On February 22, 2024, Governor of Texas, Greg Abbott (R-TX), signed House Bill 5 (HB5) following the 88th Regular Legislative Session. The “Texas Jobs, Energy, Technology, and Innovation (JETI) Act,” which was created by the bill, has emerged as an initiative reflective of Texas's plan to foster a business-friendly environment. The passage of HB5 also underscores a legislative consensus on the importance of establishing new economic development incentives to attract large, capital-intensive projects that will create jobs and support local communities.
At its core, the JETI Act is designed to attract and retain large-scale economic development projects through a competitive economic incentive program. It facilitates agreements between companies, school districts, and the governor’s office, offering a 10-year limitation on the appraised value for school district maintenance and operations (M&O) tax, based on certain job creation and capital investment thresholds.
The program specifically targets sectors such as manufacturing, natural resource development, high-tech infrastructure, and dispatchable electricity generation facilities. Additionally, projects situated in qualified Opportunity Zones are eligible for an enhanced tax incentive.
“The JETI program is a new, transparent economic development incentive tool to help our communities continue to attract transformational capital investments that will create good-paying jobs for generations to come. “Texas is America’s jobs engine, thanks to our welcoming business climate, robust infrastructure, and skilled and growing workforce. But we cannot be complacent as we now compete both nationally and globally in industry sectors critical for growth tomorrow.”
- Governor of Texas, Greg Abbott (R-TX)
JETI Program Benefits
The primary benefit of the JETI program is for a company to enter into an agreement with a school district and the governor’s office that results in a substantial reduction of the appraised value of a property for school district maintenance and operations (M&O) taxing purposes. This reduction is set at 50% over a 10-year period, contingent upon meeting certain job creation and capital investment thresholds (described below). For businesses located in qualified Opportunity Zones, the program offers an additional 25% reduction.
Project Eligibility
- The property to which the incentive applies must be wholly owned or leased and used as part of an eligible project by the applicant.
- The project must construct or expand a new or existing facility. This may be a manufacturing facility, a facility related to utility services including dispatchable electric generation, a facility related to the development of natural resources, or a facility engaged in the research, development, or manufacture of high-tech equipment or technology.
- The project could also involve the construction or expansion of critical infrastructure.
- Projects that involve non-dispatchable electric generation facilities or electric energy storage facilities are not eligible. Dispatchable electricity generation refers to the capacity of power sources to be actively controlled and adjusted by grid operators in response to fluctuations in demand. Certain renewable energy sources like wind and solar power are not able to be controlled by operators and are therefore not considered dispatchable. Nonetheless, alternative renewable energies exist that can be dispatched directly, without the need for additional energy storage systems. These include hydroelectric, biomass, geothermal, and ocean thermal energy conversion.
Job Creation and Investment Requirements
The number of required jobs and the minimum investment amount vary based on the population of the county where the project is located.
Example JETI Project
Below, we have provided two examples of how the program would impact projects, depending on the capital investment and jobs impact.
Example #1 – A company is located in an Opportunity Zone
Assume a manufacturing company wants to make a $200 million capital investment for a new manufacturing facility in the Galena Park School District, supporting 75 jobs, in an Opportunity Zone. The property the company is investing in has an assessed value of $50 million. As the investment is in an Opportunity Zone, the company would receive an estimated benefit of $3,422,348 over 10 years.
Example #2 – A company is not located in an Opportunity Zone
For comparison purposes, if a company were to consider this same investment, jobs impact, and property value ($200 million, 500 jobs, and $50 million) at a property that is not within an Opportunity Zone, they would only receive an estimated benefit of $2,281,566 over 10 years.
Resources
- Application Forms
- Governor Greg Abbott’s Press Release
- House Bill 5 - Legislative Bill Text, 88(R)
- Texas Comptroller Summary of the Jobs, Energy, Technology, and Innovation Act (JETI)
- Texas Administrative Code – Subchapter O
- Chapter 403
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
