PART 1. COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 9. PROPERTY TAX ADMINISTRATION
SUBCHAPTER O. TEXAS JOBS, ENERGY, TECHNOLOGY AND INNOVATION PROGRAM
The Comptroller of Public Accounts proposes new §9.5000, concerning definitions, §9.5001, concerning applicant eligibility requirements, §9.5002, concerning application requirements, §9.5003, concerning economic benefit statement criteria, §9.5004, concerning application process, §9.5005, concerning agreement for limitation on taxable value of eligible property, §9.5006, concerning agreement process, §9.5007, concerning amendment process, §9.5008, concerning job and wage requirements; penalty for failure to comply with job or wage requirement, §9.5009, concerning biennial compliance report, §9.5010, concerning biennial report to legislature, §9.5011, concerning conflicts and §9.5012, concerning electronic submissions; notices. These new sections implement the Texas Jobs, Energy, Technology and Innovation Act to comply with Government Code, Subchapter T, Chapter 403, which was enacted by House Bill 5, 88th Legislature, R.S., 2023. The new sections will be located in Chapter 9 (Property Tax Administration), new Subchapter O (Texas Jobs, Energy, Technology and Innovation Program).
Section 9.5000 provides definitions.
Section 9.5001 describes applicant eligibility requirements.
Section 9.5002 establishes the application requirements.
Section 9.5003 establishes the economic benefit statement criteria and methodology.
Section 9.5004 describes the application process including the comptroller review and recommendation.
Section 9.5005 describes the requirements for an agreement for limitation on taxable value of eligible property.
Section 9.5006 describes the agreement process.
Section 9.5007 describes the amendment process.
Section 9.5008 establishes the job and wage requirements as well as the penalty for failing to comply with the job or wage requirement.
Section 9.5009 describes the biennial compliance report submitted by a business entity subject to an agreement under Government Code, Chapter 403.
Section 9.5010 describes the biennial report to the legislature.
Section 9.5011 addresses compliance with conflict-of-interest laws.
Section 9.5012 provides that the comptroller may require electronic submission of documents under the Texas Jobs, Energy, Technology and Innovation Act.
Brad Reynolds, Chief Revenue Estimator, has determined that during the first five years that the proposed new rules are in effect, the rules: will not create or eliminate a government program; will not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropriations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the number of individuals subject to the rule's applicability; and will not positively or adversely affect this state's economy.
Mr. Reynolds also has determined that the proposed new rules would have no significant fiscal impact on the state government, units of local government, or individuals. The proposed new rules would benefit the public by implementing the current statute. There would be no significant anticipated economic cost to the public. The proposed new rules would have no significant fiscal impact on small businesses or rural communities.
You may submit comments on the proposal to John Villarreal, Manager, Economic Development & Local Government at John.Villarreal@cpa.texas.gov or at P.O. Box 13528, Austin, Texas 78711-3528. The comptroller must receive your comments no later than 30 days from the date of publication of the proposal in the Texas Register.
The new sections are proposed under Government Code, §403.623, which permits the comptroller to adopt rules regarding the Texas Jobs, Energy, Technology and Innovation Act as necessary to implement that chapter.
The new sections implement Government Code, Subchapter T, Chapter 403.
§9.5000.Definitions.
As used in this subchapter, the following words and terms shall have the following meanings, unless the context clearly indicates otherwise:
(1) Agreement holder--A business entity that is subject to an executed agreement under Government Code, §403.612.
(2) Construction job--A job that is temporary in nature, typically performed on a full-time basis and takes place before the commencement of the eligible project's incentive period. The purpose of the job is to perform construction, maintenance, remodeling or repair work for an applicant's project.
(3) Eligible project--The construction of a project, or the expansion of an existing facility that is:
(A) a manufacturing facility, classified in NAICS 31-33;
(B) a facility related to the provision of utility services, including an electric generation facility that is considered to be dispatchable because the facility's output can be controlled primarily by forces under human control, classified in NAICS 2211;
(C) a facility related to the development of natural resources, defined as the following Goods-Producing Industries subsector groups as identified by the U.S. Bureau of Labor Statistics:
(i) Agriculture, Forestry, Fishing and Hunting, classified in NAICS 11; and
(ii) Mining, Quarrying, and Oil and Gas Extraction, classified in NAICS 21;
(D) a facility engaged in research and development, classified in NAICS 5417, or manufacture of high-tech equipment or technology; or
(E) related to critical infrastructure such as:
(i) a water intake structure, water treatment facility, wastewater treatment plant, or pump station, classified in NAICS 2213;
(ii) a liquid natural gas terminal or storage facility, classified in NAICS 424710;
(iii) pipelines and pipeline appurtenances or facilities, including pipes, valves, meters, pumps, compressors, treating and processing facilities, cathodic protection facilities, and any other equipment, facilities, devices, structures, and buildings used or intended for use in the gathering, transportation, treating, storage, or processing of CO2, oil, gas, or other minerals, and the liquefied or gaseous substances, constituents, products, or mixtures derived from those minerals through refining, processing, or other methods, classified in NAICS 486; and
(iv) utility-scale water or wastewater storage, treatment, or transmission facilities, classified in NAICS 2213.
(4) Eligible property--Property that is used in connection with an eligible project and is either wholly owned by an applicant or leased by an applicant through a capitalized lease. To be eligible, the property must be:
(A) a new building or expansion of an existing building, including a permanent and nonremovable part of a building that is:
(i) constructed after the execution of the agreement; and
(ii) located in an area that is, at the time the agreement is executed, designated as a contiguous reinvestment zone under Tax Code, Chapter 311 or 312, or as an enterprise zone under Government Code, Chapter 2303; or
(B) tangible personal property, excluding inventory, that is initially placed in a zone described in subparagraph (A)(ii) of this paragraph after the agreement execution.
(5) Full-time job--A permanent position of employment, other than a construction job, requiring a minimum of 1,600 hours of work per year in connection with an eligible project.
(6) Investment--Capital that is expended on the construction or acquisition of eligible property for an eligible project with the exclusion of expenses related to land and inventory for the project.
(7) NAICS--North American Industry Classification System, developed by the U.S. Office of Management and Budget as the standard for use in classifying business establishments.
(8) Performance bond--A surety bond with an amount determined by the comptroller.
(9) Required job--A job, other than construction jobs, that an applicant commits to create or demonstrate for an eligible project that meets the following requirements:
(A) must be a new full-time job in this state;
(B) must be performed at the site of the project by an employee hired by the applicant (including a Texans Work Program trainee under Labor Code, Chapter 308), or by an independent contractor or independent contractor's employee;
(C) must require at least 1,600 hours of work a year;
(D) may not be transferred by the applicant from an existing facility or location in this state unless the applicant fills the vacancy caused by the transfer;
(E) may not create a job to replace an existing job, unless the applicant fills the vacancy caused by the replacement;
(F) must offer and contribute to a group health benefit plan for each full-time employee of the applicant; and
(G) must meet the wage requirement.
(10) Trainee--An individual enrolled in the Texans Work Program who fulfills the following eligibility criteria:
(A) receives a minimum monthly payment of $300;
(B) is engaged for a duration of at least 6 months but not exceeding one year;
(C) contributes at least 30 hours weekly; and
(D) constitutes no more than 20% of the employer's total workforce.
(11) Wage Requirement--A wage that exceeds 110% of the statewide average annual wage for all jobs in the applicable industry sector as computed by the Texas Workforce Commission in the Quarterly Census of Employment and Wages publication and as described in the executed agreement under Government Code, §403.612. The term does not include the wages for trainees in the Texans Work Program.
§9.5001.Applicant Eligibility Requirements.
(a) An applicant that is listed as ineligible to receive a state contract or investment or is otherwise ineligible to contract with a state governmental entity under Government Code, Chapters 808, 809, 2270, 2271, or 2274, is ineligible to apply for an agreement for limitation on taxable value of eligible property under Government Code, Chapter 403.
(b) The comptroller may reject an application based on an applicant's ineligibility under subsection (a) of this section.
(c) The comptroller shall send notice of the rejection described in subsection (b) of this section to the applicant.
(d) An applicant may not submit an administrative appeal to the comptroller for reconsideration of an application that has been rejected under subsection (b) of this section.
§9.5002.Application Requirements.
(a) Each application shall include:
(1) a completed application form;
(2) proof of a $30,000 payment as a nonrefundable application fee, payable to the applicable school district;
(3) a sworn affidavit by an agent authorized to bind an applicant attesting that the applicant is not ineligible under Government Code, §403.606;
(4) a map of the proposed project site;
(5) an economic benefit statement for the proposed project as described in Government Code, §403.608; and
(6) any additional information requested by the comptroller to complete its evaluation of the application.
(b) Applicants must segregate confidential information described by Government Code, §403.621, or information that is confidential as a matter of law from other information in their application, amended application or supplement to an application. A cover sheet marked "Confidential" with the legal justification for confidential treatment must accompany all information that is considered confidential.
(c) If an applicant proposes to place an eligible property in a qualified opportunity zone, the entire project including its boundaries must fall within that qualified opportunity zone in order to be subject to the taxable value prescribed in Government Code, §403.605(a)(2).
§9.5003.Economic Benefit Statement Criteria.
(a) The economic benefit statement must include the information described in Government Code, §403.608(b), including the sources relied upon.
(b) The comptroller may require an applicant to supplement or modify the economic benefit statement to provide further clarity or if there are changes to project-related information.
(c) Information provided as an estimate of the associated economic benefits that may be reasonably attributed to the project may be generated from standard economic estimation techniques and multipliers. This information shall be used to obtain a generalized estimation of the economic benefits to be associated with the proposed project. Any economic estimation modeling software used and all modifiers that were incorporated in the calculations must be disclosed.
(d) The economic benefit statement must include the project's associated economic benefits that, at minimum, consist of the following:
(1) the impact on the gross revenues and employment levels of local businesses that provide goods or services in connection with the project or to an applicant's employees;
(2) the amount of state and local taxes that will be generated as a result of the indirect economic impact of the project;
(3) the development of complementary businesses or industries that locate in this state as a direct consequence of the project;
(4) the total impact of the project on the gross domestic product of this state;
(5) the total impact of the project on personal income in this state; and
(6) the total impact of the project on state and local taxes.
(e) The comptroller may reject an economic benefit statement that is determined to be unreasonable or relies on unrealistic assumptions of economic conditions.
(f) If the economic benefit statement is rejected, then the comptroller may recommend not to approve the application.
§9.5004.Application Process.
(a) An applicant must submit an application for a limitation on taxable value of eligible property in the form and manner prescribed by the comptroller. The comptroller may require applications to be submitted electronically.
(b) After the eligibility of the applicant is assessed in §9.5001 of this chapter, the comptroller shall review an application to determine if it is administratively complete. An application is considered administratively complete when it includes all the information requested by the comptroller.
(c) The comptroller shall provide notice of an administratively complete application to the applicant, the governor and the applicable school district. The comptroller may provide notice electronically.
(d) If an application is not administratively complete, the comptroller may require an applicant to submit the necessary information by a deadline.
(e) The comptroller shall publish on its website information from each application including maps, economic benefit statement and any amendments within 10 business days of receiving an administratively complete application.
(f) To assess whether a project proposed in an application is an eligible project, the comptroller must find that:
(1) an applicant satisfies the application requirements;
(2) the proposed project meets the definition of eligible project in §9.5000 of this title and Government Code, §403.602(8); and
(3) The applicant is willing to agree and accept the terms described in Government Code, §403.604, and the agreement terms.
(g) To assess whether an agreement is a compelling factor and whether the applicant would make the proposed investment in the absence of the agreement under Government Code, §403.609(b)(3), the comptroller may consider:
(1) any public documents and statements relating to the applicant, the proposed project or the proposed eligible property that is subject to the application;
(2) official statements by the applicant, government officials or industry officials concerning the proposed project;
(3) alternative sites and prospects explored including any specific incentive information;
(4) any information concerning the proposed project's impact on the Texas economy;
(5) previous applications for and subsequent granting of economic development incentives;
(6) documents pertaining to the proposed project's financials, real estate transactions, utilities, infrastructure, transportation, regulatory environment, permits, workforce, marketing, existing facilities, nature of market conditions, and raw materials that demonstrate whether the incentive is a compelling factor in a competitive site selection process to locate the proposed project in Texas; and
(7) any other information that may aid the comptroller in its determination.
(h) Upon request, the comptroller may require that an applicant provides additional documents to demonstrate a compelling factor in a competitive site selection process to locate the proposed project in Texas. Failure to provide these documents may result in the comptroller being unable to make a recommendation under Government Code, §403.609.
(i) Within 60 days of an application being deemed complete, the comptroller shall examine and determine whether the application should be recommended or not recommended for approval based on the criteria in Government Code, §403.609(b).
(j) The comptroller shall provide written notice of action under Government Code, §403.609(a), to the applicant, the governor and the applicable school district.
(1) The notice shall indicate the comptroller's recommendation either for approval or non-approval of the application along with a copy of the application, and all documents or information relied upon to make the findings prescribed by Government Code, §403.609(b).
(2) A recommendation for approval shall specify a performance bond amount that is at minimum 20% of the required investment prescribed by Government Code, §403.604.
(k) An applicant may submit an amended or supplemental application to the comptroller at any time after the submission of the original application. If an applicant modifies an application recommended by the comptroller prior to the execution of the agreement, the applicant must submit said modifications to the comptroller to make a recommendation pursuant to Government Code, §403.609, before the agreement can be executed.
§9.5005.Agreement for Limitation on Taxable Value of Eligible Property.
(a) An applicant, the governor and the governing body of the applicable school district must mutually agree to enter into an agreement for limitation on taxable value of eligible property that includes the requisite terms in Government Code, §403.604 and §403.612.
(b) An applicant must satisfy the criteria required to enter in a contract with the state of Texas.
(c) The agreement must be based on information from an application that was recommended for approval by the comptroller.
(d) The agreement must comply with all applicable rules, regulations and statutes.
§9.5006.Agreement Process.
(a) Both the governor and the governing body of the applicable school district must decide under Government Code, §403.610(a) and §403.611(a), that they are agreeable to entering into an agreement with the applicant for a limitation on taxable value of eligible property.
(b) The governor and the governing body of the applicable school district must provide written notice of their determination in compliance with Government Code, §403.610(b) and §403.611(d).
(c) The agreement must be written in the manner and form prescribed by the governor.
§9.5007.Amendment Process.
(a) An agreement holder may propose to modify the beginning and ending dates of the incentive period. Notice of the proposed modification must be provided to the comptroller, the governor, and the applicable school district not later than the 90th day before the first day of the incentive period specified in Government Code, §403.612(b)(3), or not later than the 90th day before the first day of the proposed incentive period, whichever is earlier.
(b) Failure to provide notice of a proposed modification in a timely manner could lead to a denial of the modification request.
(c) To change the beginning and ending dates of the incentive period, the agreement holder must update the most recent schedules and economic benefit statement as necessary to reflect the proposed change to the incentive period. The agreement holder must include the revised schedules and economic benefit statement with the notice provided to the comptroller, the governor, and the applicable school district under this section.
(d) The comptroller shall make the finding required by Government Code, §403.609(b)(2), regarding the project as proposed to be modified or determine that the finding cannot be made.
(e) The comptroller shall notify the agreement holder, the governor and the applicable school district of the comptroller's finding not later than the 60th day after the date the comptroller receives the notice and revised economic benefit statement from the agreement holder of the proposed modification.
(f) The incentive period for the project may not be modified if the comptroller determines that the finding required by Government Code, §403.609(b)(2), regarding the project as proposed to be modified cannot be made or if the governor or the applicable school district objects to the proposed modification.
§9.5008.Job and Wage Requirements; Penalty for Failing to Comply with Job or Wage Requirement.
(a) Except as otherwise provided in Government Code, §403.604(a), the number of required jobs may not be waived.
(b) The wage requirement applies to required jobs and additional jobs, as the terms are defined in §9.5000 of this title and Government Code, §403.602. The wage requirement may not be waived.
(c) The comptroller shall conduct a biennial review of the periods covered by two consecutive reports submitted by an agreement holder to determine whether the agreement holder has created the number of required jobs and has met the wage requirement under Government Code, Chapter 403.
(d) To make the determination, the comptroller may:
(1) review the Biennial Compliance Report submitted by the agreement holder;
(2) request additional information from the agreement holder to substantiate the number of required jobs and the wage requirement and/or inspect the eligible property with a 3-day advance notice to the agreement holder in order to perform the inspection at a mutually agreeable time during regular business hours; or
(3) consider any other information that is available to the comptroller.
(e) The comptroller may issue a determination that a job created by the agreement holder is not a required job if the job as identified by the agreement holder:
(1) does not provide 1,600 hours or more of work for that year;
(2) is not a new job but rather a position that was transferred from a facility of the agreement holder from one area of the state to the project covered by the agreement, unless the agreement holder fills the vacancy caused by the transfer;
(3) is not a new job but rather a position that replaced an existing job of the agreement holder, unless the agreement holder filled the vacancy caused by the replacement;
(4) is not covered by a group health benefit plan for which the agreement holder contributes; or
(5) does not meet the wage requirement.
(f) If the comptroller makes a determination that the agreement holder did not create the required number of jobs or meet the wage requirement, the comptroller shall provide notice to the agreement holder, which shall include an explanation for the adverse determination.
(g) If the comptroller finds that an agreement holder received two consecutive adverse determinations for failing to meet the wage requirement prescribed by the agreement, the comptroller shall impose a penalty on the agreement holder in an amount equal to two times the difference between:
(1) the product of:
(A) the actual average annual wage paid to all persons employed by the agreement holder in connection with the project that is the subject of the agreement as computed under Government Code, §403.612(b)(6); and
(B) the number of required jobs prescribed by the agreement; and
(2) the product of:
(A) the average annual wage prescribed by the agreement; and
(B) the number of required jobs prescribed by the agreement.
(h) If the comptroller finds that an agreement holder received two consecutive adverse determinations for failing to maintain at least the number of required jobs prescribed by the agreement, the comptroller shall impose a penalty on the agreement holder in an amount equal to two times the difference between:
(1) the product of:
(A) the number of required jobs prescribed by the agreement; and
(B) the number of required jobs actually created as stated in the most recent report submitted by the agreement holder under Government Code, §403.616; and
(2) the average annual wage prescribed by the agreement during the most recent four quarters for which data is available, as computed by the Texas Workforce Commission.
(i) A determination by the comptroller under subsection (f) of this section is a deficiency determination under Tax Code, §111.008. A penalty imposed under this section is an amount the comptroller is required to collect, receive, administer, or enforce and is subject to the payment and redetermination requirements of Tax Code, §111.0081 and §111.009. A redetermination under Tax Code, §111.009, of a determination under this section is a contested case as defined by Government Code, §2001.003.
(j) In no event shall a penalty imposed under this section exceed the amount of the ad valorem tax benefit received by the agreement holder under the agreement.
(k) The comptroller shall deposit a penalty collected under this section and any interest on the penalty to the credit of the foundation school fund.
§9.5009.Biennial Compliance Report.
(a) Each agreement holder must submit a biennial compliance report with the supportive documents required by Government Code, §403.616 in the manner and form prescribed by the comptroller. The comptroller may require the report to be submitted electronically.
(b) The report must be submitted by June 1 of every even numbered year from the start to the conclusion of the incentive period.
(c) The report must include the minimum number of required jobs described in Government Code, §403.604(b) for every tax year throughout the duration of the incentive period.
(d) The report must include the signature of agreement holder's authorized representative(s) by which the representative confirms and attests to the truth and accuracy of the information submitted in the form to the best knowledge and belief of the agreement holder and its representative(s).
(e) Agreement holders must segregate confidential information described by Government Code, §403.621(b) or information that is confidential as a matter of law from other information within the biennial report. A cover sheet marked "Confidential" with the legal justification for confidential treatment must accompany all information that is considered confidential.
(f) For trainees identified in the report, the agreement holder must also submit documentation confirming its approval to take part in the Texans Work Program as set forth in Labor Code, §308.003, along with proof of the trainee's participation in the program including the beginning and ending dates of the trainee's participation.
§9.5010.Biennial Report to Legislature.
(a) Each agreement holder must submit information for the report described in Government Code, §403.617(b), in the form and manner prescribed by the comptroller.
(b) Not later than December 1 of each even year, the comptroller may electronically submit the report under Government Code, §403.617(b), to the lieutenant governor, the speaker of the house of representatives, and each other member of the legislature.
§9.5011.Conflicts.
To comply with Government Code, §403.619, both applicant and applicable school district must disclose any potential conflicts of interest related to a submitted application or an agreement, as mandated by state and federal laws, before executing the same agreement.
§9.5012.Electronic Submission; Notices.
Unless otherwise required by law, the comptroller may require forms, notices and other documents to be submitted electronically (including via web form).
The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.
Filed with the Office of the Secretary of State on September 18, 2023.
TRD-202303462
Don Neal
General Counsel, Operations and Support Legal Services
Comptroller of Public Accounts
Earliest possible date of adoption: October 29, 2023
For further information, please call: (512) 475-2220