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Texas Direct Financial Incentives

Texas's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment.

Corporate Taxes & Incentives Guide

Industrial Revenue Bonds:

The Industrial Revenue Bond Program is designed to provide tax-exempt and taxable financing to eligible projects as defined in the Development Corporation Act of 1979. The projects must be in the public interest and serve a public purpose of the state in promoting economic development by securing and retaining business enterprises resulting in a higher level of employment, economic activity and stability. Bond proceeds may be used to finance land, depreciable property, inventory, raw materials, research-and-development costs and job training. The Act gives cities, counties, conservation and reclamation districts the authority to form Industrial Development Corporations (IDC) that can issue bonds on their behalf for eligible businesses. The IDC acts as a conduit through which monies are channeled. The money from the sale of the bonds flows to the business and the debt service of the bonds are paid by the business under the terms of a lease, sale or loan agreement. The bonds do not constitute a debt or obligation of the governmental unit, the IDC or the state of Texas.

Skills Development Fund:
The Skills Development Fund is Texas' premier job-training program providing training opportunities for Texas businesses and workers. Funding for the program is administered by the Texas Workforce Commission. Success is achieved through collaboration among businesses, public community and technical colleges, Workforce Development Boards and economic development partners.

Texas Enterprise Zones:
Texas Enterprise Zones are designated by the state using poverty criteria based upon the U.S. Department of Commerce, Bureau of the Census decennial information. An area is an enterprise zone if it meets one of the following criteria: a census tract block group that has a poverty level of 20 percent or greater is an enterprise zone, any area designated by the federal government as a renewal community, a federal empowerment zone, a federal enterprise community, including any developable area approved by the federal agency responsible for making that decision, distressed counties, or an area inside the boundaries of a defense base development authority established under Chapter 379B, Local Government Code.

State incentives include a refund of state sales and use taxes paid at the qualified business site during the designation period.

Depending upon capital investment, Texas will refund $2,500 for each allocated permanent or retained job - up to 500 jobs created and/or retained - during the five-year designation period, adding up to potentially $1.25 million in state sales tax for each enterprise project. For projects with eligible capital investment levels between $150 million and $250 million, qualified businesses may receive up to $2.5 million in state sales and use tax refunds ($5,000 per job with a maximum of 500 jobs created). For projects with a capital investment of $250 million or more, qualified businesses may receive up to $3.75 million in state sales and use tax refunds ($7,500 per job for no less than 500 jobs created).

Additional incentives may be offered by localities; examples include real and personal property tax abatement, certain local sales tax refunds, reduced utilities, and development participation.

Defense Economic Readjustment Zone Program:
The Defense Economic Readjustment Zone Program assists areas impacted by defense base closure, downsizing, or realignment and provides local and state regulatory and tax incentives to encourage businesses to locate or expand in these areas. Cities and counties, separately or together, can identify and nominate areas for designation as defense economic readjustment zones.

State incentives include a refund of state sales and use taxes paid on qualified expenditures, examples of which are building materials, machinery and equipment, and labor costs for rehabilitating an existing building. Texas will refund $2,500 for each allocated permanent or retained job during the five-year designation period and up to $1.25 million in state sales tax for each defense economic readjustment project.

Additional incentives may be offered by localities. Examples include real and personal property tax abatement, certain local sales tax refunds, reduced utilities, and development participation.

Texas Enterprise Fund
The Texas Enterprise Fund (TEF) is the largest “deal-closing” fund of its kind in the nation. The fund is a cash grant used as a financial incentive tool for projects that offer significant projected job creation and capital investment where a single Texas site is competing with another viable out-of-state option.

The TEF is a significant investment by Texas in the state’s economy. Projects that are considered for TEF support must meet a number of key criteria, including, but not limited to, competition with a site outside Texas; significant job creation and capital investment; high wages; financial strength of the applicant; a significant rate of return on the public dollars proposed for investment; and community involvement from the city, county, and/or school district, primarily in the form of economic incentives.

Since the program’s inception in 2004, the state has allocated over $575 million from the Texas Enterprise Fund, bringing over 77,000 new jobs and generating more than $24.6 billion in capital investment.

Applications for the Texas Enterprise Fund are accepted by the Office of the Governor, Economic Development and Tourism (EDT) division on a rolling basis.

Product Development & Small Business Incubator Fund
The Product Development Fund and Small Business Incubator Fund, collectively PDSBI, is a revolving loan program administered by the Office of the Governor, Texas Economic Development Bank at the direction of the Governor-appointed nine-member board.

PDSBI provides financing to aid in the development, production, and commercialization of new or improved products and to foster and stimulate the development of small businesses in the State. In determining eligible projects and businesses, special preference is given to products or businesses in the areas of semiconductors, nanotechnology, biotechnology, renewable energy, agriculture, aerospace and biomedicine that have the greatest likelihood of commercial success, job creation, and job retention in the state.

Attributes of the Product Development & Small Business Incubator:
  • Collateralized loans to finance growth and expansion, equipment purchase, etc.
  • Low variable interest rate and flexible amortization
  • Competitive Loan-To-Value (LTV) requirements
  • Communities or individuals can assist as Guarantors
Texas Leverage Fund:
The Texas Leverage Fund (TLF) is a community driven program designed to expand economic development through business expansions, business recruitment, and exporting. The program offers favorable terms designed to give communities quick access to capital to finance their economic development projects, as defined in the Development Corporation Act of 1979, by leveraging future 4A/4B economic development sales tax revenue.
  • Leverage future Economic Development Sales Tax revenue
  • Funds can be utilized for Bridge Financing
  • Collateral is a 1st lien on the Economic Development Sales Tax
  • EDC must not have had a sales tax decline of greater than 10% in the last 4 years
  • Must meet required debt service coverage ratios specified in the TLF Program Guidelines
Loan Terms:
  • Terms: 5 year, 10 year, 15 year, with no pre-payment penalty
  • Variable Rate equal to the Federal Fund Rate plus 3%, currently at 3.25%
  • Borrowing amounts up to $5,000,000 and based on the municipality’s historical sales tax
  • Funding available within 60 days
Events Trust Fund:
The Events Trust Fund applies local and state gains from sales and use, auto rental, hotel and alcoholic beverage taxes generated over a specified period of time. Eligible events are not restricted to sports, but the venue must have been selected over others as a sole event site or the sole site in Texas and adjoining states. The Events Trust Fund can be used to help pay costs related to preparing for or conducting the event, including equipment, or to pay principal and interest on notes used to build or improve facilities to host the event. One hundred percent of allowable expenses can be funded provided sufficient tax receipts are deposited in the trust fund.

Texas Capital Fund Infrastructure Program
The Texas Capital Fund Infrastructure Program is an economic development tool designed to provide financial resources to non-entitlement communities. Funds from this program can be utilized for public infrastructure (water, sewer, roads, etc.) needed to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons. The minimum award is $50,000 and the maximum is $750,000. The award may not exceed 50 percent of the total project cost. The Texas Department of Agriculture administers the Texas Capital Fund Program. For more information, please review the link.

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 $50,000 and the maximum is $750,000. The award may not exceed 50 percent of the total project cost. Funds are provided with no interest accruing and with payments based on a 20-year amortization schedule.

The Texas Department of Agriculture administers the Texas Capital Fund Program. For more information, please review the link.

Texas State Contact: Nicole Sidoff
Business Incentives Program Coordinator
Office of Governor Greg Abbott – Economic Development and Tourism Division
512.936.0275
Nicole.Sidoff@gov.Texas.gov

Zach Scott
Texas Enterprise Zone Program Administrator
Office of Governor Greg Abbott – Economic Development and Tourism Division
512.936.6443
Zach.Scott@gov.Texas.gov
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings. This information was last updated October 2015.

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