Abatements can't touch school taxes. No JETI deal covers a data center.

A Texas data center campus can sign a property tax abatement with its city and its county. Its school district is another matter. Tax Code §312.002(f) says: "On or after September 1, 2001, a school district may not enter into a tax abatement agreement under this chapter." The school district's tax on the buildings and servers stays outside every Chapter 312 deal.

The Texas Jobs, Energy, Technology and Innovation Act, known as JETI, is a state program that limits a school district's maintenance and operations (M&O) taxable value. The Governor's public JETI listing, as of Sept. 30, 2026, shows 21 contracted projects and 8 more approved and negotiating. None is a data center. So on a Texas campus today, the school district M&O levy on the compute buildings is a cost that the city and county abatements cannot reach and that no JETI agreement has yet reached.

Sitebraid's tenant financing and ERCOT milestone insight carries property tax as one 2.2 percent line. A model built that way needs the school district's share split out before any abatement percentage is applied.

What a Chapter 312 abatement reaches

Each taxing unit signs its own abatement. Under §312.204, a city may agree to exempt part of the value of real property or tangible personal property in a reinvestment zone. The exemption runs "for a period not to exceed 10 years, on the condition that the owner of the property make specific improvements or repairs to the property." A county commissioners court has its own authority under §312.402. When a city abates, §312.206 lets "each other taxing unit eligible to enter into tax abatement agreements under Section 312.002" sign its own agreement with the owner.

The school district still hears about a city's deal. At least seven days before a city enters an abatement agreement, §312.2041 requires written notice to each other taxing unit where the property sits, and "The notice must include a copy of the proposed agreement."

The other common local tools are Chapter 380 programs, which a city's governing body may establish, and Chapter 381 programs, which a county commissioners court may develop and administer. Neither chapter is a school district program.

How JETI limits the school M&O tax

JETI is Subchapter T of Government Code Chapter 403, added by House Bill 5 in 2023 and effective Jan. 1, 2024. Under §403.612, three parties sign each agreement: the Governor, the school district's governing body and the applicant. The Comptroller recommends or does not recommend each application (§403.609). It may not recommend one unless it finds that:

• the project is an eligible project;
• it is reasonably likely to generate state or local tax revenue, before the 20th anniversary of the first day of the construction period, sufficient to offset the school M&O revenue the agreement costs the district;
• "the agreement is a compelling factor in a competitive site selection determination" and, without it, the applicant would not make the investment in Texas;
• if the application claims a qualified opportunity zone, the project is located in the zone.

The Governor and the district then each have 30 days to act on a recommended application (§§403.610, 403.611).

What the agreement does, per the statute:

• During construction, the eligible property's taxable value for school M&O is zero, from the tax year after the agreement through the tax year that includes the construction completion date (§403.605(b)).
• For the incentive period, its M&O taxable value is 50 percent of market value, or 25 percent in a qualified opportunity zone (§403.605(a)).
• The incentive period is "a period of 10 consecutive tax years specified in the agreement" (§403.613).
• The limit applies to school district maintenance and operations taxes only.

The applicant must commit to jobs and investment by county population (§403.604(b)):

• 750,000 or more: 75 jobs and $200 million.
• 250,000 to 749,999: 50 jobs and $100 million.
• 100,000 to 249,999: 35 jobs and $50 million.
• Under 100,000: 10 jobs and $20 million.

The jobs requirement does not apply to a dispatchable electric generation facility (§403.604(a)). Eligible property must be owned by the applicant or held under a capitalized lease. A building must be new or expanded after the agreement and sit in a reinvestment zone or enterprise zone when the agreement is signed (§403.602(9)). The subchapter itself "expires December 31, 2033" (§403.603).

Where a data center falls

The statute defines an eligible project as a facility that is manufacturing, related to utility services (including dispatchable generation), related to natural resources, or "engaged in the research, development, or manufacture of high-tech equipment or technology." A fifth category reads "to construct or expand critical infrastructure." Nondispatchable generation and electric energy storage are excluded (§403.602(8)).

The statute does not define critical infrastructure. The Comptroller's rule, 34 TAC §9.5000, ties each category to industry codes: manufacturing to NAICS 31-33, utility services to NAICS 2211, natural resources to NAICS 11 and 21, and research and development to NAICS 5417. For critical infrastructure it gives examples "such as" water and wastewater facilities (NAICS 2213), liquefied natural gas terminals (NAICS 424710) and pipelines (NAICS 486).

The Census Bureau's 2022 NAICS puts cloud and hosting in code 518210, "Computing Infrastructure Providers, Data Processing, Web Hosting, and Related Services." That code is not in the rule. The critical infrastructure examples follow "such as," so the rule does not close that list, and it does not say whether a data center could apply under it.

The Governor's Sept. 30 listing has 21 contracted projects. Sixteen are manufacturing (organic chemical, aircraft parts, steel, petrochemical, paper, plastics film, pharmaceutical, electronic component and eight semiconductor phases). Four are electric generation and one is natural gas extraction. The 8 approved and negotiating are ship building, automotive, pharmaceutical and semiconductor projects plus one electric generation project. The one company on the list with "AI" in its name, TeraFab AI, LLC, is listed as semiconductor manufacturing. The Comptroller's current agreements table, read Oct. 22, lists the same 21 agreements under 11 project types, none of them a data center.

Two parts of a campus may sit closer to the listed categories than the compute buildings do. The utility services category names dispatchable electric generation, and the five generation projects on the listing show zero required jobs. Water and wastewater treatment plants are named among the critical infrastructure examples. Whether a plant that serves one campus is "a facility related to the provision of utility services" is a question neither the statute nor the rule answers. Battery storage is out by statute.

Dates on the JETI clock

• By Dec. 1, 2026: the Comptroller's report to the Legislature on JETI agreements, due "not later than December 1 of each even-numbered year" (§403.617).
• Dec. 31, 2033: the JETI subchapter expires (§403.603).

Before the next tax commitment on a Texas campus

These are the sponsor's calls, made with counsel. The steps below gather the facts for them. None of this is legal advice.

1. Split the property tax line in the pro forma by taxing unit: city, county, school district M&O, school district debt service and any special district. Apply each abatement only to the unit that signs it.
2. For each Chapter 312 agreement under negotiation, record the abated percentage, the years (10 at most), the reinvestment zone and the improvement conditions. Confirm the school district received the §312.2041 notice and copy.
3. Carry school district M&O on the compute buildings and servers with no abatement and no JETI limit, unless a signed JETI agreement covers that property.
4. List each campus component that may be an eligible project on its own: dispatchable generation, water or wastewater treatment. Name the entity that would own each one. Decide with counsel whether any of them qualifies and which entity would apply.
5. For any component that might qualify, check the county population tier for jobs and investment, the reinvestment zone timing in §403.602(9) and the storage exclusion. Gather the facts the Comptroller would need for each §403.609(b) finding: the revenue offset and the competitive site selection record. Decide with counsel whether to apply before construction starts, since the zero-value period runs from the tax year after the agreement.
6. Watch the Comptroller's JETI report due by Dec. 1, 2026 and the Governor's public listing for any data center project type.

If your project budget counts on a school tax break, our Entitlements & community work checks which local incentives can actually apply to your campus.