Texas JETI Incentives Replace Chapter 313 | Five Points Strategic Advisors

For years, Texas was one of the most aggressive states in the country when it came to using tax incentives to attract large capital investments. At the heart of its strategy was the Chapter 313 program, formally known as the Texas Economic Development Act. However, the program was allowed to expire at the end of 2022, leading to significant changes in how Texas approaches corporate site selection and economic development. In its place, the Texas Legislature introduced the Jobs, Energy, Technology, and Innovation Act (JETI), but the transition has been anything but smooth.

The Rise and Fall of Chapter 313

Chapter 313 was established in 2001 as a way to encourage large-scale capital investment in Texas by providing school district property tax abatements for qualifying projects. Companies that committed to certain job creation and investment thresholds could receive substantial property tax reductions for up to 10 years, making Texas an attractive destination for businesses in industries such as manufacturing, energy, and technology.

By the end of the program, it was approving approximately 50 projects per year, playing a crucial role in the state’s economic growth. However, despite its success in attracting investment, Chapter 313 faced increasing criticism. Detractors argued that the program lacked sufficient oversight, leading to cases where companies received tax breaks without delivering on promised job creation. Additionally, critics pointed out that the program disproportionately benefited renewable energy projects, something that became a point of contention in the state’s political landscape.

Ultimately, the Texas Legislature opted not to renew Chapter 313, and it officially expired on December 31, 2022.

The Introduction of JETI: A Different Approach to Incentives

With the expiration of Chapter 313, Texas lawmakers sought to craft a new incentive program that would address some of the criticisms of its predecessor while still keeping the state competitive for large-scale corporate investments. This effort resulted in the passage of the JETI Act in 2023.

JETI introduced a more restrictive framework for tax incentives. One of the most notable differences is that renewable energy projects are no longer eligible. Under Chapter 313, renewable energy projects—particularly wind and solar developments—had made up a significant portion of the program’s beneficiaries. The exclusion of these projects under JETI signals a major shift in Texas’ economic development priorities, favoring traditional industries such as manufacturing, oil and gas, and semiconductor production.

Additionally, JETI imposes stricter requirements for job creation and capital investment. It also includes more stringent oversight mechanisms to ensure that companies receiving incentives are delivering on their commitments.

A Slow Start for JETI

Despite the introduction of JETI, the transition away from Chapter 313 has been anything but seamless. In the first year of JETI’s implementation, only a handful of projects have been approved—far fewer than the 50 or so projects that were typically approved annually under Chapter 313.

The slow adoption of JETI raises questions about whether Texas remains competitive in attracting major corporate investments. With fewer companies applying for incentives, there is concern that the state’s ability to attract large-scale projects could diminish, especially in industries that require significant upfront capital investment.

The Future of Texas Incentives

The expiration of Chapter 313 and the slow rollout of JETI mark a significant shift in Texas’ economic development strategy. While JETI aims to create a more transparent and accountable incentive structure, its reduced scope and eligibility criteria could lead to fewer investment opportunities for the state. In response, local economic developers have continued to step up to assist with economic development, working to bridge the gap left by the transition from Chapter 313 to JETI.

For companies evaluating Texas as a potential site for investment, understanding these changing incentive landscapes is crucial. Firms looking to capitalize on available benefits must carefully assess whether their projects qualify under JETI or if alternative state and local incentives may be a better fit. Five Points Strategic Advisors is here to assist businesses in navigating these complexities, ensuring they make informed decisions and maximize available opportunities.

As Texas policymakers continue to assess the effectiveness of JETI, businesses and economic development professionals will need to stay informed and proactive in navigating the new incentive framework. Whether JETI will ultimately prove successful or lead to further adjustments remains to be seen, but what is clear is that Texas’ approach to economic incentives has entered a new era.