About Tax Abatements
A tax abatement is a local agreement between a taxpayer and a taxing unit that exempts all or part of the increase in the value of the real property and/or tangible personal property from taxation for a period not to exceed 10 years. Tax abatements are an economic development tool available to cities, counties and special districts to attract new industries and to encourage the retention and development of existing businesses through property tax exemptions or reductions. School districts may not enter into abatement agreements.
Local governments often use property tax abatements to attract new industry and commercial enterprises and to encourage the retention and development of existing businesses. Incorporated cities, counties, and special districts are allowed to enter into tax abatement agreements. School districts cannot enter tax abatement agreements. While tax abatements are short-lived, they can have a significant future impact.
In the State of Texas, Chapter 312 of the Tax Code, the Property Redevelopment and Tax Abatement Act, allows the governing bodies of cities, counties, and special districts to exempt all or part of the taxable value of new investments for a period not to exceed 10 years. Chapter 312 was first passed in 1987 and was extended in 1991, 2001, and 2009. Texas House Bill 3143, which went into effect Sept. 1, 2019, extended Chapter 312 until Sept. 1, 2029.
House Bill 2404, passed by the 87th Texas Legislature, instructs the Comptroller’s office to create and make accessible an online Chapter 380 and 381 Local Development Agreement Database that contains information regarding all local development agreements in the state. HB 2404 also requires local governments to provide the Comptroller’s office with the information required by Government Code Sec. 403.0246(c) and the agreements they have entered into, amended or renewed within 14 days so the information may be made available on the Comptroller’s website. Local governments must also provide on their websites a direct link to the location of their agreement information on the Comptroller’s website.
For more information about Tax Abatement and other economic development programs visit the State of Texas Comptroller Office website.
City of Southlake – Tax Abatement Policy
The City Council adopted Resolution No. 22-010 on April 5, 2022, renewing a tax abatement policy for the City of Southlake. That policy is effective for two years, which is the maximum term allowed by law, and identified the following terms:
- New Facilities or Structures: The project must be reasonably expected to produce a minimum added value of Thirty Million Dollars ($30,000,000) in real and personal property improvements within the City and create a minimum of 1,000 full-time jobs, with an average annual total compensation of $60,000; and,
- Expansion or Modernization of Existing Facilities or Structures: The project must be reasonably expected to produce a minimum added value of Ten Million Dollars($10,000,000) in real and personal property improvements within the City of Southlake and create a minimum of 500 new full-time jobs with an average annual total compensation of $50,000.
Additionally, the policy specifies in Section XIII. Expiration and Guidelines, “This Policy is effective upon the date of its adoption and will remain in force for two years, at which time all reinvestment zones and tax abatement contracts created pursuant to its provisions will be reviewed by the City Council of Southlake to determine whether the goals of the abatement program have been achieved.”
The full language of the City of Southlake’s Tax Abatement policy can be found here: Resolution 22-010 – City of Southlake Tax Abatement Policy
