The Texas Enterprise Zone Program (EZP) offers a state sales and use tax refund worth $2,500 per qualifying employee at a qualified business site. The maximum benefit is subject to the type of project designation determined by the company’s level of capital investment and associated new or retained jobs at a qualified business site.
How Texas Enterprise Zone Can Help Business Expansion or Retention Projects provides an overview of the EZP program. This article will focus on the following nuances that are unique to this program.
- Recent legislative changes allowing for remote employees
- Despite the program’s name, applicants are not required to be located in an enterprise zone
- Retroactive 90-day window
What Is a Qualified Employee?
Since the COVID-19 pandemic, many companies have implemented permanent hybrid or remote work schedules, allowing employees to work a portion of their time off-site. In recognition of the changing work environment, House Bill 1515 was passed on June 12, 2023, expanding the definition of qualified employee to the following:
- Is a Texas resident
- Works for a qualified business
- Receives wages from the qualified business from which employment taxes are deducted
Additionally, to be considered a qualified employee, an individual must meet one of the following qualifications:
- The person performs at least 50% of their service for the business at the qualified business site
- If the person engages in the transportation of goods and services, the person reports to the qualified business site and resides within 50 miles of the qualified business site
- If the person engages in services off-site, the person is assigned to the qualified business site and resides within 25 miles of the qualified business site
The above modifies the widely utilized Texas EZP to meet the needs of employers who implement permanent hybrid or remote work schedules. Most notably, an employee is no longer required to perform at least 50% of their service at the qualified business site. The new statute allows employees who work off-site to qualify if they live less than 25 miles from the qualified business site.
Enterprise Zone Location Not Required
Unlike most other states’ enterprise zone programs, a business location doesn’t need to be situated within an enterprise zone to qualify for the Texas EZP.
A business location outside of any designated enterprise zones may still qualify as an enterprise zone project and receive related benefits, upon approval. Location inside or outside of an enterprise zone will determine the percentage threshold for certifying new jobs over the designation period.
- If the project is located within a designated enterprise zone, 25% of newly hired employees must be economically disadvantaged, residents of a zone, or veterans
- If the project is located outside of a designated enterprise zone, 35% of newly hired employees must be economically disadvantaged, residents of a zone, or veterans
90-Day Window
Generally, with most other incentive programs, a company can’t invest or create new jobs until they’re approved the incentive. The Texas EZP allows a 90-day window to look back and capture investment and new jobs created at the qualified business site before the application due date.
Below is a chart for fiscal year 2024–2025 listing program deadlines.
Fiscal Year 2024 – 2025 Biennium Program Deadlines
Applications are accepted every quarter with deadlines falling on the first working day of March, June, September, and December. The 90-day window column lists the dates a qualified company can start to make its investment and create jobs at its facility. For purposes of the 90-day window, weekends and holidays are excluded, which results in the inclusion of approximately four months before the application deadline.
Looking for Texas Enterprise Zone Benefits?
Whether or not your current or future location is within an enterprise zone, you can work with a local community to secure enterprise zone benefits. This process can be complex, but in simple terms, you’ll be required to:
- Obtain the support of your local community to nominate the project as an enterprise zone project
- Work with local government to draft a nominating ordinance or resolution
- Complete a Texas enterprise zone application
- Receive an enterprise zone project designation by the state
- Meet compliance obligations to monetize enterprise zone benefits
We’re Here to Help
Contact your Moss Adams professional if you have questions about the EZP, specifically site selection projects or how to align your business expansion strategy with incentives such as enterprise zone benefits.
You can also find additional resources with our Tax Credits & Incentives Services.
Additional Resources