When does the 10-year clock on a Texas property tax abatement start, the date the agreement is signed or a later date?

TX AG Opinion GA-0734: When does the 10-year tax abatement clock start?

Plain-English summary

A navigation district, through the Jefferson County Criminal District Attorney, asked when the maximum 10-year term for a property tax abatement begins. Tax Code section 312.204(a) lets an eligible city agree in writing with the owner of taxable real property in a reinvestment zone to exempt part of the property's value from taxation "for a period not to exceed 10 years." The statute caps the abatement at ten years but does not say what date the ten years are counted from, the date the agreement is signed or the date the project is substantially complete.

While the request was pending, the 81st Legislature answered the question by enacting Tax Code section 312.007 (passed in identical form as House Bill 3896 and Senate Bill 1458, effective June 19, 2009). That section defines the "abatement period" as the period during which the property covered by the agreement is exempt from taxation, and it provides that the taxing unit and the owner "may agree to defer the commencement of the abatement period until a date that is subsequent to the date the agreement is entered into," so long as the abatement period does not exceed ten years. The Legislature stated the new section was meant to clarify rather than change existing law.

Reading those provisions together, the opinion concluded that the maximum ten-year tax abatement period under section 312.204(a) may commence in a year after the year in which the agreement is signed. The ten-year limit attaches to the period during which the property is actually tax exempt, not to the calendar running from the date of the agreement.

Currency note

This opinion was issued in 2009. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Chapter 312 of the Tax Code has been reauthorized and amended several times since 2009. Confirm the current text of sections 312.007 and 312.204 before relying on anything below.

Who this opinion affected (as of 2009)

Cities and other taxing units granting abatements: The opinion explained that, under the newly enacted section 312.007, a taxing unit and a property owner could agree to start the abatement period on a date later than the date of the agreement, with the 10-year cap measured against the abatement period itself.

Property owners in reinvestment zones: The opinion described section 312.007 as letting an owner and the taxing unit defer the start of the exemption, for example to line it up with substantial completion of a project, without losing any of the ten allowable years.

Navigation districts and other overlapping taxing units: The opinion noted that when a city abates taxes under section 312.204, other eligible taxing units in which the property sits may execute their own abatement agreements governed by the same section, so the timing rule applied to them too.

Common questions

Did the AG say the abatement can be longer than 10 years?
No. The opinion was clear that the abatement period may not exceed ten years. What it allowed was starting that ten-year period on a date after the agreement is signed.

What changed in 2009?
The Legislature added Tax Code section 312.007, which defined the "abatement period" and expressly let a taxing unit and owner defer the start of that period to a date after the agreement, capped at ten years. The opinion read that section as clarifying existing law.

Why would a city want to delay the start of the abatement?
The opinion did not give business reasons, but it recognized that the parties could align the start of the exemption with a later date, such as when the project is finished and the new value comes onto the tax roll.

Background and statutory framework

Section 312.204(a) authorizes an eligible city to agree in writing with the owner of taxable real property in a reinvestment zone to exempt a portion of the value from taxation "for a period not to exceed 10 years" (Tex. Tax Code Ann. § 312.204(a) (Vernon 2008)). When a city abates taxes under that section, other eligible taxing units in which the property is located may also execute abatement agreements governed by section 312.204 (id. § 312.206(a) (Vernon 2008)), and a navigation district can be a taxing unit for chapter 312 purposes (id. §§ 312.002(g), 1.04). Section 312.204(a) caps the abatement at ten years but does not identify the date from which the ten years run.

The 81st Legislature enacted section 312.007 (H.B. 3896, § 2; S.B. 1458, § 2, eff. June 19, 2009), defining the "abatement period" as the period during which the covered property is exempt from taxation, and providing that the taxing unit and owner "may agree to defer the commencement of the abatement period until a date that is subsequent to the date the agreement is entered into, except that the duration of an abatement period may not exceed 10 years." The Legislature stated the section was "intended to clarify rather than change existing law." Construing the plain language (Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008)), the opinion concluded the ten-year maximum may commence in a year after the agreement is signed.

Citations

Statutes:

• Tex. Tax Code Ann. §§ 312.204(a), 312.206(a) (Vernon 2008); 312.002(g), 1.04
• Tex. Tax Code Ann. § 312.007 (H.B. 3896, S.B. 1458, 81st Leg., R.S., eff. June 19, 2009)

Cases:

• Leland v. Brandal, 257 S.W.3d 204 (Tex. 2008)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0734
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2009/ga0734.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

August 6, 2009

The Honorable Tom Maness
Jefferson County Criminal District Attorney
Jefferson County Courthouse
1001 Pearl Street, 3rd Floor
Beaumont, Texas 77701-3545

Opinion No. GA-0734

Re: Calculation of the maximum time allowable for tax abatement under Tax Code section 312.204(d) (RQ-0784-GA)

Dear Mr. Maness:

On behalf of a navigation district, you ask whether under Tax Code section 312.204(a), "the 10-year maximum allowable term of abatement begin[s] at the date of 'substantial completion of the project' or ... as of the date of execution of the agreement providing for the abatement[.]"[1] Section 312.204(a) authorizes an eligible city to "agree in writing with the owner of taxable real property that is located in a reinvestment zone ... to exempt from taxation a portion of the value of the real property or of tangible personal property located on the real property, or both, for a period not to exceed 10 years." TEX. TAX CODE ANN. § 312.204(a) (Vernon 2008) (emphasis added).[2] While section 312.204(a) limits the authorized exemption of the property from taxes — the tax abatement — to a maximum of ten years, it does not specify the date from which the maximum ten-year abatement period must be calculated.

Your request for an opinion was submitted to this office before the Eighty-first Legislature specifically addressed the issue you raise by enacting section 312.007. See Act of May 29, 2009, 81st Leg., R.S., H.B. 3896, § 2; Act of May 30, 2009, 81st Leg., R.S., S.B. 1458, § 2 (both containing identical language and to be codified at TEX. TAX CODE ANN. § 312.007) (effective June 19, 2009) [hereinafter H.B. 3896 and S.B. 1458]. Section 312.007(a) defines the term "abatement period" to mean "the period during which all or a portion of the value of real property or tangible personal property that is the subject of a tax abatement agreement is exempt from taxation." H.B. 3896, § 2; S.B. 1458 § 2 (emphasis added). Section 312.007(b) then provides:

Notwithstanding any other provision of this chapter, the governing body of the taxing unit granting the abatement and the owner of the property that is the subject of the agreement may agree to defer the commencement of the abatement period until a date that is subsequent to the date the agreement is entered into, except that the duration of an abatement period may not exceed 10 years.

H.B. 3896 § 2; S.B. 1458 § 2 (emphasis added).

Section 312.007 plainly allows a taxing unit and a property owner to agree to defer the start of the tax abatement period to a date after the date of the agreement covering the abatement. See H.B. 3896, § 2; S.B. 1458 § 2; see also Leland v. Brandal, 257 S.W.3d 204, 206 (Tex. 2008) (stating that to determine and give effect to the Legislature's intent, the court "look[s] first to the statute's language" and "[i]f the statute's language is unambiguous, its plain meaning will prevail"). The statute also plainly states that the tax abatement period — the period during which the property subject to the agreement is tax exempt — may not exceed ten years. See H.B. 3896, § 2; S.B. 1458, § 2; Leland, 257 S.W.3d at 206. In short, section 312.007 now expressly (i) provides that the maximum ten-year limit applies to the period during which the property covered by the agreement is actually exempt from taxes, i.e., the abatement period; (ii) permits the abatement period to start at a date later than the date of the agreement; and (iii) applies "notwithstanding any other provision of [chapter 312]." See H.B. 3896, § 2; S.B. 1458, § 2; see also H.B. 3896, § 4; S.B. 1458, § 6 ("Section 312.007 ... is intended to clarify rather than change existing law.").

Accordingly, we conclude that the maximum ten-year tax abatement period authorized under section 312.204(a) may commence in a year subsequent to the year in which the agreement providing for the abatement is entered into by the taxing unit and the owner of the property subject to the agreement.

SUMMARY

The maximum ten-year tax abatement period authorized under Tax Code section 312.204(a) may commence in a year subsequent to the year in which an agreement providing for the tax abatement is entered into by the taxing unit and the owner of the property subject to the agreement.

ANDREW WEBER
First Assistant Attorney General

JONATHAN K. FRELS
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee

[Footnote 1: Request Letter at 1 (available at http://www.texasattorneygeneral.gov).]

[Footnote 2: If taxes on property located in a city's taxing jurisdiction are abated pursuant to section 312.204, other eligible taxing units in which the property is located may also execute a tax abatement agreement with the owner of the property. TEX. TAX CODE ANN. § 312.206(a) (Vernon 2008); see also id. §§ 312.206(a) ("The execution, duration, and other terms of an agreement made under this section are governed by ... Section[] 312.204 ...."), 312.002(g) (stating that "'[t]axing unit' has the meaning assigned by [Tax Code] Section 1.04"). You tell us that the navigation district is a taxing unit for the purposes of chapter 312. See Request Letter at 1.]