Texas House Speaker Dade Phelan has issued interim charges for the Ways and Means Committee that include instructions to “study the impact of not renewing” the corporate subsidy program known as Chapter 313. Chapter 313 was not reauthorized during the last legislative session, but may be seeing new life with Phelan's directive.
"Inequitable tax reform rears its ugly head again," Luis Figueroa, the legislative and policy director of Every Texan, wrote in an email newsletter. "[T]he Ways and Means Committee attempts to restore life to the corporate tax giveaway program known as Chapter 313, which allows energy and manufacturing corporations to avoid paying school taxes. Unsurprisingly, corporations that don’t want to pay their fair share of taxes want to revive Chapter 313 in the next session. Speaker Phelan has included this charge to gather recommendations for incentivizing manufacturers and other capital-intensive businesses to move to Texas.”
The Texas Comptroller website describes Chapter 313 tax abatements as a program “designed to attract new businesses by offering a 10-year limitation on appraised property value for a portion of the school district property tax.” State leaders add the abatements were meant to incentivize companies to come to Texas, create jobs and boost such critical sectors as renewable energy.
Not everyone agrees with Phelan’s vision of the program, with policy analysts from both sides of the aisle blasting the program as "handouts to favored industries" that are "unnecessary and wasteful."
In a joint statement, analysts from Texas Public Policy Foundation (TPPF) and Every Texas lamented, "Texas is fortunate to not need incentives to persuade companies to locate here. Research and experience show that abatements are an unnecessary and wasteful perk and companies would have come to Texas regardless. But the carve-outs do have a real impact on our ability to adequately fund all public schools and ultimately shift the responsibility for supporting them onto other businesses, homeowners and renters.”
In 2015, Gov. Greg Abbott also vetoed legislation designed to expand 313 incentives to projects involving multiple, contiguous school districts. In rejecting the measure, Abbott said, “While the program may sometimes have a positive impact on local economic development, serious concerns exist about its oversight, its transparency and its value to the taxpayers.”
Chapter 313 allows public school districts to offer tax incentives for businesses that invest in their communities, with the incentive designed to attract new businesses by offering them a 10-year limitation on their appraised property value for a portion of the school district property tax. As a tradeoff, the new business agrees to build or install new property and create jobs in its new home district.
While a recent study found that up to 95% of the Chapter 313 projects studied would have located in Texas without the incentive, the program has proven popular with legislators who have moved to extend it on three different occasions since it was originally set to expire in 2007.
Besides reviewing the impact of not renewing Chapter 313, Phelan asked House committees to study other issues of interest for the next legislative session.
“These charges touch on the most pressing issues facing Texans, from improving the quality and safety of our state’s foster care system to confronting our state’s growing infrastructure demands,” Phelan said in a statement posted to the Texas House website. “As House committees formally kick off their work for the interim, I'm confident that their research and recommendations on these topics will position our chamber to tackle these priorities in an effective and productive manner once the Legislature convenes in January.”