State Refunds for Economic Development
82 Companies Refunded $10 Million for 2000 School TaxesThe Texas Tax Code provides for state tax refunds for economic development. Some Texas property owners are eligible to receive refunds on their net state sales and use taxes and franchise taxes for paying local school taxes. The total for all refunds collectively may not exceed $10 million, the maximum amount made available by the Texas Legislature.
Of the 122 individual refund applications received for 2000 school taxes, the Comptroller’s office approved 114 applications representing 82 companies. While the approved 2000 refunds totaled $46.3 million, these 82 companies received prorated refunds totaling $10 million.
Tax year 2000 was the fourth year that companies could apply for reimbursement of school taxes paid on a property that received a county or city abatement but not a school tax abatement. Companies had to file refund applications by July 31, 2001 to reimburse them for paying 2000 school taxes.
Tax Code Section 111.304 requires the Comptroller’s office to submit a December 1 report to the Texas Legislature about the annual state refunds for companies who do not have school tax abatement agreements.
Prior years
Tax year 1997 was the first year that companies could apply for reimbursement of school taxes paid on a property that received a county or city abatement but not a school tax abatement. In that year, 10 companies received total refunds of $4,886,663 to reimburse them for paying 1997 school taxes.
For tax years 1998 and 1999, the Comptroller’s office refunded the full $10 million to 28 companies in 1998 and 62 companies in 1999.
No school abatements
Starting in 1997, property owners were eligible to receive refunds on their net state sales and net franchise taxes. The Tax Code requires the Comptroller’s office to issue state tax refunds to qualified property owners who entered into property tax abatement agreements—after January 1, 1996—with a city or county, but not a school district. Property owners with tax abatement agreements entered into on or before this date were not eligible for these state refunds.
Refund requirements
To be eligible for a refund, a property owner must have established a new business in a reinvestment zone, or expanded or modernized an existing business located in the zone. The city or county must have granted a tax abatement for the owner’s property, but not the school district.
Since entering into a city or county abatement agreement, the property owner must have increased the business’s payroll by at least $3,000,000, specific to its property in Texas. Or, the owner must have increased the abated property’s appraised value by at least $4,000,000. The maximum refund is the lesser of the school taxes paid or the amount of net sales and use tax and net franchise tax paid for the tax year the refund is claimed.
The property owner is barred from a refund if the company has agreed to an in-lieu-of-taxes payment—including a gift, grant, donation, or provision of in-kind services—to the city or county, if the payment exceeds $5,000 in value.
A property owner’s refund equals the school property taxes paid by the owner in that tax year on property subject to a city or county abatement agreement. The refund also must be within the state’s annual cap of appropriated funds for these refunds.
2001 refund applications
To claim a refund for 2001 school taxes, a property owner must submit an application to the Comptroller’s office, along with the school district tax receipts showing the amount of school taxes paid on the property and other required documents. A property owner must file the refund application by July 31, 2002.
Senate Bill 1125 changed Tax Code Section 111.302, effective September 1, 2001.
Tax Code Section 111.302 now gives the Comptroller 90 days, rather than 60 days, to compute the total amount of eligible refunds.
A new subsection (d) added to Section 111.302 by the 77th Texas Legislature addresses county and city agreements with different terms. It states:
“(d) If an eligible person has entered into tax abatement agreements with the municipality and the county, and the agreements provided to the comptroller show that the agreements exempt different portions of property value, the refund amount shall be computed based on the greater of the portions exempted.”
If, in any year, the total amount of all refunds claimed by property owners exceeds $10 million, the Comptroller’s office must reduce each claimant’s refund proportionally so that all property owners share in the state appropriated $10 million.
The law also provides that property owners may receive these refunds on state taxes for the lesser of five years or the duration of the tax abatement agreement with the city or county. If the property owner or the taxing unit cancels the tax abatement agreement or the property owner relocates the business outside the reinvestment zone, the owner’s right to claim a refund ends.
For more information about this state refund program, contact Patricia Bailey at the Property Tax Division by e-mail to patricia.bailey@cpa.state.tx.us or call 1-800-252-9121, extension 3-4416. In Austin, call 512/463-4416.
