Texas’s largest corporate tax incentive plan will expire at the end of next year, after lawmakers chose not to update the plan for the first time in its 20-year history.

However, as the state's energy and manufacturing companies try to lock in large-scale property tax relief before time runs out, the imminent termination of the Chapter 313 program is expected to trigger a large number of applicants-which will lead to a surge of billions of dollars in funding. At least plans for the next ten years.

State legislators, business groups, and economic development leaders are already in dialogue about what (if any) should happen after the plan ends, or whether the legislature is interested in resuming a version of the plan.

Its supporters stated that the plan, known as Chapter 313 after the state’s tax code, played an important role in attracting refineries, petrochemical plants, and other companies that create jobs and promote the economy, such as Tesla and Samsung Electronics. .

Economic development officials say the incentive provides companies with discounts on local school property taxes and is a key tool for attracting companies to the state — without it, they predict Texas will be hit.

Tony Bennett, President and CEO of the Texas Manufacturers Association, said: "If we do not act as a state, and as economic development policies are reconsidered, we may miss dozens of A major project."

Critics believe that many of these companies may land in Texas without the plan. They say the plan lacks accountability and is a burden for taxpayers in the state.

According to data from the Office of the State Comptroller, by June 2020, more than 500 actively traded projects are expected to receive $10.8 billion in local property tax relief within the 10-year agreement period.

The next regular legislative session is scheduled to be held in January 2023, which means that if Governor Greg Abbott intends to revive him before Chapter 313 expires, he will have to convene legislators to participate in another meeting. A special meeting.

However, so far, Abbott has remained silent on whether he plans to hold a fourth special meeting before then, and the governor’s office has not responded to a request for comment on whether he supports the plan that expires at the end of 2022.

Abbott could also ask state lawmakers to discuss this issue at any of the three special meetings he held this year, but he did not do so.

State Representative Stein Lambert, a Republican from Abilene, asked Abbott in June to include the plan update on the agenda of the special meeting that began in July. He said earlier this week that he did not want the state to Legislators have the opportunity to update or reformulate the plan. Before the plan expires.

"This season may have passed, trying to solve this problem in a special meeting," he said. "If we hold three or four more special meetings, I'm not too optimistic that [this question] will be included."

According to the Chapter 313 plan, manufacturing and energy companies apply for a 10-year property tax discount to the local school district in exchange for building or expanding in the community, and in many cases creating new employment opportunities. The Texas Comptroller's Office must also approve these agreements.

It does no harm to the school district to approve tax deductions, because any income from public schools is made up by the state. Critics say that this transfer of state funds has reduced funding for services in other countries, such as health care or public safety.

Schools can also directly sign an agreement with the company to supplement the payment in exchange for approving tax cuts, which will exacerbate the unfairness of funds between school districts.

"In essence, the school district is making a decision, and the state government is paying for it," said Dick Lavine, a left-leaning "Every Texan" senior financial analyst. "This is a distorted incentive-one person makes a decision and the other bears the cost."

At the regular meeting that ended in May, every Texan and the right-leaning Texas Public Policy Foundation joined forces to oppose the legislative extension of the plan, stating that these agreements “did not provide promised benefits and shifted school funding costs. Taxes were wasted."

"It's time to call these tax reliefs what they mean: provide relief to favored industries and the few school districts that use them to incentivize companies to establish there," the two groups' joint statement read.

At about the same time, the Houston Chronicle published a multi-part investigation that found that dozens of companies had failed to fulfill their job creation promises but were not penalized, and in some cases, had announced before applying for the program Up the project. The investigation also revealed that almost all applications for the program have been approved.

Just days before the investigation was announced, the House of Representatives passed legislation drafted by State Representative Morgan Meyer, a Dallas Republican who chaired the House Tax Writing Committee, and the bill would extend the plan for two years. But the bill has never been debated in a plenary session of the Senate.

The House of Representatives also debated a proposal by State Representative Jim Murphy (R-Houston) that would extend the program for 10 years and extend incentives to the renovation or other improvements of existing projects. But according to the Texas Comptroller’s Office, this legislation is costly — the state will cost nearly $45 billion by 2049 — which will only increase the suspicion of Republicans and Democrats.

"Chairman, if the idea of ​​the plan is...attract the company and make it a business partner, why do we need to further incentivize 313 industries to undertake renovation projects?" State Representative Trey Martinez Fischer ) Ask Murphy in the debate on legislation in the House of Representatives. "Why do we need to continue to motivate?"

Murphy finally gave up his efforts and effectively stifled the legislation.

Some groups, such as the Greater Houston Partnership, have stated that they are dealing with the consequences of a plan that is about to expire — and “there is no doubt that the failure of the plan will hinder efforts to compete for future projects.”

Bob Harvey, the group’s president and chief executive officer, said in a statement: “We recently partnered with a company that has been considering building a large-scale manufacturing project in the region, but later added Dirk Saskatchewan was excluded, partly because the future of Chapter 313 is uncertain." Email for this story.

Lambert, a Republican member of the House of Representatives from Abilene, said these incentives are especially important for the rural communities he represents in western Texas. He said that for these towns, such large-scale projects have injected much-needed investment into the community, such as new hotels and restaurants.

"West of I-35, we provide most of the fuel, fiber, and food that the other 85% of Texans enjoy every day," he said. "You in big cities need us. Don't forget us here."

But others are skeptical. Jason Isaac, director of the Life:Powered program of the Texas Public Policy Foundation, said that Texas will not "see a slowdown in economic development" because the state already has a climate that is conducive to business.

Before the end of the program, as Glenn Hammer, Chairman and CEO of the Texas Business Association said, applicants will have "a lot of activity" from now to the end of 2022.

The university's government professor Nathan Jensen (Nathan Jensen) said that because exit agreements will not be punished, companies considering future projects or expansion to "lock in some of these incentives" will not pay too much. At Austin, Texas, he studies government economic development strategies.

"If you are thinking about capital-intensive investments in the future, this is a very profitable incentive, and there are few conditions - it is essentially free money," Jensen said in an interview last week. "I don't think we have fully seen this craze. It is coming."

As the Houston Chronicle and Texas Observer recently reported, last month, the Auditor General’s Office proposed to reduce the amount of information it collects on Chapter 313 before the end of the program. Critics of the plan, such as LaVine and Jensen, described the proposed rule changes as a lack of transparency.

At the same time, some advocates of the plan still hope that the legislature can finally consider restoring certain versions of tax incentives and are willing to see its changes.

"I think most legislators who understand economic development now realize that 313 is too burdensome," said Bennett, chairman of the Texas Manufacturers Association. "Let's put a sheet on it, bury it, and start again. We are willing to do this. We want a competitive plan without all the heavy and exhausting features of the current 313 plan. These Features will only reduce our competitiveness."

Hamer said that part of the Texas discussion will involve understanding what is happening in Washington, DC, related to federal tax credits for renewable energy or similar technologies, if any.

"You don't want to be over-motivating or under-motivating," he said. "And what the federal government does will have an impact on the idea of ​​the 313 tool."

At the same time, House Republican Meyer, who drafted the failed two-year extension bill, said last month that he hopes the tax writing committee he oversees will "dive into" the plan during this period.

"We need some kind of 313 plan," Meyer said in a virtual conversation hosted by the Texas Taxpayer and Research Association. "We need to pass a meeting similar to the next one to ensure that Texas remains competitive with other states in attracting companies."

In the Senate, Meyer’s legislation expired during regular meetings, and it is not clear whether there is the same interest in re-enacting the plan. A spokesperson for Lieutenant Dan Patrick, who presided over the House of Lords, did not respond to a request for comment.

Nevertheless, Meyer apparently has the support of House Speaker Dade Phelan and R-Beaumont. He defended the plan at the same event last month, saying that if other states or countries do not provide similar incentives, the state will There is no need to provide such incentives to reduce emissions.

"Those who oppose them, they don't understand what we are opposing," said Phelan, who represents the state's House of Representatives district, which has dozens of valid Chapter 313 agreements for petrochemical and refining companies. "So when we have nothing and [others] have a complete toolbox, we are at a distinct disadvantage."

Ferran said that although he believes that the plan "proved effective" in attracting industry and innovation, the Senate "seems no interest in extending the 313 period."

"And I don't know if this has changed, or if it will change," Ferran said.

Disclosure: Every Texan, the Greater Houston Partnership, the Texas Business Association, the Texas Public Policy Foundation, and the University of Texas at Austin have always been financial supporters of the Texas Tribune, which is a non-profit, non-partisan news organization. Part of the funding comes from donations from members, foundations and corporate sponsors. Financial supporters have no role in the news of the Tribune. Find a complete list of them here.

This article originally appeared in the Texas Tribune https://www.texastribune.org/2021/12/09/corporate-tax-incentive-chapter-313-texas-legislature/.

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