Texas county approves up to 35 years of tax breaks for Tesla — Electrek

Commissioners in Fort Bend County, Texas, approved four agreements under which Tesla could receive up to 35 years of local tax breaks on equipment for a planned solar factory worth about $10 billion. The project, called Project Crystal Sun, is planned to be located near Richmond, southwest of Houston, Electrek reports.

The decision was supported by four votes, with none against. Acting County Judge Daniel Wong abstained because his engineering company had worked with Tesla. At the same time, Tesla has not yet made a final commitment to build the facility in Texas.

Breaks for equipment and inventories

One of the agreements provides for a full exemption from the county tax on manufacturing equipment and other tangible personal property at the plant for 10 tax years. The countdown will begin by default in 2029, but Tesla may move it to the first year after production starts — no later than 2031.

According to Tesla’s application, the project is valued at $10.1 billion: $1.52 billion is allocated to real property, while $8.6 billion is allocated to personal property, mostly manufacturing equipment. Land and buildings are not included in the exemption mechanism and will remain fully taxable.

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After the 10-year period ends, Tesla will pay tax on equipment, but the county will return 90% of that amount to it in the form of an annual grant over the following 20 years. A similar scheme is provided for manufacturing inventories through the Port Freeport foreign-trade zone: during the initial exemption period, the payment instead of tax will be zero, and afterward it will be 10% of the tax that would otherwise apply.

Conditions for Tesla

If Tesla averages at least 12,000 employees during any two consecutive years in the project’s first decade, the first five years of the grant period will provide for full tax reimbursement. The duration of the agreements would then increase to 35 years. This figure is 2,288 jobs higher than the company’s stated target of 9,712 employees.

To retain the breaks, Tesla must begin construction by June 30, 2027, start regular commercial production of solar cells by December 31, 2030, and invest $10 billion by the later of two dates: December 31, 2031, or two years after production begins. The company expects commercial production to begin in the first quarter of 2029.

The agreement also guarantees the county minimum revenue of $2 million annually. This amount will include 25% of Tesla’s real property taxes, the county’s 10% share of equipment taxes, and payments within the foreign-trade zone.