Texas Enterprise Zone Program and Where Value Is Missed

An often-overlooked state-level incentive is the Texas Enterprise Zone Program (TEZ). Perhaps the incentive’s name creates the impression that the program applies only to projects physically located within a state-designated enterprise zone. Alternatively, the project team may decide that the compliance burden is not worth the return on investment before the refund opportunity has been fully vetted. Maybe the project has already been announced or started, and a company thinks it’s too late. 

All these assumptions can cost a project real value. This blog aims to provide an overview of the TEZ program and identify a targeted group of projects that should consider seeking designation.

Texas Enterprise Zone Program Overview

The TEZ program is a key economic development tool designed to promote job creation and capital investment in economically distressed areas of Texas. Administered by the Texas Economic Development Bank within the Governor's Office of Economic Development and Tourism, the program enables local communities to partner with the state to promote economic growth through various tax incentives. Under this program, Companies designated as "Enterprise Projects" may qualify for state sales and use tax refunds on taxable purchases made to construct or improve their facilities.

Texas communities must first nominate companies in their jurisdiction to receive an Enterprise Zone designation and thus be eligible to receive state sales and use tax refunds (i.e., 6.25%) on qualified expenditures by applying on the company’s behalf. Each city and county has a limited number of designations, based on population, available per biennium to nominate a company. The state may award a maximum of 105 designations statewide per biennium, with up to 12 designations per quarterly round. For the current biennium (FY 2026-2027), the remaining application deadlines are:

• June 1, 2026
• September 2, 2026
• December 1, 2026 
• March 1, 2027
• June 1, 2027

The requisite level of capital investment and jobs for each designation type and corresponding maximum refund potential is shown below:

Notably, the state allows for Half Enterprise project designations to maximize the number of designations per biennium and spread the benefits to more projects. This uncaps a unique opportunity for smaller projects to apply, which we will discuss below.

Eligibility for the Texas Enterprise Zone Program

The ideal candidates for the Texas Enterprise Zone Program are businesses planning capital investments in regions identified as economically disadvantaged or in need of revitalization. These include businesses from various sectors such as manufacturing, research and development, distribution, warehousing, headquarters, and professional services such as back-office support. 

There are several requirements that must be met for a company to be eligible for an Enterprise Zone designation. A few of the initial gating items are as follows: 

• Jobs counted for benefit must have an average weekly wage that meets or exceeds the average county weekly wage in the county in which the qualified business site is located.
  
  • Note that this includes the wage for all industries and is not industry-specific based on the proposed project.
• Employment (new and retained jobs) and capital investment commitments must be met prior to the expiration of the designation period, which is typically five years.
• A company must first pay the applicable state sales and use tax on qualified expenditures in order to receive a refund of those taxes paid.
• The percentage of a project’s new employees who must be considered economically disadvantaged, enterprise zone residents, or veterans varies depending on whether the qualified business site is located inside or outside of a state-designated Enterprise Zone:
  
  • If located within a zone, 25% of the company’s new employees at the qualified business site must meet economically disadvantaged, enterprise zone residency, or veteran requirements
  • If located outside a zone, 35% of the company’s new employees at the qualified business site must meet economically disadvantaged, enterprise zone residency, or veteran requirements.
  • In general, if an application for designation includes retained jobs, then these employee requirements only apply to any newly hired employees hired to replace such positions, as necessary. 
• Only full-time jobs qualify for TEZ award consideration.

Why 150+ Employee Projects are Often Strong Candidates

While many companies and service providers may be focused on projects with 300-500 or more employees, projects with 150 or more employees are often large enough to entice local communities to participate and compete well in the TEZ process. In our experience, these projects typically create impactful headcount, payroll, and investment, which makes them easier for a city or county to support, especially if the project does not otherwise qualify for local incentives. Projects of this size also tend to yield enough taxable activity for the refund opportunity to be worth the economic incentive compliance effort. That is true for net new hiring, but it also applies to retention-driven projects where the company maintains a substantial workforce and commits at least $4 million in spend over the designation period, which can extend up to five years.

The following questions can aid in screening for the TEZ opportunity:

• Are you creating and/or retaining at least 150 jobs?
• Do the jobs meet the average county weekly wage requirement? 
• Will the company meet and be able to comply with the hiring test? 
• Are there enough taxable expenditures to make the effort worthwhile? 

Because TEZ is a tax refund program, the opportunity hinges on actual taxable expenditures made during the designation period. Projects with 150 or more employees are worth analyzing because they often generate enough spend to create a meaningful refund opportunity.

The Intricacies of Application Timing

The timing of submitting a TEZ application is important for several reasons, but in general, because the TEZ program is competitive and there are only a certain number of allocations per biennium, projects that are able to engage early may have an edge. However, another unique aspect of the TEZ program is that the state's guidance provides that the designation period begins 90 business days before the deadline for the applicable application round (i.e., 90-business-day window) and lasts for not less than one year and not more than five years from the date of designation. Accordingly, even if a project has been sited or announced, a company can still apply and take advantage of the 90-day window.

For example, assume Project ABC applies on the June 1, 2026, quarterly deadline date. This means they will be able to capture eligible headcount and capital expenditures starting January 15, 2026 (90 business days from the application deadline). Thus, while earlier is always optimal, not applying in advance of a project decision may not preclude a company from considering the TEZ program.

Conclusion

If your company is evaluating a Texas project with 150 or more employees, TEZ should be screened early, whether the project is driven by new jobs, retained jobs, or a combination of both. Site Selection Group helps companies evaluate whether TEZ is relevant to their project, including employee retention-oriented projects that may qualify based on retained jobs and a meaningful capital commitment, by evaluating how the project may score relative to competing applications, coordinating the application submission with the nominating jurisdiction, and navigating the compliance requirements that follow a designation. 

Contact us for more guidance and information.