can be amortized up to the life of the asset. Texas companies or out-of-state/international companies doing business in the state are eligible to apply. Funding preferences will be given to emerging technologies including semiconductors, nanotechnology, biotechnology and biomedicine, renewable energy, agriculture and aerospace.
Moving Image Industry Incentive Program: Provides grants to promote film, video game and visual effects industry growth in Texas. The incentive is available in the form of a cash production grant from 5% to 22.5% of qualified in-state spending for eligible projects. Commercial and reality television projects are eligible for a cash production grant from 5% to 12.5% of qualified in-state spending.
State Sales & Use Tax Exemptions: Leased or purchased machinery, equipment, replacement parts and accessories that have a useful life of more than six months, and that are used or consumed in the manufacturing, processing, fabricating or repairing of tangible personal property for ultimate sale, are exempt from state and local sales and use tax.
- Texas companies are exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing or fabricating tangible personal property if at least 50% of the electricity or natural gas consumed by the business directly causes a physical change to a product.
- Texas provides 100% exemption on sales tax for computers, equipment, cooling systems, power infrastructure, electricity and fuel for data centers meeting the minimum thresholds of $200 million in capital investment, 20 new jobs, and an average salary at least 120% of the county average salary.
Texas Enterprise Zone Program: An economic development tool for local communities to partner with the State of Texas to promote job creation and significant private investment that will assist economically distressed areas of the state. Approved projects are eligible to apply for state sales and use tax refunds on qualified expenditures. The refund can be an amount ranging from a minimum of $2,500 per job to a maximum of $7,500 depending on the size of the capital investment and the number of jobs created/retained.
Texas Research & Development Tax Credit: In 2013, the 83th Texas Legislature enacted House Bill 800 creating a Research & Development tax credit effective January 1, 2014. Providing companies a choice between a franchise tax credit and a sales tax exemption for materials, software and equipment used for R&D purposes. Tax Code Chapter 171, subchapter M effectively establishes the qualifications, definitions and eligibility criteria for the credit.
Property Tax Value Limitation: Encourages large-scale manufacturing, research and development, renewable energy, nuclear and integrated gasification combined cycle electric generation facilities capital investment projects in the State of Texas. It requires companies to invest a specified amount of money to qualify for 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 local school district must elect to participate and the state comptroller must determine the limitation is a determining factor in the applicant’s decision to invest capital and construct the project in the state in order for the company to recognize this benefit.
Renewable Energy Incentives: Tax Code Section 171.056 extends a franchise tax exemption to manufacturers, sellers or installers of wind or solar energy devices. The state also permits a corporate deduction from the state’s franchise tax for renewable energy sources. Business owners may deduct the cost of the system from the company’s taxable capital or deduct 10% from the company’s income. Texas property tax code also permits a 100% exemption on the appraised value of solar, wind or biomass energy devices installed or constructed for the production and use of energy on-site.