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Section 7: Reestablishment Expenses - Non-residential

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Overview

A small business (not more than 500 on-site employees), farm operation, or nonprofit organization is entitled to receive a payment not to exceed $25,000 for expenses incurred in relocating and reestablishing the business, farm, or nonprofit organization. This payment is to assist a small business, farm, or nonprofit organization in continuing its operation at a new location in the same manner. Payment may also be made to establish a different type of business operation. Reestablishment expenses claimed must be reasonable and necessary, as determined by TxDOT. Reestablishment expenses may include the following items.

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Eligible Expenses:

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  • Repairs or improvements at the replacement site as required by Federal, State or local law, code, or ordinance not specifically required for reinstallation of displaced personalty; these are included as moving costs under Allowable Moving Expenses - Non-residential, Removal and Reinstallation. Reasonable and necessary are the determining criteria.
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  • Modifications to the replacement property to accommodate the business operation. There are two concepts included within this eligibility:
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    • First, if a suitable replacement structure is not available and it is determined necessary for the owner of a small business, farm, or nonprofit organization to purchase or lease vacant property and build a structure to conduct business, adding the structure would not be an eligible reimbursement. Modifications to a structure to accommodate the business operation may be eligible for reimbursement. These modifications shall not include costs of substantial improvements normally found in a finished structure such as air conditioning and heating, septic or sewer service, well or water service, and walls and ceilings except as modifications specific to the nature of the displaced business. Site preparation may be included in modification costs.
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    • Second, when a replacement property already contains a structure, costs for structure modifications necessary to accommodate the business operation (e.g., moving walls, changing doors, installing lighting) are eligible. An exception occurs if specific modifications are required to promote the proper operation of the relocated personalty (these costs are included as moving costs under Allowable Moving Expenses - Non-residential, Removal and Reinstallation. Reasonable and necessary are the determining criteria.
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  • Installation costs for exterior signing to advertise the business.
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  • Replacement of soiled or worn surfaces at the replacement site (e.g., paint, paneling, or carpeting).
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  • Licenses, fees, and permits if not paid as moving expenses.
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  • Advertisement of the replacement location.
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  • Impact fees or one-time assessments for anticipated heavy utility usage.
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  • Other items TxDOT considers essential to reestablishment of the small business, farm, or nonprofit organization.
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  • Estimated increased operating costs during the first two years at the replacement site for such items as:
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    • personal or real property taxes;
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    • insurance premiums;
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    • utility charges, excluding impact fees; or
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    • lease or rental charges. Discussion and agreement should be made with the owner who intends to lease or rent replacement facilities as to the space required at the replacement property to operate in a similar manner as at the displacement site. This procedure eliminates TxDOT participation in costs for space not necessary for the business reestablishment. The owner may decide to lease or rent excessive space, but advise the owner that TxDOT will not participate in the additional costs. If unusual circumstances are encountered, submit these for approval by ROW Division HQ before committing to the displacee.

An increase in operating costs may be considered if total replacement site operating costs exceed total displacement site operating costs. If replacement site costs are equal or less than displacement site costs, no payment will be made. If replacement site costs exceed displacement site costs, document all costs.

Operating costs are reportable business expenses; therefore, business income tax records provide a record of operating costs before displacement. Replacement site costs can be documented or estimated by using sources such as new leases, utility company projections for utility charges, and taxing authority records for estimated tax increases. This documentation is required to support a claim for increased operating costs. No consideration must be given to a business status change (i.e., a change from tenant to owner operated).

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Ineligible Expenses

Reestablishment expenses not considered reasonable, necessary, or otherwise eligible include the following:

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  • Capital asset purchases, such as office furniture, filing cabinets, machinery, or trade fixtures.
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  • Purchase of manufacturing materials, production supplies, product inventory, or other items used in the normal course of business operations.
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  • Interest on money borrowed to make the move or purchase the replacement property.
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  • Payment to a part-time home business that does not materially contribute to household income.
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  • Payment to a lessee whose business is sub-leasing space.

Refer questions concerning expense eligibility to ROW Division HQ before making commitments to displacees.

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