Error sends NXP's bid for state tax refunds back to City Hall – Austin Business Journal – The Business Journals
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Austin city officials have identified an issue tied to NXP USA Inc.'s application for state tax rebates for the expansion of its Central Texas facilities. The problem is set to be amended quickly. Included is a list of the region's leading manufacturers.
Update: Austin City Council on Jan. 18 approved both resolutions on consent that corrected the errors tied to NXP’s nomination for state incentives.
An error by the city is bringing NXP’s aim for state incentives back to the table.
In November, Austin City Council nominated local chipmaker NXP USA Inc., a subsidiary of the Netherlands-based NXP (Nasdaq: NXPI), for the state’s Texas Enterprise Zone Program, allowing the company to apply for state tax refunds as it plans to invest $291 million to replace production lines at its two Austin factories. The program’s refunds, if granted by the state, would add to the $1 million incentives package NXP already secured from the city.
However, it has come to light that NXP’s two Austin facilities are not located within an enterprise zone, as city staff previously stated, which has caused a hiccup in the company’s bid for the additional incentives. To correct the issue as rapidly as possible, two resolutions amending the error for each NXP property are set to be approved by the council during its upcoming Jan. 18 meeting, which also will include an update on what NXP must pledge to be eligible for the refunds.
The amended resolutions will clarify that the company’s Austin manufacturing facilities are outside of a designated enterprise zone. The city also revised the requirements that 35% of the company’s new permanent jobs must be held by economically disadvantaged individuals or veterans, in compliance with the Enterprise Zone program, up from the 25% standard that was previously approved for each facility. The company has pledged to create at least 53 jobs with the project. It already employs 2,768 people between the two sites.
Sylnovia Holt-Rabb, the director of Austin’s economic development department, stated in a Dec. 8 memo that, if left uncorrected, NXP’s application for state incentives would be suspended without further consideration.
“The city has been a supportive partner throughout this process and has acted quickly to remedy the problem,” said Paige Iven, a spokesperson for NXP. “We look forward to our continued partnership with the city on various incentive processes to enable further local investment and job growth in the Austin community.”
An investment of $142.2 million is pegged for the factory at 3949 Ed Bluestein Blvd. in East Austin, and another $148.6 million will be funneled into its factory at 6501 W. William Cannon Drive, in the Oak Hill neighborhood of Southwest Austin, according to city documents.
The Texas Enterprise Zone Program is a state-administered sales and use tax refund program that is designed to encourage private investment and job creation in economically distressed areas. According to the state’s website, the company’s two investments both qualify for up to $1.25 million in state tax refunds.
Austin’s September approval of $1 million in city incentives, made through the Chapter 380 tax abatement program, marked the first time the council approved a tax break through the program since 2020. It indicates a significant shift in Austin’s willingness to issue tax incentives to companies, whether already located in the city or seeking to establish new operations within Texas’ capital.
The deal and its support from the city are also important as NXP seeks additional funding for the local expansion and improvement project through the federal CHIPS Act. The federal initiative has earmarked nearly $700 million in federal funding for the semiconductor industry in Texas alone.
The company was unable to offer a timeline for its application for CHIPS Act funding or how much it might receive through the federal program.
“NXP is working through the application process with the federal government and is optimistic that the proposed expansion will meet the program goals,” Iven said.
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