Texas Incentives Support Economic Development

Texas Economic Development puts forth wide-ranging incentives for Texas small business. Various programs assist companies responsible for job creation and innovation within the state. Among the resources supporting Texas commerce, several incentives administered by the Department of Economic Development Finance provide competitive investment in the state’s economic future.

Texas Enterprise Zone Program

The Texas Enterprise Zone Program (EZP) provides sales and use tax rebates for companies meeting certain qualifications. The program is specifically designed to spark private sector investment and create jobs in Texas’ most distressed economic regions.

In order to capitalize on the incentive, companies are nominates by individual communities. The process begins when a community files an application on behalf of a company seeking Enterprise Zone designation, which may include information provided by the company. Eligible applicants must met a capital investment threshold to qualify for the rebate incentive, and hiring practices must reflect the goals of the organization. Texas Enterprise Zone designees must employ

• veterans,
• members of economically disadvantaged groups,
• Enterprise Zone residents.

Enterprise Zone sales and use tax refunds are capped for maximum refunds. Qualified companies earn credits based upon their planned level of capital investment and the number of jobs created or retained at the approved business site. The Enterprise Zone incentive allows companies to apply for sales and use tax refunds on money paid during the organization’s eligibility period; credits are paid by the Texas Comptroller’s Office. Specific eligibility requirement include these and other stipulations:

• Jobs considered for the Enterprise Zone program must pay wages equal to or greater than competitive pay rates for similar jobs.
• Participating companies must achieve their capital investment and employment projections during their eligibility periods.
• In order to receive rebates, Enterprise Zone companies must first pay the sales and use taxes, and then request refunds
• Each state is granted a limited number of designations annually.
• Employment qualifications stipulate at least 25 percent of an organization’s workforce must be hired from disadvantaged groups, zone residents, and veterans. For companies with qualified business sites located outside Enterprise Zones, 35 percent of workers must come from the designated employee groups.

Skills Development Fund

The Texas Skills Development Fund is a job training program intentionally aimed at certain parts of the Texas workforce. The Fund offers custom local training for Texas businesses. Administered by the Texas Workforce Commission, the program strives to increase skills among workers, ultimately leading to higher wages for members of the Texas workforce.

Uniting businesses, community and technical colleges, and workforce development organizations in a singular vision for Texas workers, the Skills Development fund backs employers and trade unions with financial assistance for training. Specifically, the fund finances the design and implementation of job training projects required to compete and expand in Texas commercial markets.

Becoming a partner and receiving grant money require participants meet various eligibility requirements, including specifics such as:

• To be considered for Skills Development grants, employers and trade unions seeking money must first partner with eligible grant applicants, drawn from community colleges, technical colleges, Texas Engineering Extension Service, and eligible community non-profits aligned with these organizations.
• Accepted applicants must take an active role in the design and implementation of job training programs.
• Employees completing the job training program must be paid competitive wages, reflecting industry standards for the paid positions.
• Applicants must disclose other state and federal assistance received for job training programs.

Skills Development grants are limited to $500,000 for each participating business. In 2019, the program helped retrain more than 9,000 workers, and also assisted with the creation of nearly 4,000 new jobs during the year. Grants typically run for 12 months, providing financial assistance for tuition, instructor fees, curriculum development, and course materials. Certain ancillary costs, such as employee drug tests and wages are not eligible for reimbursement under the program.

Product Development and Small Business Incubator Fund (PDSBI)

PDSBI grants long-term loans to small business incubators and accelerators, as well as providing financial assistance for product development companies. The alternative capital resource aims at businesses unable to generate full financing in traditional capital markets.

Program participants benefit from two distinct funds: Product Development and Small Business Incubator.

The Product Development Fund exists to help Texas businesses develop new and improved products. Money awarded through the program can be used for development, commercialization, and production within the state. The Fund does not offer resources for pure research, instead requiring money to be used developing

• Inventions
• Devices
• Techniques
• Processes

Eligible applicants receive asset-backed loans typically ranging in amounts from $1-5 million. The low, variable interest rate loans can be used for capital infusions or meeting working capital requirements. Loan terms typically extend 15-20 years.

The Small Business Incubator Fund strives to assist development among new and existing small businesses in the State of Texas. Eligible program participants represent small businesses meeting standards such as:

• Is physically located within the State of Texas or employing at least 51% of workers from the state
• Employs fewer than 100 full-time workers
• Is independently owned and operated

In addition to businesses that meet these requirements, any business is also eligible if the entity is likely to develop or expand small business opportunities within the State of Texas – business incubators, for example.

Benefits of the Small Business Incubator Fund are similar to those available for qualified Product Development Fund applicants. Asset-backed loans are offered in both cases, with industry preferences going to nanotechnology, semiconductor, biotechnology and biomedicine companies.

Texas Enterprise Fund

Texas Enterprise Fund (TEF) exists to close deals. The program was specifically conceived to help companies make locating decisions, when a Texas work site is being considered alongside another out of state location.

TEF funding is reserved for companies planning new projects within the State of Texas, including opening and expanding new facilities. Qualified applicants expect to make substantial capital investment and create a significant number of jobs as a result of expansion initiatives. In order to benefit from the Fund, a Texas business site must be in direct, active competition with another proposed location outside the state.

Before awarding funds, a uniform analytical model is applied to each applicant. Deal closing grants are then calculated, based upon the average wage of new employees. Among other variables, the formula accounts for the proposed hiring timeline, the number of jobs being created by the new project, and adjustments made relative to the total amount of capital investment resulting from the expansion. Qualified candidates meet these and other eligibility requirements for TEF assistance:

• The new project must create at least 75 full-time jobs in urban areas, or 25 jobs at rural sites
• The Texas site must be in direct competition with another location and the company must be undecided
• Wages for newly-created jobs must meet or exceed average county wages for the locale
• The project must have local support, including financial backing from community resources
• The initiative must bring substantial capital investment to be considered for Enterprise Fund support
• Successful applicants are well-established with sound financials

Various government incentives assist Texas small business professionals and entrepreneurs exploring opportunities within the state. These funds and programs represent only a few of the capital resources available to Texas small business owner-operators.