Manufacturing Grants in Texas: Incentives for Texas Manufacturers

Texas is one of the top manufacturing states in the country, and the state actively invests in attracting and supporting manufacturers through some of the largest economic development programs in the nation. From the Texas Enterprise Fund to workforce training grants and property tax abatements, Texas manufacturers have access to a deep bench of incentive programs.

This guide covers the most important manufacturing grant and incentive programs available in Texas, including state, federal, and local programs that manufacturers should evaluate.

Texas State Programs for Manufacturers

Texas Enterprise Fund (TEF)

The Texas Enterprise Fund is the state's flagship deal-closing fund and is heavily used to attract and retain manufacturing operations. TEF awards are negotiated directly with the Governor's Office and are typically tied to specific job creation and capital investment commitments. Awards have ranged from hundreds of thousands of dollars to tens of millions for large-scale manufacturing facilities.

To qualify, manufacturers generally need to demonstrate that they are considering Texas against competing states, plan to create a significant number of jobs, and will make a meaningful capital investment. While the largest awards go to major corporate operations, mid-size manufacturers with strong job creation plans can also qualify.

Skills Development Fund

The Skills Development Fund is one of the most accessible and valuable programs for Texas manufacturers. Administered by the Texas Workforce Commission, the fund provides grants to community and technical colleges that partner with employers to deliver customized workforce training. For manufacturers, this means the state can fund training for CNC operators, welders, industrial maintenance technicians, quality control staff, and other skilled positions.

The partnership model works like this: your manufacturing business identifies its training needs, partners with a local community college or technical school, and the college applies for the grant. Training is then delivered according to your specifications. Awards have ranged from tens of thousands of dollars for small programs to several million for large-scale training initiatives.

Texas Capital Fund — Infrastructure Program

The Texas Capital Fund provides grants to non-entitlement communities (cities with populations under 50,000 and non-participating in the HUD entitlement program) for infrastructure improvements that directly support manufacturing operations. This includes water and sewer upgrades, road improvements, rail spurs, and utility extensions. If your manufacturing facility is in or expanding to a smaller Texas community, this program can fund the public infrastructure needed to support your operations.

Chapter 313 / Chapter 403 Tax Limitations

Texas has historically offered property tax limitations for qualifying manufacturing projects through its school district tax incentive programs. These programs allow manufacturers making large capital investments to limit the appraised value of their property for school district tax purposes for a period of years, resulting in significant property tax savings. The specific program structure has evolved over time — check with the Texas Comptroller's office and your local appraisal district for current availability and requirements.

Freeport Exemption

Texas offers a Freeport Exemption that eliminates local property taxes on goods that are detained in Texas for 175 days or fewer before being shipped out of state. This is a significant benefit for manufacturers who hold inventory, raw materials, or finished goods before shipping to out-of-state customers. Most Texas counties and cities have adopted the Freeport Exemption, but it is worth confirming with your local appraisal district.

Sales Tax Exemption on Manufacturing Equipment

Texas exempts manufacturing machinery and equipment from state and local sales and use tax. This includes equipment that is used or consumed in the manufacturing process, as well as repair and replacement parts. This is not a grant, but it represents a significant cost reduction for manufacturers making capital equipment purchases.

Federal Programs for Texas Manufacturers

SBIR/STTR for Manufacturing Innovation

Manufacturers developing new products, processes, or technologies can apply to SBIR and STTR programs. The Department of Defense, Department of Energy, and National Science Foundation all fund manufacturing- related research. Phase I awards typically range from $50,000 to $275,000, and Phase II awards can reach $1 million or more.

MEP (Manufacturing Extension Partnership)

The NIST Manufacturing Extension Partnership provides technical assistance and consulting services to small and mid-size manufacturers. The Texas MEP center, TMAC (Texas Manufacturing Assistance Center), provides subsidized consulting on lean manufacturing, quality systems, technology adoption, and growth strategies. While not a direct grant, MEP services are subsidized and provide significant value — the national MEP network reports that for every dollar of federal investment, manufacturers see $35.80 in new sales growth.

Advanced Manufacturing Tax Credits

Federal tax credits available to Texas manufacturers include the Research and Development Tax Credit (Section 41), which provides a credit for qualifying research activities in the development of new or improved products and processes. Many manufacturers underutilize this credit because they do not realize that process improvements, material testing, and product refinement often qualify. See our full guide to Texas business tax credits.

Department of Energy Programs

The Department of Energy offers multiple programs relevant to manufacturers, including the Industrial Assessment Centers program (free energy audits for qualifying manufacturers), the Better Plants program (energy efficiency partnership), and various grant programs for clean energy manufacturing. Texas manufacturers in energy-intensive industries should evaluate DOE programs carefully.

Local Incentives for Manufacturers

Property Tax Abatements

Many Texas cities and counties offer property tax abatements to manufacturers making capital investments. Abatements typically cover a portion of the increase in property taxes resulting from new construction or equipment investment for a period of 5 to 10 years. The specific terms vary by jurisdiction — contact your city and county economic development office to explore available abatements.

Enterprise Zone Incentives

Manufacturers in designated Texas Enterprise Zones can receive state sales and use tax refunds on equipment and building materials. Refunds can reach $2,500 per job created within the zone. Enterprise Zone nominations are made by the local community and approved by the state.

Foreign Trade Zones

Texas hosts multiple Foreign Trade Zones (FTZs) that allow manufacturers to defer, reduce, or eliminate customs duties on imported materials and components. If your manufacturing operation uses imported inputs, an FTZ can provide significant cost savings. Major FTZ operations exist in Houston, Dallas-Fort Worth, San Antonio, El Paso, and other Texas metros.

Workforce and Training Resources

• Texas State Technical College (TSTC): Partners with manufacturers on customized training programs through the Skills Development Fund.
• Community college partnerships: Local community colleges across Texas offer manufacturing-focused programs and can partner with employers on Skills Development Fund applications.
• Apprenticeship programs: Texas supports registered apprenticeship programs in manufacturing through the Department of Labor, with tax credits available for employers who hire apprentices.
• Work Opportunity Tax Credit: Federal tax credit for hiring workers from target groups — relevant for manufacturers building their workforce from diverse labor pools.

How Manufacturers Should Approach Incentive Programs

1. Start with workforce training: The Skills Development Fund is the most accessible program for most manufacturers.
2. Evaluate tax exemptions: Make sure you are claiming the manufacturing equipment sales tax exemption and Freeport Exemption.
3. Explore property tax abatements: If you are making capital investments, contact your local economic development office about available abatements.
4. Consider R&D credits: If you are improving processes or developing products, you may qualify for the federal R&D tax credit.
5. Contact TMAC: The Texas MEP center provides subsidized consulting that can help you identify operational improvements and relevant programs.

Find Programs That May Fit Your Business

Texas manufacturers are often eligible for more programs than they realize. Between state incentives, federal programs, local abatements, and workforce training funds, the landscape is broad — and navigating it all manually is time-consuming.

Not sure which programs may fit your business? Our free screening report checks your business against 150+ verified programs — grants, tax credits, loans, and incentives — and shows you which ones may match. Start your free screening →