Article
How Texas enterprise zones can help business expansion or retention projects
April 17, 2022 · Updated Oct. 9, 2024 · Authored by Gina Kucera, Craig Lammlin
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Article
April 17, 2022 · Updated Oct. 9, 2024 · Authored by Gina Kucera, Craig Lammlin
If you’re contemplating a business expansion or job retention project in Texas, it could prove beneficial to consider the Texas Enterprise Zone Program (EZP), a sales-and-use tax refund program meant to encourage private business investment, job creation, and job retention in the state’s more economically distressed areas.
In some instances, projects located outside of enterprise zones could also be approved for benefits as part of related job retention efforts.
A business could qualify for this tax refund on eligible items for use at the qualified business site for up to a defined amount when the:
Below are some frequently asked questions that could apply to those looking into enterprise zones.
Texas communities must nominate businesses in their jurisdiction to receive an enterprise zone designation.
Upon achieving an enterprise zone designation through a competitive application process from the state, a business is then eligible to receive state sales-and-use tax refunds on qualified expenditures.
A business location outside of any designated enterprise zones could still qualify as an enterprise zone project and receive related benefits, upon approval.
Applications are accepted on a quarterly basis with deadlines falling on the first working day of March, June, September, and December.
The state of Texas allocates a limited number of projects per community. Texas has a maximum of 105 designations per biennium but only approves up to 12 designations per quarterly round, making it increasingly competitive to acquire an enterprise zone designation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
Applications are scored based on a variety of factors, including:
Some of the basic business qualifications for EZP status include:
There are four types of projects:
Each requires varying levels of capital investment with a maximum number of jobs allocated, maximum potential refund, and maximum refund per job allocated. The qualifying factors of each are outlined below.
Jobs must be maintained through the end of the enterprise zone designation period, or for at least three years after the date on which tax benefits are received, whichever is later.
The state’s sales-and-use tax credit refund is the main incentive for building in an enterprise zone.
The maximum allowable refund of state sales and use tax, both total and per-job, is awarded based on the organization’s planned capital investment and job retention or creation at the site. The maximum refund per job is between $2,500 and $7,500 depending on the level of investment made by the company.
An enterprise project designation is valid for up to five years, in addition to a 90-day window prior to the quarterly deadline application and designation date. Employment and capital investment commitments must be incurred and met within the 90-day window through the designated expiration date.
There’s a nonrefundable fee for consideration of an enterprise project, ranging from $500 to $2,250 depending on the proposed project status. Enterprise zones will be assessed 3% on the amount of any refund benefit that’s received under the state enterprise zone program.
Whether or not your current or future location is within or outside of an enterprise zone, you can work with a local community to secure enterprise zone benefits. This process can be complex, but in simple terms, you will be required to:
