- May 02, 1996
- All Texas Issuing Offices
- Tax Abatement (Chapter 312, Texas Tax Code)
Texas law allows "tax abatement" or relief from taxes on improvements made to land to encourage development or redevelopment, to create jobs, or to revive a substandard area. The city or county must designate a reinvestment zone. The owner of the land within the zone may then sign tax abatement agreements with one or more taxing unit (e.g., county, city, school district). A copy of the tax abatement agreement is available from the National Legal Department in Houston.
The tax abatement agreement allows partial or complete tax exemption for 10 years or less only for new improvements added after the date of the agreement. The taxing unit may recapture the reduction in taxes if the owner defaults in the agreement. For example, the owner may default by failure to complete the improvements or by failure to pay the taxes on the land and prior improvements. If the taxing unit consents, a new buyer may assume the agreement or sign a new agreement. If a sale occurs without approval, the tax abatement ends, full tax amounts are owed for the current year, and there normally is no recapture for prior years.
The tax certificate or tax search should reflect the tax abatement. It may say "abat" or similar language. The improvements often are shown on a separate tax account from the land. The land will not be exempt.
If the tax certificate or tax search shows that the improvements are subject to tax abatement, you should:
- Verify with the taxing units that the tax abatement agreement remains in
effect and obtain the date of and parties to the agreement.
- Except in Schedule B to each tax abatement agreement as follows:
"Terms, conditions and stipulations of Tax Abatement Agreement between __________ and _________ dated ________."
- You may delete the rollback tax language from the Mortgagee Policy or Binder if there is no special use valuation (such as agricultural or open space use). The exception to the Tax Abatement Agreement incorporates the recapture and abatement provisions.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- Related Bulletins:
- Underwriting Manual:
- TX 19.04 Taxes And Assessments
- Exceptions Manual: