Texas Enterprise Zone Program Overview
by Will Ramirez, on Jul 15, 2024 7:45:00 AM
The Texas Enterprise Zone Program (TEZ) 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 Office of the Governor Economic Development and Tourism Division, the program grants local communities the ability to partner with the state to encourage economic growth through various tax incentives. Under this program, companies designated as Enterprise Zone projects may qualify for state sales and use tax refunds on taxable purchases made to construct or improve their facilities.
Candidates for the TEZ
The ideal candidates for the TEZ are businesses planning significant capital investments in regions identified as economically disadvantaged or needing revitalization. These include various sectors such as manufacturing, research and development, distribution, warehousing, headquarters and professional services such as back office support.
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 (FY2024-2025), the remaining application deadlines are:
- September 3, 2024
- December 2, 2024
- March 3, 2025
- June 2, 2025
In a previous legislative session, the state allowed half enterprise project designations to maximize the number of designations per biennium and spread the benefits to more projects. The requisite level of capital investment and jobs for each designation type and corresponding maximum refund potential are shown below:
Level of Capital Investment |
Maximum Number of Jobs Allocated |
Maximum Potential Refund |
Maximum Refund Per Job Allocated |
| Half Enterprise Project $40,000 to $5,000,000 or more |
$250 | $625,000 | $2,500 |
| Enterprise Project $5,000,000 to $149,000,000 |
$500 | $1,250,000 | $2,500 |
| Double Jumbo Project $150,000,000 to $249,000,000 |
$500 | $2,500,000 | $5,000 |
| Triple Jumbo Project $250,000,000 or more |
$500 | $3,750,000 | $7,500 |
Eligibility for the Texas Enterprise Zone Program
Several requirements must be met for a company to be eligible for an Enterprise Zone designation.
A few of the initial requirements are as follows:
- Jobs counted for benefits must have an average weekly wage that meets or exceeds the average county weekly wage in the county where the qualified business site is located.
- Note: 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 before the expiration of the designation period, 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.
- 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 TEZ, 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 TEZ, 35% of the company’s new employees at the qualified business site must meet economically disadvantaged, Enterprise Zone residency, or veteran requirements.
- Only full-time jobs qualify for TEZ award consideration.
Recently approved Texas Enterprize Zone projects
To illustrate the type of projects that recently received TEZ designations, the following chart lists the companies, type of EZ designations and project locations announced to date in 2024:
Company |
Project Approved |
Designation Type |
Total Investment |
Existing Jobs at Project Site |
New
|
Retained Jobs |
Total Announced Jobs |
Inside / Outside Zone |
Community |
County |
| CFAN Company | 1-Mar-24 | Single | $40,000,000 | 357 | 10 | 357 | 357 | Inside | San Marcos | Hays |
| BASF Corporation | 2-Mar-24 | Half | $7,000,000 | 78 | 0 | 78 | 78 | Outside | Kingsville | Bishop |
| Vitro Flat Glass LLC | 3-Mar-24 | Single | $60,000,000 | 486 | 10 | 486 | 496 | Outside | Wichita Falls | Wichita |
| ElbitAmerica, Inc | 4-Mar-24 | Single | $20,000,000 | 707 | 10 | 490 | 500 | Outside | Fort Worth | Tarrant |
| Sabre Communications Corp | 5-Mar-24 | Single | $5,000,000 | 247 | 10 | 247 | 257 | Outside | Conroe | Montgomery |
| Johns Mansville | 6-Mar-24 | Single | $25,000,000 | 322 | 0 | 322 | 322 | Outside | Cleburne | Johnson |
Compliance and reporting for Texas Enterprise Zone projects
Once designated as a TEZ project, companies are required to comply with specific performance requirements over the designation period. These requirements primarily involve job creation and capital investment targets outlined in the application phase. Businesses must regularly report their progress to the state, including employment levels and investments.
The compliance process includes periodic audits and annual report submissions to ensure that the commitments made at the outset of the designation are being met. Failure to meet these commitments can result in the revocation of the TEZ project designation and the requirement to repay any incentives received.
Conclusion
The Texas Enterprise Zone Program encourages businesses to engage in projects that enhance the economic landscape of Texas’s most needy areas by refunding state sales and use tax. Potential applicants must carefully assess their ability to meet the stringent eligibility requirements and compliance obligations associated with the program to maximize the benefits of the program.
Site Selection Group can assist with evaluating whether the Texas Enterprise Zone Program is relevant to your project and how it may be scored and judged among competing applications along with assistance with the compliance burden associated with previously approved designations.
