If you’re looking for ways to expand your small business, but don’t know where to start, grants may be available to help fund your business growth. The best thing about grants? You don’t have to repay them. Grants are accessible from both the government and private entities for small businesses in Texas who need financial assistance.

Tax Incentives in Texas

With a stable regulatory environment, a vibrant, diversified, and competent workforce, and world-class facilities, it's no wonder Texas has been named the "Best State for Business" for 18 years.

There are multiple tax incentives offered to firms in Texas, including no corporation or personal income tax. Texas also provides tax incentives for franchise relocation, renewable energy incentives, R&D tax credits, and various state sales and use tax exemptions.

If you are wondering “What incentives does Texas offer for a small business?” you have come to the right place. We have created a list of incentives that Texas offers that you can apply for!

State Incentives

A range of local and state incentives are accessible to attract new, growing, and migrating companies in the Houston area. The Partnership will help you find possible economic incentives that are best suitable for your relocation and/or growth, as well as facilitate the incentives approach with local and state leadership. Texas invests in its future by providing competitive incentives to companies that create jobs and drive innovation in the state. This article describes some of the most popular state offerings managed by the Governor's Office of Economic Development and Tourism.

1. The Texas Enterprise Fund (TEF)

The Texas Enterprise Fund (TEF), for example, is one of the state's largest "deal-closing" programs and is an incentive for corporations whose proposals bring significant amounts of capital and job creation to the state's economy. Businesses considering Texas or another out-of-state location for a new or expanded facility can be granted competitive, performance-based grants to fund financial and workforce investment to get their projects up and running.

2. The Texas Enterprise Zone Program (EZP)

The Texas Enterprise Zone Program (EZP) is a nationwide sales and use tax refund programme aimed to encourage private investment and job development in economically distressed regions around the state.

3. Skill Development Fund (SDF)

Grants from the Skills Development Fund (SDF) are available to assist businesses in forming collaborations with local state community colleges and technical institutions to provide customized job training for new or existing personnel. The Texas Workforce Commission administers training and charges an average of $1,800 per trainee. Companies with less than 100 employees can apply through the Skills for Small Business initiative (workforce incentive).

4. Texas Capital Corporation

The Texas Capital Fund, which is conducted by the Department of Agriculture, is an economic and social development tool that provides financial means to non-entitlement societies for public infrastructure or investment in real estate needed to help a business that commits to creating and/or retaining permanent jobs (cash incentive).

5. Events Trust Funds

The Events Trust Funds scheme applies local and state revenues from sales and use taxes, auto rental taxes, hotel taxes, and alcoholic drink taxes produced during a specific time period. Eligible events are not limited to sports, but the venue must have been chosen in a highly competitive procedure.

6. Permit Assistance

The TCEQ and the Governor's Office have formed a partnership to assist businesses that may face unjustified delays in their environmental approval process for projects that potentially affect job creation or have a significant economic impact.

7. Product Development and Small Business Incubator Fund (PDSBI)

The Product Development and Small Business Incubator Fund (PDSBI) is a loan programme supported by the original bond issuances. The program's primary goal is to assist in the creation, production, and marketing of new or better products, as well as to encourage and stimulate small businesses in the state of Texas.

8. Texas Small Business Credit Initiative (TSBCI) 

The Texas Small Business Credit Initiative (TSBCI) seeks to support state initiatives that provide resources to help small businesses thrive and create new jobs by increasing access to small business financing. Furthermore, the program will aid small enterprises that have historically been marginalized, as well as those affected by the COVID-19 pandemic. The TSBCI is scheduled to receive more than $472 million, and the State of Texas is committed to staying up to date on the most recent program information issued by the United States Department of Treasury.

Local Incentives

Companies that want to invest in the Houston area, for example, can take advantage of a variety of local incentive schemes. Many cities throughout Texas have similar opportunities available.

1. Property Tax Abatement - Chapter 312

“A tax abatement is a local agreement between a taxpayer and a taxing unit that exempts all or part of the increase in the value of the real property and/or tangible personal property from taxation for a period not to exceed 10 years.”

Tax breaks are an economic development tool that municipalities, counties, and special districts can employ to attract new firms and assist the retention and growth of existing ones by exempting or cutting property taxes. Educational districts are not permitted to enter into abatement agreements.

Local governments frequently employ property tax exemptions to recruit new industries and commercial companies, as well as to encourage the retention and growth of current businesses. While tax breaks are only temporary, they can have a substantial long-term impact.

2. Chapters 381 and 380

These flexible incentives often take the form of property tax exemptions, loans/grants, infrastructural pledges, or payments of a percentage of the project's sales tax. Discussions on these incentives take place on a case-by-case basis between the local authorities and the developer. Chapter 380 is intended for use by cities, whereas Chapter 381 is intended for use by county governments. These agreements can be used alongside one another for one particular project.

3. Foreign Trade Zones (FTZs)

Foreign Trade Zones (FTZs) enable enterprises engaged in international trade to postpone payment of U.S. Customs import charges until their products and merchandise reach U.S. commerce. Items can be carried into Foreign Trade Zones (FTZs) without requiring formal U.S. Customs entry or paying U.S. Customs duties or excise duties until and unless they are imported into the U.S. Ad Valorem taxes on inventories may be waived in specific zones, depending on the FTZ sponsor approval.

4. Pollution Control Property Tax Abatement

The Tax Relief for Pollution Control Property Program (Prop 2) determines whether a facility uses certain assets or supplies for pollution reduction in whole or in part (a use determination).

Companies with facilities, techniques, and equipment used to manage air, water, or land pollution are eligible for Ad Valorem Property Tax Abatements. Businesses that want to apply for tax breaks for their efforts to reduce pollution can do so through the Texas Commission on Environmental Quality.

5. LEED Incentive 

The LEED (Leadership in Energy and Environmental Design) Green Building Rating System is the worldwide most widely used green building rating system. LEED, which is available for almost all building, community, and residential project types, provides a foundation for creating healthful, highly efficient, and cost-saving green buildings. LEED accreditation is a worldwide recognized mark of excellence in sustainability.

Wrapping Up

Companies in Texas can benefit from a variety of tax relief options. Texas's lack of corporate income taxes is a big inducement for businesses. While there are no state corporate income taxes in Texas, the state does collect a franchise tax on businesses with more than $1.23 million in revenues. In 2022-23, the retail and wholesale tax rate is 0.375%, and the other business tax rate is 0.75%.

Texas has the country's fifth-lowest fiscal burden per capita. According to the Tax Foundation, individuals pay 7.6% of their wages in state and local taxes. This is lower than the national average of 10.3%. That is nearly half the percentage in New York, which is 14.1%.

Tax breaks for businesses and individuals make Texas an appealing location for developing and migrating enterprises and their personnel.