An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in Pennsylvania Economic Development for a Growing Economy (PA EDGE) tax credits, further providing for definitions and providing for tax credits for critical minerals extraction.

PRINTER'S NO. 3024
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2301
Session of
2026
INTRODUCED BY FRITZ, PICKETT, OLSOMMER, RAPP AND STENDER,
MARCH 18, 2026
REFERRED TO COMMITTEE ON FINANCE, MARCH 19, 2026
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," in Pennsylvania Economic Development for a
Growing Economy (PA EDGE) tax credits, further providing for
definitions and providing for tax credits for critical
minerals extraction.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definition of "upstream company" in section
1702-L of the act of March 4, 1971 (P.L.6, No.2), known as the
Tax Reform Code of 1971, is amended to read:
Section 1702-L. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
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"Upstream company." The term includes a company that is
engaged in the exploration, development, manufacturing,
production, processing, refining or transportation of natural
gas, clean hydrogen, critical minerals, milk or products used in
semiconductor manufacturing, biomedical manufacturing or
biomedical research in this Commonwealth.
Section 2. Section 1791-L of the act is amended to read:
Section 1791-L. Definitions.
The following words and phrases when used in this subarticle
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Qualified project facility." Any of the following:
(1) A project facility as defined in section 1711-L.
(2) A project facility as defined in section 1731-L.
(3) A project facility as defined in section 1751-L.
(4) A project facility as defined in section 1771-L.
(5) A project facility as defined in section 1793.1-L.
"Qualified tax credit recipient." Any of the following who
have been awarded a tax credit:
(1) A qualified taxpayer as defined in section 1711-L.
(2) A qualified taxpayer as defined in section 1731-L.
(3) A qualified taxpayer as defined in section 1751-L.
(4) A qualified taxpayer as defined in section 1771-L.
(5) A qualified taxpayer as defined in section 1793.1-L.
Section 3. Article XVII-L of the act is amended by adding a
subarticle to read:
SUBARTICLE G
CRITICAL MINERALS EXTRACTION
Section 1793.1-L. Definitions.
The following words and phrases when used in this subarticle
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shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Critical mineral." A mineral, element, substance or
material identified by the United States Department of the
Interior, the United States Department of Energy or the United
States Geological Survey in accordance with 30 U.S.C. § 1606
(relating to mineral security), which is essential to the
economic or national security of the United States, has a supply
chain vulnerable to disruption and serves an essential function
in the production, storage or transmission of energy, defense
systems or advanced technologies.
"Produced water." Water, brine or wastewater of any kind
generated at a conventional or unconventional oil or gas well
site.
"Project facility." A facility located in this Commonwealth
that extracts a critical mineral from produced water and meets
any of the following criteria:
(1) Required a capital investment of at least $1,000,000
to construct and place into service.
(2) Required a capital investment of at least $1,000,000
to expand or renovate an existing facility in this
Commonwealth for the purpose of enabling the extraction of a
critical mineral from produced water.
"Qualified taxpayer." A company that satisfies all of the
following requirements:
(1) Obtains and uses produced water generated in this
Commonwealth to extract a critical mineral at a project
facility located in this Commonwealth that is placed in
service on or after the effective date of this section.
(2) Has made a capital investment of at least $1,000,000
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to construct and place the project facility into service in
this Commonwealth.
(3) Has made good faith efforts to recruit and employ,
and to encourage contractors and subcontractors to recruit
and employ, workers from the local labor market for
employment during the construction or expansion of the
project facility.
(4) Ensures that construction work to place the project
facility into service is performed in compliance with the act
of March 3, 1978 (P.L.6, No.3), known as the Steel Products
Procurement Act .
Section 1793.2-L. Eligibility.
To be eligible to receive a tax credit under this subarticle,
a company shall demonstrate all of the following to the
department:
(1) The company meets the requirements of a qualified
taxpayer.
(2) The company has filed all required State tax reports
and returns for all applicable taxable years and has paid any
balance of State tax due as determined by assessment or
determination of the department and not subject to a timely
appeal.
Section 1793.3-L. Application and approval of tax credit.
(a) Application.--
(1) A qualified taxpayer may apply to the department for
a tax credit under this subarticle.
(2) The application must be submitted to the department
by March 1 for a tax credit based on the use of produced
water for the extraction of a critical mineral at a project
facility during the prior calendar year.
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(3) The application shall be submitted on a form
determined by the department and shall include all of the
following:
(i) Documentation sufficient to demonstrate the
extraction of a critical mineral from produced water at
the project facility.
(ii) Information necessary to verify that the
applicant is a qualified taxpayer.
(iii) Any other information the department deems
necessary to administer the tax credit.
(b) Review and approval.--
(1) The department shall review each application
submitted under this section and issue a written notice of
approval or disapproval no later than May 1.
(2) If the application is approved, the department shall
issue a certificate to the qualified taxpayer stating the
amount of the tax credit granted for the prior calendar year.
(c) Availability of tax credits.--
(1) The total amount of tax credits available under this
subarticle shall not exceed $25,000,000 in a fiscal year.
(2) A qualified taxpayer may not receive more than
$5,000,000 in tax credits in any fiscal year.
(d) Rate of tax credit.--
(1) A qualified taxpayer approved under this subarticle
shall be eligible to receive a tax credit equal to $20 for
each kilogram of the aggregate total of qualifying critical
minerals extracted from produced water at a project facility
located in this Commonwealth during the prior calendar year,
subject to the limitation in subsection (c)(2).
(2) The aggregate total shall include the combined
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weight, in kilograms, of all qualifying critical minerals
extracted from produced water, as verified through production
documentation submitted with the application.
(3) The tax credit shall be calculated based on the
total combined weight of all qualifying critical minerals
extracted at the project facility, and not on a per-element
basis.
Section 1793.4-L. Use of tax credits.
(a) Initial use.-- Before selling or assigning a tax credit
under section 1793.6-L, a qualified taxpayer shall first apply
the tax credit against the qualified tax liability incurred in
the taxable year for which the credit was approved or in any of
the four taxable years immediately following that year.
(b) Application to liability.-- A tax credit under this
subarticle may be applied against up to 20% of the qualified
taxpayer's qualified tax liability incurred in the taxable year
for which the credit was approved or in any of the four
succeeding taxable years.
(c) Limitation.-- A qualified taxpayer that receives a tax
credit under this subarticle shall not be eligible to receive
any other tax credit provided under this act.
Section 1793.5-L. Carryback and refund.
A tax credit awarded under this subarticle may not be carried
back or applied for the purpose of obtaining a refund.
Section 1793.6-L. Sale or assignment.
(a) Authorization.-- A qualified taxpayer that retains a tax
credit through the end of the calendar year in which the credit
was approved may sell or assign the tax credit, in whole or in
part, if the sale or assignment is completed no later than the
end of the fifth calendar year following the year in which the
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credit was approved.
(b) Application.--
(1) To sell or assign a tax credit under this section, a
qualified taxpayer shall file an application with the
department on a form specified by the department.
(2) The department shall approve the application if the
department receives all of the following:
(i) A determination by the department that the
applicant has:
(A) filed all required State tax reports and
returns for all applicable taxable years; and
(B) paid all outstanding State tax liabilities
not subject to a timely appeal, as determined by
assessment or other determination of the department.
(ii) If the proposed sale or assignment is to a
company that is not an upstream company or downstream
company, a certification from the qualified taxpayer that
the taxpayer has offered to sell or assign the tax
credit:
(A) exclusively to a downstream company for a
period of 30 days following the approval of the
credit under section 1793.3-L; and
(B) to an upstream company or downstream company
for a period of 30 days following the expiration of
the period under clause (A).
(c) Approval.-- Upon approval of the application under
subsection (b), the qualified taxpayer may sell or assign the
tax credit, in whole or in part.
Section 1793.7-L. Purchasers and assignees.
(a) Time for use.-- A purchaser or assignee of a tax credit
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under section 1793.6-L shall claim the credit in the calendar
year in which the purchase or assignment occurs.
(b) Limitation on use.-- The amount of the credit a purchaser
or assignee may apply against qualified tax liabilities in a
taxable year shall not exceed 50% of the purchaser's or
assignee's total qualified tax liability for that year.
(c) Restriction on resale or reassignment.--
(1) A purchaser of a tax credit under section 1793.6-L
may not sell or assign the purchased credit.
(2) An assignee of a tax credit under section 1793.6-L
may not sell or assign the assigned credit.
(d) Notice requirement.-- A purchaser or assignee shall
notify the department of the identity of the seller or assignor
in accordance with procedures established by the department.
Section 1793.8-L. Pass-through entity.
(a) Election.-- A pass-through entity with an unused tax
credit under this subarticle may elect, in writing and in
accordance with procedures established by the department, to
transfer all or a portion of the credit to the pass-through
entity's shareholders, members or partners in proportion to the
share of the entity's distributive income to which each is
entitled.
(b) Double use prohibited.-- A tax credit transferred under
subsection (a) may not be claimed by both:
(1) the pass-through entity; and
(2) a shareholder, member or partner of the pass-through
entity.
(c) Limitation on use.-- A transferee under subsection (a)
may not apply more than 20% of the credit against the
transferee's qualified tax liability for any taxable year.
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(d) Time for use.-- A transferee under subsection (a) shall
claim the tax credit in the calendar year in which the transfer
is made.
(e) Resale and assignment prohibited.-- A transferee under
subsection (a) may not sell or assign the tax credit.
Section 1793.9-L. Administration.
(a) Audits and assessments.--
(1) The department may conduct an audit of any taxpayer
awarded a tax credit under this subarticle to verify the
validity of the credit awarded.
(2) If the department determines that a tax credit was
improperly issued, the department may issue an assessment
against the taxpayer. The procedures for issuance,
collection, enforcement and appeal of an assessment under
this section shall be governed by Article II.
(b) Guidelines and regulations.-- The department shall
develop written guidelines for the implementation of this
subarticle. The guidelines shall remain in effect until the
department promulgates regulations to implement the provisions
of this subarticle.
Section 1794.1-L. Reports to the General Assembly.
(a) Annual report.-- Beginning in the year following the
first award of tax credits under this subarticle, and by October
1 of each year thereafter, the department shall submit a report
on the tax credit under this subarticle to all of the following:
(1) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(2) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(3) The chairperson and minority chairperson of the
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Finance Committee of the Senate.
(4) The chairperson and minority chairperson of the
Finance Committee of the House of Representatives.
(b) Contents.--The report shall include the following
information as of the date of the report:
(1) The names of all qualified taxpayers utilizing tax
credits under this subarticle.
(2) The amount of tax credits approved for, utilized by
or sold or assigned by each qualified taxpayer.
(c) Reconciliation report.-- By May 1 of the year that is 10
years after the year in which tax credits are first awarded
under this subarticle, the department shall submit a
reconciliation report on the effectiveness of the tax credit
program to the Secretary of the Senate and the Chief Clerk of
the House of Representatives. The report shall include, to the
extent available, the following information covering the
preceding 10 years:
(1) The name and business address of each qualified
taxpayer granted tax credits under this subarticle.
(2) The total amount of tax credits granted to each
qualified taxpayer.
(3) The total number of jobs created by qualified
taxpayers, upstream companies, downstream companies and any
other companies providing goods, utilities or services
supporting their business operations, including average
annual salary and hourly wage information.
(4) The amount of tax paid under Article II by the
entities listed under paragraph (3).
(5) The amount of tax withheld from employees or paid by
members, partners or shareholders under Article III of the
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entities listed under paragraph (3).
(6) The amount of tax paid under Article IV by the
entities listed under paragraph (3).
(7) The amount of tax paid under Article XI by the
entities listed under paragraph (3).
(8) The amount of any other State or local taxes paid by
the entities listed under paragraph (3).
(9) Any other information relevant to the economic
impact of this subarticle on this Commonwealth.
(d) Recommendation for changes.-- If the reconciliation
report required under subsection (c) shows that the total amount
of tax credits granted under this subarticle exceeds the total
amount of tax revenue reported under subsection (c)(4), (5),
(6), (7), (8) and (9), the department shall include in the
report any recommendations for changes to the calculation or
administration of the tax credit.
(e) Public access.-- The reports required under this section
shall be public records as defined in section 102 of the act of
February 14, 2008 (P.L.6, No.3), known as the Right-to-Know Law ,
and shall be posted on the department's publicly accessible
Internet website. The reports may not include confidential
proprietary information as defined in section 102 of the Right-
to-Know Law .
Section 1794.2-L. Applicability.
This subarticle shall apply to the use of produced water from
within this Commonwealth during the period beginning January 1,
2027, and ending December 31, 2039.
Section 1794.3-L. Expiration.
The authority of the department to accept applications for
tax credits under this article shall expire December 31, 2040.
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Section 4. This act shall take effect in 60 days.
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