Summary: Business and legislative leaders push to replace expired tax break with a new one; Abbott opposes including renewables. / Willow Park Civics is providing a blog of articles and research on specific legislative topics, during the 88th Texas Legislative Session. We will update and repost this blog as new information develops about Corporate Welfare issues and activities.
Latest Update: Friday, 03 March, 2023; Originally Posted: 04 January 2023
Select #Tags for additional articles: #StateLegislation #PropertyTax
Corporate Welfare, 88th TX Legislative Session
Merriam Webster Dictionary chiefly US / money or aid given by the government to help a large company
Week of Friday, 03 March, 2023
• Gov. Greg Abbott vows to exclude renewable energy from any revived economic incentive program, The Texas Tribune, 01 March 2023, Excerpts. In 2021, the Texas Senate declined to consider a bill extending the program, which discounted local property taxes to lure big companies to the state. It had become plagued with bipartisan accusations of “corporate welfare.” As Gov. Greg Abbott signals stronger support for the creation of a new program to replace a multibillion dollar corporate tax break program that expired last year, he’s also drawing a clear line in the sand: wind and solar energy projects need not apply.
• Legislature Prepares Replacement for Chapter 313, Abbott Opposes Including Renewables, The Texan, 01 March 2023. For 20 years, Chapter 313 of the Texas Tax Code allowed school districts to grant private companies a 10-year reduction in the taxable value of their property in exchange for moving their operations to the district’s jurisdiction. It came with expectations of a long-term return of tax payments by the entity after the abatement expired. But over the years, it grew into more than just that.
A few years after its first passage, the Legislature added to the application process a job requirement — the creation of 10 jobs in a rural area and 25 in an urban or suburban one. That addition was meant to reassert the program’s purpose: economic development.
But according to Robert Wood, a lobbyist who used to run the Texas Comptroller of Public Accounts Chapter 313 division, school districts waived that job requirement in upwards of 80 or 90 percent of applications. Many of those are renewable projects, wind or solar farms that promise to create one qualifying, permanent job.
• Business and legislative leaders push to replace expired tax break with a new one, The Texas Tribune, 01 March 2023, Excerpts. Business groups warned lawmakers that Texas could lose business to other states without something to replace the so-called Chapter 313 tax break, which gave some companies big breaks on school taxes. Nearly 200 representatives of trade organizations, economic development councils and chambers of commerce are included among the signatories of a Feb. 14 letter to the Legislature calling for “a new, transparent, and accountable economic development policy.” The signatories warned that Texas could lose business if legislators don’t hurry up and create a new tax break program.
• Chapter 313 Replacement, Commercial Court in Economic Development Slate of Phelan’s Priority Bills, The Texan, 28 February 2023, Excerpts. Speaker Dade Phelan (R-Beaumont) continued on Tuesday the slow drip of House priority bills, announcing three more bills that include the much-anticipated economic development incentive program to replace the now-expired Chapter 313. In addition to the economic development proposal, the slate includes one bill that would create a commercial court to handle disputes between businesses and another that would create a higher education scholarship program for trade school education.
• Abbott Wants To Resurrect Discredited Corporate Welfare Program, Texas Scorecard, 23 February 2023, Excerpts. Despite not being renewed by the state legislature in 2021, Gov. Greg Abbott is teasing the potential return of a controversial corporate welfare program despite bipartisan opposition from voters.
The Chapter 313 program, which expired at the end of 2022, allowed school districts to offer large tax breaks for 10 years to unreliable energy and other businesses— including wind farms that famously failed Texans during the winter storm of 2021. The tax breaks come at no loss to the school districts. Instead, the state supplements the lost revenue to the districts from sales taxes and other state-collected taxes.
Week of Friday, 24 February, 2023
• Gov. Greg Abbott says Texas will revamp economic development program after property tax incentive expires, The Texas Tribune, 22 February 2023, Excerpts. Abbott told business leaders in Arlington on Wednesday that Texas is already suffering from the end of the tax-break program, recently losing a “massive” computer chip factory to New York.
Addressing the Greater Arlington Chamber of Commerce, Abbott appeared to give his most extensive public comments yet on the future of economic development in Texas after the end of the so-called Chapter 313 program. Abbott nodded to the politically charged nature of the topic by bringing it up as the “elephant in the room.”
“Chapter 313 is gone, and that said, there is a desire in the Capitol to make sure Texas does remain No. 1 for economic development,” Abbott said, “and we’re working on — and others in the Capitol are working on — to ensure that we will have economic development tools going forward that may not exactly replicate 313” but will keep Texas No. 1 for economic development.
Abbott did not detail what those new tools would be, but his comments are a boost to business leaders who are trying to bring back Chapter 313 in some form. The program was intended to lure large companies to Texas by discounting local school district property taxes for them, but it had become beset with bipartisan accusations of “corporate welfare.” In 2021, the state Senate declined to consider a bill extending the program, the first time in its 20-year history that legislators decided not to renew it.
Under the program, businesses could apply to the local school district for a 10-year discount on their property tax bills in exchange for building or expanding in the community and, in a number of cases, creating new jobs. There was little downside for school districts to approve the tax breaks, because any foregone revenue for public schools was made up for by the state. But conservatives denounced it as a corporate giveaway and some liberals argued it left less money on the table for other state services, such as health care or public safety.
Week of Friday, 10 February, 2023
• Critics say state tax break helps petrochemical companies and hurts public schools, The Texas Tribune, 02 February 2023, Excerpts. ...all of these projects — and hundreds more across Texas — have benefited from Chapter 313, a two-decade-old tax abatement program that critics have described as “free money for big business.” The enabling legislation expired on Dec. 31, but a flurry of last-minute proposals approved before the deadline may have irreversible effects for decades into the future. Crafted to lure businesses to Texas, Chapter 313 allowed companies to lock in a minimal property valuation for a proposed industrial project for 10 years in exchange for economic growth commitments and kickbacks to local school districts. Advocates for retaining the tax break liked to point out that renewable energy companies have made up the majority of Chapter 313 applicants in recent years.
In simple dollar terms, however, the petrochemical industry has been the program’s largest beneficiary — receiving abatements worth $7.6 billion in 2020 alone, compared to $2.1 billion for wind farm companies... Opposition to the program, described by one group as a “colossal giveaway” to industry, grew so loud that, in a rare show of bipartisanship, Republican and Democrat legislators combined forces to block the law’s reauthorization in the 2021 session.
The program may not be that easy to get rid of. House Speaker Dade Phelan, R-Beaumont, has vowed to pursue revival of Chapter 313 in the 2023 session. But for now, Chapter 313 is dead. Proposals that remained in process as of Jan. 1 have been nullified.
Week of 13 January 2023
Texans for Fiscal Responsibility, December 30, 2022. Excerpts. "In the 87th Legislative Session, state lawmakers ended up not renewing the Chapter 313 tax abatement program as a part of the Texas Economic Development Act. This prompted a rush of applications from corporate entities all across the state in an attempt to take advantage of the program before its end [31 December 2022], as companies that receive approval in 2022 can still receive the abatement for an additional 10 years, even if the program no longer exists
In response, Texas Comptroller Glenn Hegar released a statement that included, “Despite receiving billions of dollars in property tax abatements over the life of the program and potentially billions more in approved incentives just this year, these companies and their attorneys are asking Texas taxpayers to should even more despite the Legislature’s decision to discontinue the program. This is a frivolous attempt to get the Texas Supreme Court to force my office to put even more resources toward the program in the final two weeks of its existence. My office has fully complied with the law and will vigorously defend our position.”
On Friday, the Texas Supreme Court denied the request to force the comptroller’s hand.
As of June 2022, the last date for which data is publicly available, there were 633 active Chapter 313 tax abatement agreements across the state of Texas. Of those, 216 (one-third) were categorized as manufacturing, and 416 (two-thirds) were categorized as renewable energy electric generation.
In a normal year, it is rare that more than 90 applications are made across the state. In the first six months of 2022 alone, more than 400 applications were filed, as it assumed more companies were attempting to take advantage of the program before its end. In theory, if these applications were ultimately accepted, it could collectively cost taxpayers an additional $5-10 billion per year. It is thus far unclear how many of the applications have been approved.
There is bipartisan opposition to such a program, as both major political parties cite opposition to corporate welfare in their respective platforms.
The Texas GOP platform states: “Plank 94: Property Tax Abatements: We support repealing Tax Code Chapter 312 county and municipal property tax abatements, and we oppose reintroducing school property tax abatements, formerly known as Chapter 313.”
The Texas Democratic Party platform states: “Eliminate tax loopholes and unproductive special breaks to simplify the tax system and provide revenue for essential services.” That same platform continues: “Prohibit ‘corporate welfare’ incentives that pit states and communities against each other.”
Reports from the capitol seem to indicate that lawmakers are working to revive a similar program without the inclusion of “renewable energy” as a means by which to potentially bring lawmakers that had previously been opposed to the program on board.
• Texas Supreme Court says it can’t force the state to process deluge of applications for tax break expiring this year, The Texas Tribune, 30 December 2022, Excerpts/ The program, known as Chapter 313, provides companies with billions of dollars in property tax breaks. The court said it is up to the Legislature to make the call on what to do as the program is set to expire and the state is swamped with applications.
• Pro-Chapter 313 Group Pauses Efforts, The Texan, 06 January 2023. Excerpts.Business Lobby Group Supporting Chapter 313 Revival ‘Stands Down.’ A coalition of industry associations formed to push for revival of Chapter 313 has decided to let its foot off the gas pedal days before legislators reconvene in Austin.
Jobs for Texas — formed by the Texas Association of Manufacturers (TAM), the Texas Oil and Gas Association (TXOGA), the Texas Association of Business, the Texas Taxpayers and Research Association (TTARA), and the Texas Chemical Council — decided to hit pause on its plan to advocate renewal of the now-expired tax abatement program.
“In looking at the lay of the land and the challenges, we’ve done as much as we can and now the ball is in the Legislature’s court,” TTARA President Dale Craymer told The Texan. He said that the group conducted polling of the issue during its concerted effort.
“As distasteful as Chapter 313 agreements may be, they can be effective in attracting business to Texas,” Craymer added.
Former Speaker Dennis Bonnen (R-Angleton) was involved in the group, providing legislative strategy and consulting services to the coalition, according to Craymer. Quorum Report reported Bonnen was paid up to $600,000 for the contract.
“The group accomplished its mission of meeting with Texans on the issue of economic development and gathered feedback including tremendously positive data and strong messages about what is important to Texans.”
• Aledo ISD trustees approve Chapter 313 resolution for ‘Project Redeemer,’ The Community News, 23 December 2022. Excerpts
The Aledo ISD Board of Trustees met in a special session last Friday, Dec. 16, finalizing approval for the Chapter 313 Value Limitation Application as part of a proposal that could see a $3.7 billion solar panel facility erected on Walsh Ranch.
Perhaps the most significant piece of information to come out of the meeting was the revealing of the mystery company on the receiving end of the proposal. The 1,100 acres of ranch land situated to the north of I-20 and south of I-30 east of Aledo is the prospective future home to Hanwha Q Cells Americas Holding Corporations’ second U.S.-based solar panel manufacturing facility. [Editorial: Q-Cells USA]
https://www.qcellsusa.com
“Right now the vast majority of the burden for all of the infrastructure that we need as a community — which includes school infrastructure, but also roadways, and water, and waste water — is on the local, individual homeowner,” Bohn detailed. “When we diversify our tax base then there’s an opportunity to spread that burden.”
Just a few months removed from bankruptcy, the Hanwha Group — a South Korean business conglomerate — purchased Q Cells in August 2012. The original headquarters in Thalheim is still home to the company’s engineering offices.
Q Cells has become the world’s largest manufacturer of photovoltaic solar panels. The company increased total sales to $60.6 billion in 2021 up from $55.8 billion in 2020. The company expects sales to top $66.3 billion in 2022 according to the company website.
• Texas Supreme Court says it can’t force the state to process deluge of applications for tax break expiring this year, The Texas Tribune, 30 December 2022, Excerpts
The program, known as Chapter 313, provides companies with billions of dollars in property tax breaks. The court said it is up to the Legislature to make the call on what to do as the program is set to expire and the state is swamped with applications.
The Texas Supreme Court declined Friday to intervene in a request from two renewable energy firms that say they’ll miss out on millions of dollars in tax savings from a program set to expire this year because an overwhelmed state agency failed to process their application in time.
The Texas comptroller’s office has until Dec. 31 to get companies into the program, known as Chapter 313, and give them a 10-year discount on their property taxes.
In 2021, the Legislature opted to let the Chapter 313 program die after complaints that it amounted to “corporate welfare.” The program provides billions of dollars in property tax breaks to businesses moving to Texas.
Under the Chapter 313 program, manufacturing and energy companies apply to local school districts for a 10-year discount on their property tax bills in exchange for building or expanding in the community and, in a number of cases, creating new jobs. The Texas comptroller’s office must also approve those agreements.
There’s no downside for school districts to approve the tax breaks because any foregone revenue for public schools is made up for by the state. That shift of state dollars, critics say, leaves less money on the table for other state services, such as health care or public safety.
Schools can also sign agreements directly with the companies for a supplemental payment in exchange for approving the tax break, which critics say fosters inequity in funding among school districts.
• Renewable Companies’ Attempt to Force Processing of Chapter 313 Applications into 2023 Denied by Texas Supreme Court, The Texan, 02 January 2023
• It’s not often that the Republican and Democrat parties of Texas agree. Yet when it comes to corporate welfare, both parties' platforms are very clearly in opposition, Texas Scorecard, 28 November 2022, Excerpts. Chapter 313 of the Texas Tax Code allows school districts to offer large tax breaks for 10 years to renewable energy and other businesses. The program has drawn criticism from both the right and left; both the Republican Party of Texas and the Democrat Party of Texas have called for the abolition of Chapter 313 abatements and corporate welfare in their party platforms.
• Texas Public Policy Foundation’s Martinez: Chapter 313 incentives ‘do not work; at worst, they can be harmful’, Austin Journal, 02 November 2022, Excerpts. Tax Code Chapter 313 “is an agreement in which a taxpayer agrees to build or install a property” that creates jobs in exchange for a limitation lasting 10 years on the taxable property value, the Texas comptroller said. This is done for school district maintenance and operations tax purposes. The value of the minimum limitation varies by school district. / “At best, these incentives do not work; at worst, they can be harmful,” Martinez wrote on Twitter in 2021. “If the problem is that property taxes in Texas are too high, then they are too high for everyone and this is the problem we should fix.”
• Texas' corporate welfare scheme decreases grid reliability, shrouds property tax pain, Houston Daily, 20 September, 2022, Excerpts. Last year pressure from both progressives and conservatives resulted in the Texas Legislature failing to renew Chapter 313 - Texas' corporate-welfare clause. It will expire at the end of this year. Yet many politicians, led by House Speaker Dade Phelan, are partnering with big business to bring the program back to life when the Legislature convenes next year.
As part of this effort, the Texas House Ways and Means Committee recently held a hearing on “the impact of not renewing Chapter 313.” While business groups like the Texas Taxpayers and Research Association, Texas Oil and Gas Association, and Texas Association of Manufacturers showed up to explain how the sky will fall without Chapter 313, a lot of good will come if the program expires without a replacement.
• Texas House speaker says he’s confident Legislature will revive expiring corporate tax break program, The Texas Tribune, 05 August 2022, Excerpts. Lawmakers let the program, known as Chapter 313, expire at the end of this year after the Senate declined to consider a bill extending it. It was the first time in its 20-year history that legislators decided not to renew the program.
Texas House Speaker Dade Phelan, R-Beaumont, said Thursday he is confident the Legislature can find a way to revive a multibillion-dollar corporate tax break program intended to attract large companies to Texas.
• A Texas economic incentive offers massive tax breaks to companies, but its renewal isn't a done deal, The Texas Tribune, 29 April 2021, Excerpts. Chapter 313, a decades-old law designed to lure companies to Texas with property tax breaks, expires in 2022. Lawmakers looking to renew it face opposition from critics who say it's unfair to many Texas schools.
Intel nearly built a massive chip fabrication plant near Fort Worth in 1991, but the tech giant instead picked Arizona because Texas property taxes were too high. Two years later, Texas lawmakers reacted by creating Chapter 313, also known as the Texas Economic Development Act, to offer property tax breaks to major companies that locate new facilities in the state.
Since then, oil refineries, petrochemical factories and even the upcoming Tesla plant outside Austin have enjoyed massive breaks on their property taxes thanks to the program. Today, Chapter 313 agreements account for almost a billion dollars in tax breaks for some of the largest companies in Texas.
In exchange for the tax incentive, those corporations pay fees directly to local school districts to make up for their share of the lost property tax revenue.
• Texas Enterprise Fund: Corporate Welfare to Some, Jobs Program to Others, The Texan, 10 June 2019, Excerpts - The Texas Enterprise Fund has doled out millions in subsidies to big businesses for job creation. So is it a jobs program or corporate welfare? Some big-name companies in Texas receive anywhere between hundreds of thousands and millions of dollars in subsidies and incentives.
One mechanism by which Texas doles out these incentives is through the Texas Enterprise Fund (TEF).
The fund was created in 2003 by the state legislature as a “business incentive” mechanism to attract companies to Texas for the purpose of job creation.
The official government website states that, “The fund serves as a financial incentive for those companies whose projects would contribute significant capital investment and new employment opportunities to the state’s economy.”
In order for companies to receive compensation, every expenditure must be approved by the Governor, Lt. Governor, and Speaker of the House.
Companies applying for TEF funding “must have community involvement from the city, county, and/or school district, primarily in the form of local economic incentive offers.” The designated bar for job creation that companies must meet to be considered is 75 jobs in urban areas and 25 in rural.
• Willow Park Civics Blog, 13 April 2022 > Article: Texas Taxpayers Forced to Tithe at Facebook ‘Temple’ In Central Texas, a new data center for the tech giant is underway. Meta will receive a 75 percent property tax break for the first 10 years from the city of Temple, with additional unknown levels of property tax breaks for the subsequent 10 years.
Willow Park Civics, Additional Resources
• Comptroller Texas > Economy > Tax Code Chapter 313 - Value Limitations and Tax Credits
• Texas Constitution and Statutes > Tax Code Chapter 313. Texas Economic Development Act
• Texas Schools for Economic Development > Introduction to Chapter 313 Agreements for Superintendents and Boards
• What Is Corporate Welfare? World Atlas
Corporate welfare refers to financial help and tax rewards that are given by the US government to corporations and businesses. This term was coined by Ralph Nader in the year 1956… The government provides funds in these two forms. Direct subsidies refer to the financial support given to different fields and programs for use in a specific plan or project. Such projects may include agricultural areas, energy, transport, economic growth and development, technology, or research. Indirect subsidies, on the other hand, is supported by the government in promoting goods and services from American corporations to revive dying businesses. The benefits of corporate welfare can be long term or short term depending on the commercial sectors.
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