The Texas Capital Access Fund Program was established by the 75th Legislature in September of 1997. The program is designed to increase the availability of financing for businesses and non-profit organizations that face barriers in accessing capital. It encourages financial institutions to support businesses that do not meet the requirements of conventional loans, lack sufficient collateral to qualify for conventional financing, or do not meet other business requirements. Eligible borrowers can be any small business with less than 100 employees, a medium-size business with employment of more than 100 but fewer than 500, or a non-profit corporation. The proceeds may be used for working capital or the purchase, construction, or lease of capital assets, which include land, buildings, and equipment. See ìDepartments and Agenciesî Finance for contact information.

The Linked Deposit Program was established to encourage lending to qualified businesses, which are historically underutilized businesses, child care providers, nonprofit corporations and small businesses located in an enterprise zone. This program offers lenders and borrowers a lower cost of capital.

Loan amounts range from $10,000 to $250,000. Eligible businesses may use the proceeds of a Linked Deposit loan for a variety of needs, including working capital, and the purchase, construction or lease of capital assets, which include land, buildings and equipment. Loans to start-up businesses are permissible, subject to the lenderís normal credit evaluation. See ìDepartments and Agenciesî Finance for contact information.

The Skills Development Fund is an innovative program created to assist Texas public community and technical colleges to finance customized job training for their local businesses. The Fund was established by the Legislature in 1995 and is administered by the Texas Workforce Commission. Grants are provided to help companies and labor unions form partnerships with local community colleges and technical schools to provide custom job training. Average training costs are $1,000 per trainee. However, the benefit may vary depending on the proposal. See ìDepartments and Agenciesî Workforce for contact information.

Entitlement communities may access the Section 108 program through HUD. The program allows entitlement communities the ability to borrow funds guaranteed by Section 108 through pledging their current and future Community Development Block Grant (CDBG) allocations (up to the loan amount) as security for the loan. HUD provides additional security for the loan (as a loan-loss reserve or debt-service) to reduce the exposure of a communityís CDBG funds. Economic Development Initiative (EDI) provides grants to local governments that can be used to enhance both the security of loans guaranteed through Economic Development Loan Fund and the feasibility of the large economic development and revitalization projects they finance. The guaranteed amount may be extended up to five time a communityís most recent CDBG allocation. Eligible activities include property acquisition, rehabilitation of publicly owned property, economic development activities, installation of public facilities, and other site improvements. See ìDepartments and Agenciesî HUD for contact information.

The Texas Comptroller of Public Accounts offers a refund of state taxes paid by companies owning certain abated property. A company who meets the following three conditions may apply for a refund 1) Paid property taxes to a school district on property that is located in a reinvestment zone established under Chapter 312. 2) Is exempt in whole or in part from property tax imposed by a city or county under a tax abatement agreement established under Chapter 312. 3) Is not in a tax abatement agreement with a school district.

The refund is equal to the amount of property taxes that would have been paid had the company entered into a school district abatement agreement with terms identical to the city or county abatement agreement, not to exceed the net state sales and use taxes and state franchise taxes paid or collected and remitted during that calendar year. The refund amount may also be limited by a statewide appropriation per year for this refund program. See ìDepartments and Agenciesî Comptroller for contact information.

The 76th Legislature passed Senate Bill 441 establishing franchise tax credits for certain research and development expenditures, jobs creation, and capital investment. These credits will become available to many taxpayers beginning with their franchise tax reports due on or after January 1, 2000. The research credit is available to corporations making research and development expenditures for research conducted anywhere in the state. Corporations make research and development expenditures in a strategic investment area of the stare will get a bonus credit. Jobs creation and investment tax credits are limited to corporations creating the jobs or making the investment in a strategic investment area of the state. Based on their relative unemployment rate and per-capita income, 115 counties qualify as full-purpose Strategic Investment Areas. Another four areas of the state qualify as full-purpose Strategic Investment Areas based on their selection as a federal urban enterprise community. In addition, corporations engaged in agricultural processing in counties with a population of less than 50,000 can apply for the jobs creation and investment credits. These counties are referred to as limited-0urpose Strategic Investment Areas. See ìDepartment and Agenciesî Comptroller for contact information.

The designation of specified areas as ìreinvestment zonesî is a local economic development tool used by municipalities and counties throughout the state of Texas. Reinvestment zones have been used to stimulate local economies by attracting new companies and encouraging the growth of existing businesses. These zones can be created for the purpose of granting local businesses ad valorem property tax abatements on a portion of the value of real and/or tangible personal property located in the zone, for a period of up to 10 years.

Special taxation entities having jurisdiction over a reinvestment zone (i.e., school districts, utility districts, and community college districts) may participate in executed abatement agreements; however, the special taxing districts may not designate reinvestment zones or initiate tax abatement agreements. Reinvestment zones are designated by local ordinance or resolution. See ìDepartment and Agenciesî Comptroller for contact information.

A community may choose to offer the Freeport exemption for various types of good 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. See ìDepartment and Agenciesî Comptroller for contact information.

Since 1989, voters in many Texas cities have had the option of imposing a local sales and use tax to help finance their communitiesí economic development efforts. Cities may adopt an economic development sales tax under Section 4A or Section 4B of the Development Corporation Act of 1979. Section 4A sales tax is eligible to cities in a county with a population of less than 500,000 if the new combined local sales tax rate would not exceed 2 percent and the city is not part of a rapid transit authority. A city that is eligible to adopt a sales tax under Section 4A may hold an election to adopt the tax under Section 4B if the new combined local sales tax rate would not exceed 2 percent. A city located in a county with a population of 750,000 or more is also eligible, but there is an additional eligibility requirement: the current combined sales tax rate cannot exceed 7.25 percent at the time of the election. A city with a population of 400,000 or more that is located in more than one county and has a combined sales tax rate that does not exceed 8.25 percent may also enact the Section 4B sales tax.

Section 4A tax proceeds may be used to fund any of thirteen types of expenditures under the Development Corporation Act. Two of the categories are pursuant to authorization under Section 4A of the Act. Under Section 4A, the Act specifically allows industrial development corporations to undertake projects, the primary purpose of which is to provide business airports and port-related facilities. The remaining eleven categories for expenditure of Section 4A tax proceeds are: manufacturing and industrial facilities, recycling facilities, distribution centers, small warehouse facilities, closed or realigned military bases, related facilities, facilities to promote new and expanded business development, facilities to promote job creation and retention, job training facilities, educational facilities, and targeted infrastructure.

The Development Corporation Act provides a wide variety of purposes for which Section 4B tax proceeds may be expended. Section 4B tax proceeds may be spent on land, buildings, equipment, facilities and improvements for items that fit under the definition of ìprojectî under Section 2(11)(A) of the Act. The Attorney General has concluded that the term ìprojectî encompasses the land buildings, equipment, facilities, and improvements that are suitable for any of the following: promotion of manufacturing and industrial facilities, recycling facilities, distribution centers, small warehouse and storage facilities, air or water pollution control facilities, development or redevelopment of closed military bases and facilities related to these projects, facilities to promote new and expanded business development, facilities to promote job creation and retention, job training facilities, education facilities and facilities for use by institutions of higher education, targeted infrastructure, athletic facilities parks and related public space improvements, tourism and entertainment facilities, commercial facilities, certain public facility improvements, transportation improvements, infrastructure improvements, other business-related improvements.

There are 431 cities that have passed the 4A and/or 4B Economic Development Tax that have generated an estimated total of $235,952,837 available for economic development purposes. See ìDepartment and Agenciesî Comptroller for contact information.


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