AUSTIN, Texas (KBTX) – The Texas Comptroller\u2019s Office has issued formal recommendations to approve all eight tax incentive applications tied to the proposed TeraFab semiconductor manufacturing facility near Gibbons Creek Reservoir in Grimes County, clearing a major hurdle for what could be the largest industrial investment in Texas history.<\/p>\n
The recommendations, signed by Deputy Comptroller Lisa Craven<\/a> and dated June 15, cover applications filed by TeraFab AI, LLC \u2014 a special-purpose entity linked to SpaceX \u2014 with both Iola ISD and Anderson-Shiro CISD.<\/p>\n But the Comptroller\u2019s approval is not the end of the road.<\/p>\n What the Comptroller Approved<\/p>\n The Comptroller reviewed each application under the state\u2019s Jobs, Energy, Technology, and Innovation (JETI) program and found all eight passed every required legal test:<\/p>\n Eligible applicant\u00a0\u2014 TeraFab AI, LLC is not on the state\u2019s ineligible contractor list, and SpaceX confirmed in writing that no citizens of China, Iran, North Korea, Russia, or other designated countries hold ownership interest in the company.Eligible project\u00a0\u2014 Semiconductor manufacturing (NAICS code 334413) qualifies under JETI.Positive 20-year fiscal analysis\u00a0\u2014 The Comptroller found each phase would generate enough tax revenue over 20 years to offset the school district\u2019s maintenance and operations (M&O) taxes lost under the deal.Compelling factor\u00a0\u2014 The Comptroller accepted SpaceX\u2019s argument that without the tax break, the project would likely leave Texas for Arizona.<\/p>\n The recommendation does not mean the deal is done. It\u2019s a prerequisite, one of three approvals required before any agreement takes effect. Board members in both school districts and the Governor still have to say yes.<\/p>\n 8 Applications, Broken Down<\/p>\n Both Iola and Anderson-Shiro CISD received four applications for TeraFab, each with four phases. Each phase covers a separate piece of land with its own 10-year tax incentive period. <\/p>\n Anderson-Shiro CISD (J0035\u2013J0038)PhaseApplicationProposed InvestmentConstructionIncentive PeriodM&O Tax BenefitPhase 1J0035<\/a>~$10.3B2026\u201320282029\u20132038$129.8MPhase 2J0036<\/a>~$23.8B2029\u201320312032\u20132041$335.8MPhase 3J0037<\/a>~$23.8B2032\u201320342035\u20132044$335.8MPhase 4J0038<\/a>~$15.6B2035\u201320362037\u20132046$214.9M<\/p>\n Anderson-Shiro total: ~$73.5 billion in proposed investment<\/p>\n Iola ISD (J0039\u2013J0042)PhaseApplicationProposed InvestmentConstructionIncentive PeriodM&O Tax BenefitPhase 1J0039<\/a>~$6.4B2026\u201320282029\u20132038$82.3MPhase 2J0040<\/a>~$14.8B2029\u201320312032\u20132041$212.8MPhase 3J0041<\/a>~$14.8B2032\u201320342035\u20132044$212.8MPhase 4J0042<\/a>~$9.7B2035\u201320362037\u20132046$136.2M<\/p>\n Iola ISD total: ~$45.7 billion in proposed investment<\/p>\n The combined proposed investments could be as high as $119 billion, among the highest manufacturing investments in U.S. history. But it\u2019s important to note that phases 2, 3, and 4 aren\u2019t guaranteed. <\/p>\n SpaceX\u2019s own filings state that after completing each phase, the company will \u201cdetermine whether to proceed with constructing the future phases.\u201d The $119 billion figure \u2014 and the full job and tax projections \u2014 only materialize if all four phases are built in both districts.<\/p>\n What the Deal Actually Does to School Taxes<\/p>\n School property taxes are split into two buckets: maintenance and operations (M&O) and interest and sinking (I&S).<\/p>\n M&O covers day-to-day costs like teacher salaries and utility bills. I&S covers repayments on voter-approved bonds used for things like new buildings and school buses.<\/p>\n Under the JETI program, SpaceX would only pay M&O taxes on half of TeraFab\u2019s appraised value for 10 years per phase \u2014 a significant discount on what would otherwise be one of the largest property tax bills in Texas history. <\/p>\n The school district doesn\u2019t simply absorb that loss: Texas\u2019s school finance system is designed so the state sends additional funding to districts when their local tax base is reduced by incentive deals like this. In theory, the district gets made whole.<\/p>\n But critics of JETI deals note that state backfill flows through a complex formula and isn\u2019t a guaranteed dollar-for-dollar replacement.<\/p>\n On the I&S portion, SpaceX would pay at full value \u2014 meaning the district gains real new bond capacity it didn\u2019t have before.<\/p>\n SpaceX\u2019s own filings say the M&O limitation reduces its effective school tax burden by about 48%, and that without it, the project\u2019s internal rate of return would fall below its minimum investment threshold.<\/p>\n \u201cCompeting jurisdictions, such as Arizona, would present a more favorable after-tax return, in which case the project would likely be relocated outside Texas,\u201d according to the TeraFab AI, LLC application filing<\/p>\n What Happens Next<\/p>\n The Comptroller\u2019s recommendation triggers what Anderson-Shiro CISD has described as the \u201corange zone\u201d \u2014 the second of three stages that encompass the JETI process. <\/p>\n The orange zone is a 30-day window where the governor and districts review the comptroller\u2019s recommendation, hold a public hearing, and take board action. The public hearings require a 15-day notice posted on the district\u2019s website. After action is taken, the governor issues a decision, and the parties are notified within seven days.<\/p>\n For the project to move forward, the governor and the district must agree. One \u201cno\u201d can kill the deal.<\/p>\n If both agree, all three parties \u2014 the applicant, the school district, and the Governor \u2014 sign the final agreement.<\/p>\n Anderson-Shiro plans a single meeting on July 13 for the public hearing and a vote on whether to enter the agreement.<\/p>\n Iola hearings are tentatively scheduled for July 6 and July 7, with a vote expected around July 13 or July 14.<\/p>\n Related:<\/p>\n Copyright 2026 KBTX. 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