OCI Sunray LLC has filed with the State Comptroller a Chapter 313 Tax Abatement request for the Knippa ISD, as reported in the Jan. 12, 2020, edition of the Uvalde Leader-News.
The Texas Legislature authorizes local governments to offer property tax abatements under Chapter 312 and 313 of the Texas Tax Code. Chapter 312 relates to abatements by cities, counties, and special district. Chapter 313 relates to abatements by school districts.
The purpose of offering an abatement of taxes is to encourage economic development, including a major increase in employment within the boundaries of the taxing entity.
As originally written, the law required a business receiving an abatement to create a minimum of 10 new jobs. Subsequent legislation allowed local governments to waive the jobs requirement.
In the last few years a majority of Chapter 312 and 313 abatements have been given to solar and wind farms which generally only provide for one or two new employees.
The provisions of Chapter 312 and Chapter 313 agreement are somewhat similar; however, there are some key differences. School property taxes consist of two elements, a Maintenance and Operations (M&O) portion that funds the day to day operations and the Interest and Sinking (I&S) portion that is for the debt service on bonded debt. School districts are not allowed to abate the taxes on the I&S portion of the levied taxes. A business which has received an abatement will pay 100 percent of the I&S portion of its tax bill, and only a fraction to the M&O portion.
The state’s school finance laws require a district to be “kept whole,” which means that beginning with the fourth year of a 313 agreement, a district may apply for addition state funding in an amount equal to 50 percent of the taxes abated.
It is estimated by the State Comptroller in his Report of Texas Economic Development Act, that this provision will cost the taxpayer of Texas several hundred million dollars per year.
As a result of Chapter 313, revenue from state sales, franchise, and other taxes paid by all of the state’s taxpayers, is diverted from other uses to make up the reduction in property taxes paid to a school district.
Most of these proposed projects request both Chapter 312 and Chapter 313 abatements. Many of these solar and wind generation projects are not economically viable without tax breaks at both the local and federal level. These abatements coupled with substantial subsidies from the federal government results in at the least, a partially taxpayer funded private enterprise.
Chapter 313 will expire on Dec. 31, 2022, unless extended by the legislature.
I urge you to contact your state representative and senator requesting them to reform Chapter 312 and 313, and for school districts and county commissioners to refrain from accepting Chapter 312 and 313 agreements which will affect all of the taxpayers of the State of Texas.