Chapter 312 of the Texas Tax Code authorizes cities, counties, and special districts to grant property tax abatements for qualifying business investments. Texas businesses making significant capital improvements may negotiate property tax abatements that reduce or eliminate property taxes on new improvements for up to 10 years.
How Chapter 312 Abatements Work
A property tax abatement is an agreement between a taxing unit and a property owner to exempt all or part of the increase in property value resulting from new improvements. The taxing unit continues to collect taxes on the pre-improvement value, but the value added by new construction, renovation, or equipment installation may be partially or fully exempt for the abatement period.
Key Terms
- Maximum term: 10 years
- Eligible improvements: New construction, renovation, modernization, and qualifying equipment
- Taxing units: Cities, counties, and special districts (school districts have separate authority)
- Reinvestment zone: Property must be in a designated reinvestment zone
Eligible Investments
Chapter 312 abatements typically apply to manufacturing facilities, data centers, distribution centers, office buildings, research facilities, and other commercial improvements. The taxing unit must designate the area as a reinvestment zone and approve the abatement through a public process.
Texas School District Considerations
School district property taxes represent the largest portion of most Texas property tax bills. The Texas Jobs, Energy, Technology, and Innovation Act (successor to Chapter 313) provides a separate mechanism for school district property tax value limitations on qualifying projects. This program is administered by the Comptroller's office and requires a separate application process.
How to Pursue a Chapter 312 Abatement
Contact your local economic development office to determine whether your investment qualifies. Abatements are negotiated individually and typically require minimum investment thresholds, job creation commitments, and location within a designated reinvestment zone. Your SBDC can help you understand the process and prepare a strong proposal.
Find More Programs for Your Business
The Chapter 312 Property Tax Abatement for Texas Businesses is just one of many programs that Texas businesses may be eligible for. Federal, state, and local governments offer a range of grants, tax credits, loans, and incentives.
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