Elon Musk's SpaceX secures 100% property tax exemption for planned $55 billion Terafab semiconductor factory in Texas — county approves 35-year deal worth hundreds of millions despite resident backlash

SpaceX has won a 100% property tax abatement from Grimes County, Texas, for its proposed, massive $55 billion Terafab semiconductor chip manufacturing facility. According to a local news outlet, KBTX, Grimes County commissioners voted 4-1 on Wednesday, June 4th, to approve both a reinvestment zone designation and the tax abatement, which will fully exempt SpaceX from property taxes tied to the project in exchange for a regular payment instead.

In exchange for the tax exemption, SpaceX will instead remit a lump sum of $10 million to the county, followed by $20 million annually for 35 years. The vote — centered on a three-part proposal for the SpaceX Terafab facility, consisting of an obligation framework for jobs and infrastructure, a Tax Increment Reinvestment Zone designation, and a 35-year PILOT tax abatement agreement — followed a hearing that drew in more than 100 residents to the Grimes County courthouse.

Proponents of the proposals, including local officials, argued that the project promises massive economic investment, job creation, and national security benefits. Conversely, residents opposed to the project cited a lack of transparency in the approval process, potential strain on water and power infrastructure, and the destruction of rural identity. Commissioner David Tullos, who cast the lone “No” in the vote, questioned SpaceX’s absence in earlier meetings, saying that the hearing was the first time it had sent a representative since the project was announced. Tullos also questioned the company about the size of the proposed reinvestment zone and the company's plans for portions of the land included within it.

Several residents reportedly expressed deep concern about environmental impacts and land loss amid tears. In response, John Federspiel, senior director of Starlink Product Engineering at SpaceX, said: "We recognize that large projects bring legitimate questions about infrastructure and environmental stewardship. Our company is committed to proactively ‌addressing those ⁠concerns and taking care of them responsibly.”

Despite an apparent majority opposition from residents who urged the commissioners to delay the vote on the tax abatement — which public records show SpaceX applied for just last month — all proposals passed. A number of local residents expressed disappointment in the outcome, with many insisting that a 100% tax rebate — for a company about to launch the largest IPO in history with an expected $1.75 Trillion valuation — was too far.

Defending the arrangement in an X post on Wednesday, SpaceX owner and world's richest man, Elon Musk, said that the exemption was necessary to remain competitive with other chip manufacturers. “The reason SpaceX asked for this, which is standard practice for massive capital investments, is because Terafab will have a large number of extremely expensive machines for making chips. Property tax on these crazy money machines would put us at a serious competitive disadvantage relative to other chip fabs in the world,” Musk said.

He also implied that the county stands to significantly benefit from the project. “Something that perhaps isn’t clear is that, if this location works out (other locations are still in the running), SpaceX will still be paying an annual amount that increases tax revenue for Grimes County by ~25% and will be by far the biggest source of revenue for the county,” Musk argued.

SpaceX is advancing the Terafab project as part of its plans to expand beyond aerospace into computing infrastructure and domestic chip production, a strategic pivot investors see as vital for future growth. The company already owns Colossus 1, a massive data center it rented out to Anthropic, and is currently building Colossus 2.

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