Introduction
In 2025, Texas continues to lead in attracting data centers with property-tax abatements under Chapter 312. For cloud infrastructure, AI compute farms, and hyperscale storage hubs, this incentive can mean millions in local tax savings.
If you’re planning or expanding a data center in Texas, here’s how Chapter 312 abatements work—and how to secure one.
Texas Code References
- Texas Tax Code §312 – Property tax abatement agreements
- Texas Property Tax Code §1.04(7) – Defines eligible property
- Local Government Code – Governs negotiation with city/county
What is Chapter 312?
Chapter 312 allows local governments (cities, counties) to reduce or eliminate property taxes on improvements for a set period (often 5–10 years).
For data centers, this can include:
- Server racks and IT hardware
- Cooling systems and backup power
- New buildings or facility expansions
Agreements must be negotiated before construction begins.
Who Qualifies in 2025?
To qualify, a project must:
- Be capital intensive ($5M+ in urban, $1M+ in rural areas)
- Create or retain local jobs
- Apply before construction starts
Local governments may have custom guidelines, so consult county-level economic development offices early.
Example: Edge Compute Hub in Houston
Example: TerraCloud, a modular data center startup, begins a $12M facility in Harris County. Before breaking ground, they:
- Negotiate a 7-year abatement on property improvements
- Agree to hire 20 local technicians
- Receive a 70% reduction in M&O property tax
They save approx. $480,000 annually, boosting ROI significantly.
Step-by-Step: Claiming a Chapter 312 Abatement
- Pre-Application Review
Contact local development authority with project scope. - Submit Proposal
Include capex budget, timeline, job projections, and maps. - Negotiate Agreement
Municipality drafts an ordinance and abatement contract. - Get Final Approval
City council or county votes to authorize. - Maintain Compliance
Meet job/hiring benchmarks and annual reporting.
Conclusion
With Chapter 313 sunset, Chapter 312 is now the top tool for property-tax relief in Texas.
Data centers—especially in energy-abundant regions like West Texas or Austin—should lock in these abatements early to reduce long-term costs.
Call to Action
Planning a data center build or expansion in Texas?
Book a consultation with Anshul Goyal, CPA, EA, FCA to:
- Structure your abatement request
- Coordinate filings with local authorities
- Ensure state and federal tax integration
Property tax can kill ROI—let us help you save it.
https://calendly.com/anshulcpa/
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 High-Searched FAQs (2025)
1. What is a Chapter 312 abatement in Texas?
It’s a local property tax reduction for capital projects.
2. Can data centers qualify?
Yes, especially if they meet capex and job requirements.
3. Is this different from Chapter 313?
Yes—313 was state school tax; 312 is local M&O tax.
4. Do you need local approval?
Yes. You must negotiate directly with the city or county.
5. Can I combine this with federal IRA credits?
Yes, if you structure the project properly.