TWO “UNDER-THE-RADAR” PROPERTY TAX CONSTITUTIONAL AMENDMENTS UP FOR VOTE
© BRUSNIAK TURNER PC 2023
Lost among the 14 proposed constitutional amendments and overshadowed by the large tax relief package are two amendments exempting daycare centers and medical-biomedical products and manufacturing equipment.
EXEMPTIONS FOR CHILDCARE CENTERS: OWNED & LEASED
Proposition 2 allows local governments to grant property tax exemptions to childcare centers. Local governments may exempt anywhere from half the value of facilities to the entire value of facilities. “For profit” owners of facilities, including lessors to childcare facilities, qualify for exemption; however, lessors are required to pass on the exemption to their lessees in the form of rent reductions.
Affordable childcare was decreasing prior to the COVID pandemic. After COVID hit, many schools regularly closed, leading working parents to rely more heavily on childcare centers. The federal government provided financial relief to keep childcare facilities open, allowing working parents to remain in the workforce instead of staying home and caring for their children. In Texas alone, over $3 billion of direct relief was paid to childcare centers in 2022. The federal funding has ended, and a new crisis of affordable childcare is about to begin. The Texas economy already loses an estimated $9 billion annually because of a shortage of childcare facilities. The crisis may ultimately affect everyone.
This amendment also authorizes the legislature to establish limitations to ensure that tax relief is only provided to childcare centers delivering affordable care. As with all exemptions, the passage of this amendment will shift the cost of government onto the rest of the property tax base.
EXEMPTION FOR MEDICAL & BIOMEDICAL MANUFACTURERS
Proposition 10 authorizes a property tax exemption for finished medical and biomedical products and property used in the manufacturing or processing of finished medical and biomedical products.
The biotech and medical device industries have been exploding over the last decade. Growth accelerated during COVID due to increased federal funding. In 2022, the biotech industries and the medical device industries had national market values of nearly $200 billion and $1.4 billion, respectively. They are expected to grow to market values of $850 billion and $3.2 billion respectively by 2030. State governments have sought to become industry hubs by attracting companies with subsidies, tax breaks, and other incentives. Austin is already a strong candidate for a hub seeking to become a “life sciences powerhouse.” Austin has moved from 23rd to 10th in the nation for life sciences investments and development. Austin is now competitive with the major Research Triangle Park in North Carolina. Other Texas cities want to draw similar business to themselves.
The proposed tax exemption provides a tax incentive for biotech and medical device companies to open campuses and manufacturing sites in the state. However, the language of the amendment and accompanying legislation is very broad and could potentially exempt existing business and products that fall within the generic headings of biomedical and medical products. As is always the case with exemptions, the passage of this amendment would shift the tax burdens from these companies onto taxpayers.
By John Brusniak and Matthieu Belanger-Coast
17480 Dallas Parkway, Suite 210, Dallas, Texas 75287