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Houston area sales tax allocations totaled $956.7 million in ’18
A range of local and state incentives are available to qualifying companies in the Houston area to support new, expanding and relocating companies. The Partnership can help identify potential economic incentives that will match best with your relocation and/or expansion, and facilitate the incentives process with local and state leadership. The state of Texas invests in its future by offering competitive incentives to companies who are creating jobs and driving innovation in the state. This section summarizes some of the most commonly used state offerings administered by the Office of the Governor, Economic Development and Tourism.
The Texas Enterprise Fund (TEF), one of the nation’s largest deal-closing funds, is a performance-based cash grant for qualifying projects that offer significant projected job creation and capital investment where a single Texas site is competing with another viable out-of-state option (cash incentive).
The Texas Enterprise Zone Program (EZP) is a potential Sales and Use tax refund based on new and retained jobs associated with the qualified business site during the designation period. Communities may nominate projects for an EZP designation, and projects are awarded by the Governor’s Office during quarterly competitive rounds.
Skills Development Fund (SDF) grants are provided to help companies form partnerships with local state community colleges and technical schools to provide custom job training for new or existing employees. Average training costs is $1,800 per trainee and is administered by the Texas Workforce Commission. Businesses with fewer than 100 employees can also apply for this program through the Skills for Small Business program (workforce incentive).
The Texas Capital Fund administered by the Department of Agriculture is an economic development tool designed to provide financial resources to non-entitlement communities that can be utilized for public infrastructure or real estate development needed to assist a business that commits to create and/or retain permanent jobs (cash incentive).
This incentive allows employees and family members of qualified businesses who have not yet located in Texas to pay in-state tuition fees if the individual files with a Texas institution of higher education.
TCEQ and the Office of the Governor have established a relationship to assist companies, which may experience unwarranted delays in their environmental permitting process for projects that could affect job creation or have a high economic impact.
Leased or purchased machinery, equipment, replacement parts, and accessories 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.
Natural Gas & Electricity Texas companies are exempt from paying state and local sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property.
Texas provides 100 percent 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 a salary at least 120 percent of the county average salary.
A taxable entity may deduct relocation costs incurred from relocating a main office or other principal place of business to the State of Texas from another state or country if the taxable entity did not do business in the State of Texas before relocating.
The Research & Development tax credit provides qualified companies with an option for tax savings based on a purchase of equipment or software, R&D expenditures or contracts with higher education institutions performing research.
The Self-Sufficiency Fund is 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 become independent of government financial assistance.
Workforce Solutions offers recruiting, training and retraining, outplacement services, assistance recruiting and retaining qualified employees, and valuable information on employment law and labor market trends and statistics.
Designed to help Texas small manufacturing companies remain competitive in the ever changing global marketplace. The TMAC center provides technical assistance at a discounted rate for process improvements, environmental regulations upgrades, changes in the technology and the marketplace.
On-the-Job Training (OJT) offers participants an opportunity to earn as they learn, while employers benefit from a partial wage reimbursement during the training period. OJT focuses on jobs that involve new technologies, production, service or additional skills for full-time positions (30 hours per week is considered full-time) paying at least $12.00 per hour or more.
An appraised value limitation agreement in which a taxpayer agrees to build or install property and create jobs in exchange for a limitation on the taxable property value for school district maintenance and operations tax (M&O) purposes and a tax credit. The minimum limitation value varies by school district.
There are a number of local incentive programs available to companies looking to invest in the Houston region.
A variety of cities and counties in the Houston region oﬀer tax abatement agreements that exempt part of the increased value in real or personal property from taxation for a period not to exceed 10 years.
These discretionary incentives typically take the form of property tax abatements, loans or grants, commitments for infrastructure, or payments of portions of the sales tax generated by the project. Negotiations on these incentives between the local jurisdiction and the developer occur on a case by case basis. The Chapter 380 is targeted specifically for use by cities while Chapter 381 is specifically for use by county governments. These agreements can be used in tandem for the same project.
Municipalities may oﬀer cash awards made possible by local sales and use tax allotments dedicated to economic development (Type A and Type B sales tax). The tax revenues in two forms, the original ‘4A’ tax and the more flexible ‘4B’ tax, are used to finance economic development programs and projects that create primary (or direct) jobs.
Foreign Trade Zones (FTZ’s) allow companies dealing in foreign trade to delay payment of U.S. Custom’s import duties until their goods and merchandise actually enter U.S. commerce. Goods can be brought into Foreign Trade Zones (FTZ) without formal U.S. Customs entry or without incurring U.S. Customs duties or excise taxes unless and until they are imported into the United States. Ad valorem taxes on inventory may be exempt in some zones, upon approval of the FTZ sponsor.
Many cities, counties and school districts in the Houston region have adopted the Freeport Tax Exemption, exempting ad valorem property taxes for any inventory exported outside the state within 175 days. Freeport property includes goods, wares, merchandise, ores and certain aircraft and aircraft parts in jurisdictions who opt-in.
A small number of taxing entities in Texas have adopted the Goods-in-Transit direct or indirect ownership interest in the inventory. To be eligible, the inventory must be transported to another location, inside or outside the state, within 175 days after the items were acquired or imported into the state.
Ad Valorem Property Tax Abatements are available to companies with facilities, devices and equipment used to control air, water or land pollution. Companies wishing to apply for tax relief for their efforts in controlling pollution can apply to the Texas Commission on Environmental Quality.
Residential, commercial, and industrial renewable energy devices are exempt from property tax under Texas law. This exemption is applicable to most renewable technologies, including solar, wind, and biomass.
The LEED (Leadership in Energy and Environmental Design) Green Building Rating System™ - This is the most widely used green building rating system in the world. Available for virtually all building, community and home project types, LEED provides a framework to create healthy, highly efficient and cost-saving green buildings. LEED certification is a globally recognized symbol of sustainability achievement.
Companies solely engaged in manufacturing, selling, or installing solar or wind devices are exempt from the Texas franchise tax. Other businesses that install solar or wind energy systems are eligible for a franchise tax deduction of 10% of the system’s cost.
An Opportunity Zone is a low-income census tract, as determined within New Markets Tax Credits legislation, that was designated by the governor of the state or territory in which the zone is located. These zones are typically in an economically-distressed community where new investments, under certain conditions in the program, may be eligible for preferential tax treatment.
The Houston region is made up of 12 unique counties, each offering ideal environments for a range of industry sectors.
Houston offers a low cost of living while maintaining an incredibly rich quality of life with the amenities you expect to find in a world-class city.
Houston offers a highly educated and ever-growing workforce skilled in both traditional and emerging industries.