Taxes & Incentives

Summary of Taxes

  • Personal Income Tax: an individual's total earnings from wages, investment interest, and other sources.
  • Corporate Income Tax: refers to a tax imposed on entities that are taxed at the entity level in a particular jurisdiction.
  • Corporate Franchise Tax: also called the “Margins Tax”; tax rate is 1% of margin for most taxable entities, and 0.5% for entities primarily engaged in retail and wholesale trades; Texas Comptroller has published detailed information on the revision in Revised Franchise Tax Overview as well as a Franchise Tax Calculator worksheet.
  • Sales & Use Tax: State 6.25%; tangible personal property and certain services; City 1%; Special Purpose District 1% (hospital); Combined Sales & Use Tax – 8.25%
  • Property Tax: 2016 City ($0.5928)  County ($0.6065)  For Taxation Summary List, see Nacogdoches Center Appraisal District. 
  • Inventory Tax: Questions concerning Inventory and Property Tax should be directed to the Nacogdoches Central Appraisal District, (936) 560-3447
  • Freeport Exemption. Freeport property qualifies for an exemption from ad valorem taxation only if it has been detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabricating. The City of Nacogdoches offers a freeport exemption, but the County does not. For more information, contact the Nacogdoches Central Appraisal District
  • State Motor Fuels Tax: Gas ($0.20), Diesel ($0.20), Gasohol ($0.20)
  • Unemployment Compensation Tax: In 2011, the minimum UI tax rate of 0.78% is paid by nearly 213,000 employers (or nearly 63% of all experience-rated employers). An employer paying the standard minimum tax will pay $70.20 in tax per employee in CY 2011. The maximum UI rate of 8.25% is paid by only 2.2% of Texas experience-rated employers. The average UI tax rate for 2011 is 1.96%.  FAQ regarding Unemployment Taxes
  • Workers Compensation Insurance.
  • Hotel Occupancy Tax: 13% on charge for sleeping accommodations (6% state and 7% city) 
  • The Texas Comptroller of Public Accounts collects more than 60 separate taxes, fees and assessments, including local sales taxes collected on behalf of more than 1,400 cities, counties and other local governments around the state.
  • Index of Frequently Asked Questions about Texas Taxes.

 
Nacogdoches Central Appraisal District
216 West Hospital Street
Nacogdoches, TX 75961
(936) 560-3447

 

 

Texas Incentive Programs

DISCLAIMER: The material contained in this Summary of State Incentives is provided for informational purposes only and cannot be construed as a commitment. Assumptions are based on creating jobs and providing a capital investment. Total jobs and capital investment have been included as eligible costs for the various incentive programs available. However, actual jobs and capital investment may vary from the assumptions made due to final determination of program eligibility and site location. 

Texas Enterprise Fund

The 78th Texas Legislature established the Texas Enterprise Fund to provide financial resources to help strengthen the state’s economy. The Governor, Lieutenant Governor, and the Speaker of the House must unanimously agree to support the use of the Texas Enterprise Fund for each specific project. Projects that are considered for Enterprise Fund support must demonstrate a project’s worthiness, maximize the benefit to the State of Texas and realize a significant rate of return of the public dollars being used for economic development in Texas. Capital investment, job creation, wages generated, financial strength of the applicant, applicant’s business history, analysis of the relevant business sector, and federal and local government and private sector financial support of a project will all be significant factors in approving the use of the Enterprise Fund. 

Read more about the Texas Enterprise Fund.

Emerging Technology

The $200 million Texas Emerging Technology Program is designed to help Texas create jobs and grow the economy over the long-term by expediting the development and commercialization of new technologies and attracting and creating jobs in technology fields that will form the backbone of our economy.

The program will work through partnerships between the state, institutions of higher education and private industry to focus greater attention on the research, development and commercialization of emerging technology. The Emerging Technology Program is dedicated to three areas:

  1. Regional Centers of Innovation and Commercialization (RCICs)
    These centers will become concentrated with applied R&D activities, be incubators (including specialized workforce training) for startup firms and encourage expansion of existing companies resulting from commercializing their developments.
  2. Matching grant funds
    Applied technology research and development projects that accelerate commercialization into production and have a demonstrated ability to receive or have received federal grants or non-state grants may apply for matching dollars from the Emerging Technology Fund. Grants such as Small Business Innovation Research grants, Small Business Technology Transfer grants, etc.
  3. Attracting research talent
    The state will help Texas public universities attract highly renowned research teams from universities and institutions in other states.
     

Texas Enterprise Zone

Under the statewide cap of 105 projects per biennium, a community with less than 250,000 in population may have up to four enterprise projects. A community with 250,000 in population or greater may have up to six enterprise projects.Upon a community designating a business as an enterprise project, and upon that project’s designation being approved by the state, the business would be eligible for the following incentives:

State Sales and Use Tax Refunds:

Beginning September 1, 2007, an enterprise project is eligible for a refund for all state sales and use taxes paid and used at the qualified business site. The total amount of any refund will continue to be predicated on investment amount and number of jobs created/retained. The refund can be an amount ranging from a minimum of $2,500 per job to a maximum of $7,500 per job as follows:

  1. If project investment amount is greater than $40,000 and less than $400,000, then refund amount is $2,500 per job up to a maximum of 10 jobs created/retained;
  2. If project investment amount is equal to or greater than $400,000 and less than $1,000,000, then refund amount is $2,500 per job up to a maximum of 25 jobs created/retained;
  3. If project investment amount is equal to or greater than $1,000,000 and less than $5,000,000, then refund amount is $2,500 per job up to a maximum of 125 jobs created/retained;
  4. If project investment amount is equal to or greater than $5,000,000 and less than $150,000,000, then refund amount is $2,500 per job up to a maximum of 500 jobs created/retained;
  5. If project investment amount is equal to or greater than $150,000,000 and less $250,000,000, then refund amount is $5,000 per job up to a maximum of 500 jobs created/retained;
  6. If project investment amount is equal to or greater than $250,000,000, then refund amount is $7,500 per job up to a maximum of 500 jobs created/retained; Receipts for purchases of building materials and machinery and equipment and payroll information are required to be retained as part of the audit process.

(Note: All contracts should separate the costs for building materials and/or equipment from the costs of labor and services in order to be eligible.)The refund for sales and use tax must be for all eligible items for use at the qualified business site.

Texas Capital Fund Infrastructure

The Texas Capital Fund Infrastructure Program is an economic development tool designed to provide financial resources to non-entitlement communities.

Funds from this program can be utilized for public infrastructure (water, sewer, roads, etc.) needed to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons. The minimum award is $50,000 and the maximum is $1 million. The award may not exceed 50 percent of the total project cost.

The Texas Department of Agriculture administers the Texas Capital Fund Program.

State Sales & Use Tax Exemptions

State Sales & Use Tax Exemptions

  • Manufacturing Machinery & Equipment
    Leased or purchased machinery, equipment, replacement parts, and accessories that have a useful life of more than six months, and that are used or consumed in the manufacturing, processing, fabricating, or repairing of tangible personal property for ultimate sale, are exempt from state and local sales and use tax. Texas businesses are exempt from paying state sales and use tax on labor for constructing new facilities. Texas businesses are exempt from paying state sales and use tax on the purchase of ma
  • Natural Gas & Electricity
    Texas companies are exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property. The company must complete a “predominant use study” that shows that at least 50 percent of the electricity or natural gas consumed by the business directly causes a physical change to a product.
  • chinery exclusively used in processing, packing, or marketing agricultural products by the original producer at a location operated by the original producer.

Texas Capital Fund Real Estate Development

The Texas Capital Fund Real Estate Development Program is designed to provide financial resources to non-entitlement communities. Funds must be used for real estate development (acquisitions, construction and/or rehabilitation) to assist a business, which commits to create and/or retain permanent jobs, primarily for low and moderate-income persons.

This program encourages business development and expansions located in non-entitlement communities. The minimum award is $50,000 and the maximum is $1 million. The award may not exceed fifty percent (50%) of the total project cost. Funds are provided with no interest accruing and with payments based on a 20-year amortization schedule. Total Texas Capital Fund participation from both Infrastructure program and Real Estate Development program may not exceed $1 million.

The Texas Department of Agriculture administers the Texas Capital Fund Program.

Ad Valorem / Property Tax Exemption

Freeport Exemption

A community may choose to offer the Freeport Exemption for various types of goods that are detained in Texas for a short period of time. Freeport property includes goods, wares, merchandise, ores, and certain aircraft and aircraft parts.

Freeport property qualifies for an exemption from ad valorem taxation only if it has been detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing, or fabricating. For more information, please refer to Texas Constitution Article 8, Section 1-J and Administrative Code. The City of Nacogdoches currently offers Freeport Exemption; Nacogdoches County does not offer it.

A company requesting a Freeport Exemption must apply at the Central Appraisal District, and the final tax assessed for each year is based on a percentage (per the application) according to the following formula: Total COGS (for calendar year) / COGS shipped out of state within 175 days (for calendar year) = Value of Freeport goods not subject to property tax.

 

Goods-in-Transit Incentive

House Bill 621 of the 80th Texas Legislature amends the Tax Code and the Government Code to add an exemption from ad valorem taxation for goods-in-transit.To qualify for the exemption, personal property used for assembling, storing, manufacturing, processing, or fabricating purposes would have to be acquired in Texas or imported into Texas and stored at a Texas location in which the owner of the goods does not have a direct or indirect ownership interest.

The goods-in-transit would have to be transported to another location in Texas or out of state no later than 175 days after the property was acquired in or imported into the state.

Oil and gas and their immediate derivatives, aircraft, and dealer's special inventories would not qualify for the exemption.

 

Pollution Control Equipment Incentive

A Texas constitutional amendment providing an exemption from property taxation for pollution control was approved in 1993. The intent was to ensure that compliance with environmental mandates, through capital investments, did not result in an increase in a facility’s property taxes.

A facility must first receive a determination from the Texas Commission on Environment Quality (TCEQ) that property is for pollution control purposes. That positive use determination is then provided to the local appraisal district, which must accept the TCEQ’s decision and grant the property an exemption from property taxes.

To be eligible for a positive use determination, the property must have been purchased, acquired, constructed, installed, replaced, or reconstructed after January 1, 1994, to meet or exceed federal, state, or local environmental laws, rules, or regulations.

Renewable Energy Incentives

Wind and Solar Energy Tax Exemptions and Deductions

Tax Code Section 171.056 extends a franchise tax exemption to manufacturers, sellers, or installers of solar energy devices.

The state also permits a corporate deduction from the state’s franchise tax for renewable energy sources. Business owners may deduct the cost of the system from the company’s taxable capital or deduct 10% from the company’s income. Wind energy qualifies under the term “solar energy” for the exemption and deduction under Sections 171.056 and 171.107.

For more information on the tax exemption, visit the State Energy Conservation Office website, or contact the Texas Comptroller of Public Accounts.

Texas property tax code permits a 100% exemption on the appraised value of solar, wind or biomass energy devices installed or constructed for the production and use of energy onsite. See Texas Property Tax Form 50-123, “Exemption Application for Solar or Wind-Powered Energy Devices” to claim this exemption.

Texas also offers a loan program for eligible efficiency technologies. The LoanSTAR Revolving Loan Program is available to schools, hospitals and local governments. The low interest loans are capped at a $5 million maximum and are required to meet certain technical guidelines including a detailed energy assessment report.

Texas Economic Development Act

In 2001, the 77th Texas Legislature enacted House Bill 1200 creating Tax Code Chapter 313, Texas Economic Development Act, to encourage large‑scale manufacturing, research and development, renewable energy, nuclear and integrated gasification combined cycle electric generation facilities capital investment projects in the state of Texas.

The law requires companies to invest a specified amount of money to qualify for a tax credit and an eight‑year limitation on the appraised value of a property for the maintenance and operations portion of the school district property tax. The local school district must elect to participate for the company to recognize this benefit.

The qualifying investment amount is determined on a sliding scale that begins at $100 million for large urban areas and $30 million for rural areas. The qualifying investment amount is reduced for areas with a lower tax base.

Moving Image Industry

In 2007, the 81st Texas Legislature enacted House Bill 1634 establishing The Moving Image Industry Incentive Program. Under the legislation, grants to promote industry growth in Texas can be made to applicant production companies.

The incentive is available in the form of a production grant equal to 5% of in-state spending, including wages paid to Texas residents. Grants are available upon project completion to features, television programs, television commercials and video games. Both live action and animated projects are eligible.

The maximum grant amounts available after September 1, 2007 are:

  • $2 million for features;
  • $2.5 million for television programs (for episodic series, $2.5 million per season);
  • $200,000 for a commercial, series of commercials or music videos; and
  • $250,000 for video games.

Available for review at the Texas Film Commission website are the specific eligibility qualifications for projects including investment thresholds, employment requirements and content. Specific incentive enhancements related to underused areas are provided.

City Tax Incentives

Tax abatement for the city of Nacogdoches will not be ordinarily considered for projects that would develop without such incentives unless it can demonstrate higher development standards, aesthetic improvements added, and/or other development and community goals achieved through the use of abatement. Tax abatements are granted to owners of improvements on real property. If an applicant leases a facility to which an application for tax abatement will relate, the agreement shall be executed with owner of the property on which the facility is located, as well as the lessee/applicant.

Within the context of these goals, the city will, on a case-by-case basis, give consideration to providing incentives as a stimulus for economic development in Nacogdoches. It is the policy of the city that said consideration will be provided in accordance with procedures and criteria outlined in this document. Nothing herein shall imply or suggest the city is under obligation to provide an incentive and/or any extension of any incentive given to any applicant.

Sec. 94-278. Criteria for Tax Abatement.

Any request for tax abatement shall be reviewed by the city and the proposed project must conform to the general guidelines specified below:

  1. Any request must involve a development project that will add at least five new fulltime jobs or retain at least five existing fulltime jobs or increase the ad valorem value by at least $250,000 in new construction, or $50,000 in rehabilitation of an existing structure.
  2. Project shall make a substantial contribution to development efforts in the city by enhancing either additional improvements or furthering redevelopment and preservation activities within special planning areas.
  3. Project shall comply with all current environmental standards.
  4. No construction shall have begun until application is approved.
  5. Competition within the city should not be increased by the project.

Applications for tax abatement incentives should provide a written narrative detailing how project relates to the above criteria. Architect’s drawings, elevations, renderings may be required to show how some standards will be met. These drawings, elevation and renderings shall be accurate in color, façade changes and landscape plans.

The subjective criteria outlined in section 94-278 will be used to determine if it is in the best interest of the city to provide tax abatement to a particular applicant. To determine amount abated on any increment in value added to the current ad valorem value of property the following objective criteria must be met:

  1. New industry or commercial establishment.

    Project Cost or Jobs (whichever is greater)
    Percent Taxes Abated by Year
    Project Cost
    Jobs
    1st
    2nd
    3rd
    4th
    5th
    $250,000
    -
    $400,000
    or
    5+
    100%
    80%
    60%
    40%
    20%


    **Any project with costs greater than $400,000 or which create more than 6 new jobs will be individually negotiated.

  2. Rehabilitation of existing industry or commercial establishment.
    Project Cost or Jobs (whichever is greater)
    Percent Taxes Abated by Year
    Project Cost
    Jobs
    1st
    2nd
    3rd
    4th
    5th
    $50,000
    -
    $250,000
    or
    5+
    100%
    80%
    60%
    40%
    20%


    **Any project with costs greater than $200,000 or creating more than 5 new jobs will be individually negotiated.
Tax Increment Financing
 
Tax increment financing is a tool that local governments can use to publicly finance needed structural improvements and enhanced infrastructure within a defined area. The cost of improvements to the area is repaid by the contribution of future tax revenues by each taxing unit that levies taxes against the property. Tax increment financing may be initiated only by a city.

Workforce Training

Training

Skills Development Fund. Partner with a Training Provider.

Self-Sufficiency Fund Program. Partner with a Training Provider.

On-The-Job and Customized Training
 

Money Saving Tools for Employers

Work Opportunity Tax Credit is a federal tax credit used to reduce the federal tax liability of private-for-profit employers. Employers can hire from eight different targeted groups.

Fidelity Bonding. The Texas Workforce Commission offers free fidelity bonding services designed to eliminate bonding as a barrier to employment and alleviate employer concerns about hiring "at-risk" job applicants.

IRS Tax Credits. There are actually quite a few tax credits available to help businesses.

 

County Tax Abatement

General Criteria
 
All applications must meet the following general criteria before being considered for tax abatement:
  1. The project expands the local tax base.
  2. The project creates permanent fulltime employment opportunities.
  3. The project would not otherwise be developed.
  4. The project makes a contribution to enhancing further economic development.
  5. The project must remain in good standing with all governmental and environmental regulations.
  6. The project has not been started and no construction by the applicant has commenced at the time the application is approved.
  7. The project must not have any of the following objections:
    • Have substantial adverse affect on the provision of government service on tax base;
    • The applicant has insufficient financial capacity;
    • Planned or potential use of the property would constitute a hazard to public safety,
    • Planned or potential use of the property would create adverse impact to adjacent properties:
    • Any violation of laws of the U.S., the State of Texas, or ordinances of Nacogdoches County, Texas would occur, or
    • It is in an improvement project financed with tax increment bonds.
Specific Criteria
 
If the project in the application meets the general criteria, is a facility of a targeted enterprise, and has a capital cost that exceeds $1Million then abatement of any or all of the increased value will be considered. In no case would tax abatement exceed the maximum allowed by state law, presently 100% for 10 years. Factors to be considered in determining the portion of the increased value to be abated and the duration of the abatement agreement include, but are not limited to the following:
  1. Total amount of the increased value.
  2. Total number of jobs created.
  3. Type of jobs created.
  4. Dollar value of payroll created.
  5. Other costs and revenues associated with the application.