Texas HB 5 Tax Abatement: Qualifying Projects, Thresholds, and Approval

The Texas HB 5 tax abatement, formally the Jobs, Energy, Technology, and Innovation Act (JETI), gives qualifying companies a 10-year reduction in school district maintenance and operations (M&O) property taxes on large capital projects in Texas. Signed by the 88th Legislature and effective January 1, 2024, the program replaced the expired Chapter 313 incentive and applies to both new construction and expansions.¹ Minimum investment ranges from $20 million to $200 million depending on where the project sits.

How the Tax Break Works

During the 10-year incentive period, eligible property is taxed at a reduced appraised value for school district M&O purposes. In most cases the appraised value is capped at 50% of market value. Projects inside a federally designated qualified opportunity zone get a steeper cut, with appraised value capped at 25%.²

Before the incentive period even begins, the construction phase carries a full 100% M&O abatement. No M&O taxes are owed on eligible property until the project is operational.

Unlike Chapter 313, JETI has no supplemental payments to school districts. Chapter 313 companies routinely paid districts up to $100 per student per year on top of the abated taxes. HB 5 removes that mechanism.¹

Which Projects Qualify

The statute recognizes five categories of eligible projects:

Manufacturing facilities, whether new plants or expansions of existing operations.
Dispatchable electric generation, meaning power plants whose output can be controlled by human operators, such as natural gas facilities. These are exempt from the job creation requirements that apply to other project types.²
Natural resource development, including facilities that extract or process natural resources.
High-tech equipment research, development, or manufacturing, including semiconductor fabrication.
Critical infrastructure the state considers essential.

Two categories are barred outright: nondispatchable electric generation (wind, solar, and other renewables whose output depends on conditions outside human control) and electric energy storage such as battery installations.³ Residential development is not a listed category and does not qualify.

Investment and Job Minimums by County

Thresholds scale with county population. There are four tiers:

Counties with 750,000 or more residents: at least $200 million invested and 75 required jobs.
Counties with 250,000 to 749,999 residents: at least $100 million invested and 50 required jobs.
Counties with 100,000 to 249,999 residents: at least $50 million invested and 35 required jobs.
Counties with fewer than 100,000 residents: at least $20 million invested and 10 required jobs.

Both the investment and job numbers must be met by the end of the first tax year of the incentive period. From then on, the company has to maintain at least that average number of jobs every subsequent tax year until the agreement expires.⁴

What Counts as a Required Job

Headcount alone will not satisfy the requirement. A “required job” must pay at least 110% of the county’s average weekly wage for manufacturing, an industry-specific benchmark rather than a general county average.¹ Full-time positions must involve at least 1,600 hours of work per year, but hitting the hour threshold does not count unless the wage floor is also met.

The Compelling Factor Test

Meeting the numbers is not enough. The Comptroller separately decides whether the project actually needs the incentive, through what the statute calls a “compelling factor” determination. The company has to show that it would not make the proposed investment in Texas without the agreement, typically by documenting alternate sites in other states or countries under serious consideration.²

The Comptroller’s office weighs project financials, real estate transactions, existing infrastructure, the company’s current facilities, and broader market conditions. If the review concludes the project would likely happen in Texas regardless, the application can be denied. A company claiming it needs the incentive after already buying land or signing local contracts will face obvious credibility problems.

Who Has To Approve

Three separate approvals are required before an agreement is finalized, and each has its own clock:

The Comptroller has 60 days to review the application and issue a recommendation, which is sent to both the Governor’s office and the school district along with the full application package.⁵
The Governor’s office has 30 days from receiving the recommendation to agree to the application.
The school district has 30 days from the recommendation to decide, and must hold a public hearing with at least 15 days’ advance notice before voting.

Both the Governor and the school district have to approve. If either declines, the agreement cannot move forward.⁵ The Governor’s role is new. Chapter 313 agreements involved only the Comptroller and the school district.

Applications are submitted electronically through the Comptroller’s eSystems portal, and the applicant must also show proof of a $30,000 application fee paid to the school district.⁵

Compliance After Approval

Winning the agreement is the start of the obligation, not the end of it. Each agreement holder has to file a biennial compliance report with the Comptroller by June 1 of every even-numbered year throughout the incentive period, documenting that the required jobs and investment commitments are being maintained.⁶ The report requires an authorized representative’s signature attesting to the accuracy of the information.

Missing the job or investment benchmarks in the agreement can trigger termination or recapture of previously abated taxes.² With a two-year reporting cycle, a company that falls behind can compound the problem before the next filing window forces a reckoning.

What Changed From Chapter 313

For companies coming from the old program, the major shifts are:

Renewable energy is out. Chapter 313 allowed wind and solar; JETI bars all nondispatchable generation and energy storage.³
Expansions are in. Chapter 313 covered only new construction; JETI covers both.¹
The Governor now has a role, adding political oversight that did not previously exist.
No supplemental payments to school districts beyond the $30,000 application fee.
Higher job minimums. Chapter 313 required 10 or 25 jobs depending on the county; JETI ranges from 10 to 75 across four tiers.⁴
Full 100% M&O abatement during construction, before the 10-year incentive period begins. Chapter 313 taxed property at full value during that phase.

1
Office of the Texas Governor. Texas Jobs, Energy, Technology and Innovation (JETI)
2
Texas Comptroller of Public Accounts. Jobs, Energy, Technology and Innovation Act (JETI)
3
State of Texas. Texas Government Code GOVT 403.602 – Definitions
4
State of Texas. Texas Government Code 403.604 – Required Jobs and Minimum Investment
5
Texas Comptroller of Public Accounts. JETI Process and Timeline
6
Legal Information Institute (Cornell Law School). 34 Texas Administrative Code 9.5009 – Biennial Compliance Report