For a list of Texas economic development agencies that can help with the site selection process, visit our Online Site Seekers’ Guide.
Texas Leverage Fund: Introduced in 1992 as a community-driven program, the Texas Leverage Fund allows Economic Development Corporations (EDC), established pursuant to Section 4A and/or 4B of the Development Corporation Act of 1979, to leverage the economic development sales and use tax to expand economic development through business expansions, business recruitment and exporting. The program offers favorable loan terms designed to give communities quick access to capital to finance their economic development projects.
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FINANCING & GRANTS
Capital Access Program: The Capital Access Program was established to increase the availability of financing for businesses and non-profit organizations that face barriers in accessing capital or fall outside the guidelines of conventional lending.
The Governor’s University Research Initiative (GURI): The Governor’s University Research Initiative (GURI) was enacted in 2015 by the 84th Legislature with a goal to bring the best and brightest distinguished researchers in the world to Texas. This program is a matching grant program to assist eligible institutions of higher education in recruiting distinguished researchers. The GURI grant program is operated within the Office of the Governor (“OOG”) in the Economic Development and Tourism Division.
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.
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.
Texas Capital Fund Real Estate Development Program: The Texas Capital Fund Real Estate Development Program is designed to provide financial resources to non-entitlement 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 non-entitlement communities. The minimum award is $100,000 and the maximum is $1,500,000. Awards of more than $750,000 require a greater level of job creation/retention and matching funds. The award may not exceed 50% of the total project cost. Funds are provided with no interest accruing and with payments based on a 20-year amortization schedule.
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 local government and private sector financial support of a project are all significant factors in approving the use of TEF.
Texas Product Development & Small Business Incubator Fund (PDSBI): The Texas Product Development and Small Business Incubator Fund, collectively PDSBI, is a revolving loan program financed through original bond issuances. The primary objective of the program is to aid in the development, production and commercialization of new or improved products and to foster and stimulate small business in the state. The fund provides asset-based lending with flexible loan terms, competitive Loan-to-Value (LTV) and interest rates. Loan proceeds can be used for a broad range of capital and operating expenditures. A company can secure loans with property, plant and equipment which can be amortized over the life of the asset. Communities or individual investors can assist as Guarantors.
To be eligible, applicants must have at least three years of operating history and have unencumbered assets available for collateral. Preference for funding is given to the state’s defined industry clusters including, but not limited to: nanotechnology, biotechnology, biomedicine, semiconductors.
Business Relocation Tax Deduction & Exemption: 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.
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. The qualifying investment amount is determined on a sliding scale that begins at $100 million for large urban areas and $30 million for rural areas. The qualifying investment amount is reduced for areas with a lower tax base.
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.
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 83rd 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.
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.
Skills Development Fund: The Skills Development Fund is an innovative program created to assist Texas public community and technical colleges finance customized job training for their local businesses. The Fund was established by the Legislature in 1995 and is administered by the Texas Workforce Commission. 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 is $1,800 per trainee; however, the benefit may vary depending on the proposal.
For more information visit https://texaswideopenforbusiness.com/services/incentives-financing