Companies say they’re being denied Texas tax breaks as a state agency is overwhelmed with applications

Glenn Hegar speaks at The Texas Tribune Festival on Sept. 23, 2022. Hegar said his office has seen an “extraordinary number of applications from companies seeking to secure an incentive” under the Chapter 313 corporate property tax savings program before it expires. (Credit: Eddie Gaspar/The Texas Tribune)

Days before the expiration of a state program that provides billions of dollars in property tax breaks to businesses moving to Texas, two companies have gone to court arguing they’re being frozen out from the last-minute savings due to an overwhelmed state agency.

The two renewable energy companies say the Texas comptroller’s office, which reviews the applications to the corporate relocation or expansion incentive program, has denied their requests for more than $20 million in tax savings because the agency can’t handle the number of entities seeking approval for tax incentives before the Dec. 31 deadline.

In 2021, the Legislature opted to let the program, known as Chapter 313, die after complaints that it amounted to “corporate welfare.” But companies approved for the savings in 2022 can still receive them for 10 years, and hundreds of companies seeking to beat the deadline have flooded the comptroller’s office with requests for the tax breaks.

Stetson Renewables Holdings LLC and Ogallala Renewable Project LLC submitted their applications in May 2022. In a request to the Texas Supreme Court filed Tuesday, their attorneys said Comptroller Glenn Hegar informed them that the Chapter 313 applications were received before the deadline and they were eligible for incentives.

But after eligibility is determined, the comptroller’s office is required to conduct an economic impact evaluation on the application within 90 days, the companies say. The attorneys asserted that Hegar failed to complete the review in time, which resulted in the applications’ denial.

“Thus, despite having an obligation that the Comptroller ‘must’ take action within 90 days, the Comptroller has used the expiration of that 90 day period as the reason for not providing the economic impact evaluation at all and for not issuing a certificate,” the attorneys say in their filing.

In a statement Tuesday, Hegar said his office has seen an “extraordinary number of applications from companies seeking to secure an incentive under the current program.”

He noted his staff had to manage a workload that has significantly increased in the past six months, despite no additional staffing support from the Legislature.

The companies filed Chapter 313 applications for wind and solar energy projects located in five different independent school districts across Texas: Bynum ISD, Hart ISD, Holliday ISD, Miller Grove ISD and Sulphur Springs ISD. They were informed of their denials last week. They claim in the filing that their applications were rejected, even though some companies — including the electric car company Tesla, owned by Elon Musk — applied for the savings after them and were still approved. Tesla applied for the tax break to build a plant that produces battery-grade lithium hydroxide.

“The Comptroller’s failure to perform his statutory obligations and issue Certificates is jeopardizing approximately $773,550,000 in proposed capital investments in Texas, $27,001,784 in projected incentives, and projected minimum tax and other payments of $29,676,6001 to the school districts,” the filing says.

According to the companies’ applications filed with the school districts named in the letter, the five projects would result in the creation of six full-time positions. The companies requested a waiver of the job creation requirement in each of their applications.

Under the Chapter 313 program, manufacturing and energy companies apply to local school districts for a 10-year discount on their property tax bills in exchange for building or expanding in the community and, in a number of cases, creating new jobs. The Texas comptroller’s office must also approve those agreements.

There’s no downside for school districts to approve the tax breaks, because any foregone revenue for public schools is made up for by the state. That shift of state dollars, critics say, leaves less money on the table for other state services, such as health care or public safety.

Schools can also sign agreements directly with the companies for a supplemental payment in exchange for approving the tax break, which fosters inequity in funding among school districts, critics say.

“It is shameful to take money from schoolchildren to line the pockets of these wealthy corporations,” said Bishop John Ogletree of The Metropolitan Organization in Houston, in a statement Tuesday opposing a different company’s Chapter 313 application to Gregory-Portland ISD.

Hegar said his office will certify more than 300 projects this year. He criticized the companies’ request of the state’s Supreme Court with roughly two weeks left in the year.

“Despite receiving billions of dollars in property tax abatements over the life of the program and potentially billions more in approved incentives just this year, these companies and their attorneys are asking Texas taxpayers to shoulder even more despite the Legislature’s decision to discontinue the program,” Hegar said in a statement.

Jolie McCullough contributed to this story.