Texas Chapter 313 provisions are currently scheduled to terminate by the end of 2022 after legislation to extend them failed to clear the Senate's last session, according to a report by the Lone Star Standard.
The bill, known as House Bill 4242 (HB 4242), was designed to extend the Texas Economic Development Act's Chapter 313 tax abatements through Dec. 31, 2024.
Even though the measure cleared the House, it did not pass the Senate before the legislative session ended. As a result, Chapter 313 Tax Abatements will now expire on Dec. 31 of this year.
Tax abatements under Chapters 312 and 313 are used to collect revenue from taxpayers to subsidize renewable energy projects in Texas.
Renewable energy sources, notably wind and solar, benefited from over $100 billion in such subsidies in 2018.
However, studies indicate that Chapter 313 abatements often fail to achieve their projected economic development targets.
Additionally, roughly two-thirds of programs end up waiving their job creation requirements and approximately 20% of programs retain their subsidies while underpaying employees.
Abatements under Chapter 313 currently require projects to produce at least 10 permanent jobs as a condition of their investment, according to Texas Comptroller data.
However, according to the WC Texas News, renewable energy projects that obtained 313 abatements seldom fulfilled these job creation criteria.
So far, no applicants in West Central Texas have fulfilled these criteria and were instead issued waivers.
Some experts argue the best approach to deal with Chapter 313 abatements is to scrap the current system and rebuild it using data from previous inefficiencies and wasteful subsidies to design a new program.
Gov. Greg Abbott is reportedly wary about 313 tax breaks and rejected an extension of the practice in 2015, expressing "serious concerns exist about its oversight, its transparency and its value to the taxpayers.”
Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities, stated his worries in a Lone Star Standard piece on the Comptroller's proposal to stop collecting information for Chapter 313-related data.
"Data collection may seem an obscure and trivial procedure, but the implications of the Comptroller’s proposed cutback in data collection and availability make it clear that elected officials, the media and Texans concerned about adequate and equitable funding of our schools and other public services should act to make their opposition to this proposal known," Lavine stated.
In an emailed newsletter, Transparency USA addressed the current bipartisan support to let Chapter 313 abatements expire.
"It’s rare to find a policy position where both Democrats and Republicans agree, but both party platforms call for eliminating corporate welfare," the newsletter stated. "The 509 agreements that have been made under Chapter 313 provisions have reduced tax revenue by $10.8 billion.
Transparency USA's newsletter also noted that although supporters of the program claim it's vital to encourage business in Texas and advance green energy policies, opponents argue that the program is inefficient and that the government arbitrarily chooses "winners and losers."
Additionally, the organization noted that Republican Speaker of the House Dade Phelan suggested that legislators would attempt to reinstate the program during the next legislative session during a speech at the Texas Oil and Gas Producers Ad Valorem Tax Conference.