Relating to incentives for the development of the clean hydrogen industry in this state, including tax benefits, loans, and grants for clean hydrogen projects, clean hydrogen workforce development, hydrogen powered motor vehicles, and certain items used to produce clean hydrogen.

89(R) HB 5600 - House Committee Report version - Bill Text

89R29674 E

By: McLaughlin

H.B. No. 5600

Substitute the following for H.B. No. 5600:

By: Darby

C.S.H.B. No. 5600

A BILL TO BE ENTITLED

AN ACT

relating to incentives for the development of the clean hydrogen

industry in this state, including tax benefits, loans, and grants

for clean hydrogen projects, clean hydrogen workforce development,

hydrogen powered motor vehicles, and certain items used to produce

clean hydrogen.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle F, Title 4, Government Code, is amended

by adding Chapter 490J to read as follows:

CHAPTER 490J. CLEAN HYDROGEN DEVELOPMENT FUND

Sec. 490J.0101. DEFINITIONS. In this chapter:

(1)

"Clean hydrogen" means hydrogen produced through

methods that substantially reduce lifecycle greenhouse gas

emissions as compared to conventional hydrogen production methods,

including:

(A)

electrolysis using electricity from

renewable or nonrenewable sources, provided that overall lifecycle

emissions are substantially reduced;

(B)

natural gas reforming combined with carbon

capture, utilization, or sequestration;

(C) nuclear energy-based hydrogen production; or

(D)

any other method meeting applicable federal

standards for low-carbon hydrogen production.

(2)

"Clean hydrogen project" means a project located

in this state that is:

(A) a facility that produces clean hydrogen;

(B)

a facility that uses hydrogen as a feedstock

to produce fuels derived from hydrogen, including electro-fuels or

e-fuels;

(C)

infrastructure for the storage,

transportation, distribution, purchase, or sale of hydrogen or

fuels derived from hydrogen; or

(D)

equipment used to capture, process, or

utilize carbon dioxide in conjunction with hydrogen production or

the production of fuels derived from hydrogen.

(3)

"Electro-fuel" or "e-fuel" means a type of fuel

derived from hydrogen that specifically uses hydrogen produced

through electrolysis, including:

(A) electro-ammonia or e-ammonia;

(B) electro-methane or e-methane; and

(C) electro-methanol or e-methanol.

(4)

"Fuel derived from hydrogen" means a fuel or

chemical product manufactured using hydrogen as a primary

feedstock, including:

(A) electro-fuels or e-fuels;

(B) sustainable aviation fuel; and

(C)

other synthetic fuels that use hydrogen as a

primary feedstock.

(5)

"Fund" means the clean hydrogen development fund

established under this chapter.

(6)

"Sustainable aviation fuel" means aviation fuel

produced from hydrogen and carbon sources with significantly lower

lifecycle greenhouse gas emissions than conventional aviation

fuel.

Sec.

490J.0102.

CLEAN HYDROGEN DEVELOPMENT FUND. (a)

The

clean hydrogen development fund is a special fund in the state

treasury outside the general revenue fund to be administered by the

comptroller in consultation with the Texas Commission on

Environmental Quality and the Railroad Commission of Texas.

(b) The fund consists of:

(1)

money the legislature appropriates for deposit to

the credit of the fund for purposes of this chapter;

(2)

gifts, donations, and grants to the fund,

including federal grants;

(3)

interest earned on the investment of money in the

fund; and

(4)

money from any other source designated for deposit

into the fund.

(c)

Money in the fund may be appropriated to the comptroller

only to provide low-interest loans and grants for:

(1)

clean hydrogen projects, including projects in the

development or pre-operations stage;

(2)

the development of a trading system located in

this state that enables the sale, purchase, and export of hydrogen

or fuel derived from hydrogen; and

(3)

the manufacture of hydrogen electrolyzers and

related technologies in this state.

(d)

A person must apply for a loan or grant from the fund in

the manner prescribed by the comptroller. In awarding a loan or

grant using money from the fund, the comptroller shall:

(1)

consider, for the project that is the subject of

the application:

(A)

the potential economic impact of the project,

including the effect on the number of jobs in this state;

(B)

the emissions reduction benefits of the

project;

(C)

the technological innovation encouraged by

the project;

(D)

the project's contribution to grid stability

and energy security; and

(E)

the ability of the state and local

governments to leverage federal funding or tax credits for the

project;

(2)

consider the length of time the applicant has been

in business as of the date of the application; and

(3)

prioritize applicants that are start-up or

pre-revenue generating entities or are relocating to this state.

(e)

The comptroller may not prioritize an energy source or

technology used to produce hydrogen when awarding a loan or grant

using money in the fund.

(f)

The comptroller shall establish eligibility

requirements for the award of a loan or grant using money in the

fund.

SECTION 2. Chapter 302, Labor Code, is amended by adding

Subchapter J to read as follows:

SUBCHAPTER J. CLEAN HYDROGEN WORKFORCE DEVELOPMENT GRANT PROGRAM

Sec. 302.301. DEFINITIONS. In this subchapter:

(1)

"Clean hydrogen" and "fuel derived from hydrogen"

have the meanings assigned by Section 490J.0101, Government Code.

(2)

"Institution of higher education" has the meaning

assigned by Section 61.003, Education Code.

(3)

"Program" means the clean hydrogen workforce

development grant program established under this subchapter.

Sec.

302.302.

PROGRAM ESTABLISHMENT AND ADMINISTRATION.

The commission shall establish and administer the clean hydrogen

workforce development grant program under which the commission may

award grants to institutions of higher education to:

(1)

provide workforce training for and higher

education programs related to clean hydrogen jobs and the

production, handling, and use of hydrogen and fuels derived from

hydrogen; or

(2)

develop curriculum or certification programs for

hydrogen technology.

Sec.

302.303.

GRANT ELIGIBILITY.

To be eligible for a grant

under the program established under Section 302.302, an institution

of higher education must:

(1)

apply to the commission in the manner prescribed

by commission rule; and

(2)

satisfy any other relevant criteria prescribed by

commission rule.

SECTION 3. Section 151.317, Tax Code, is amended by adding

Subsection (f) to read as follows:

(f)

For the purposes of Subsection (a)(9), "gas" includes

hydrogen.

SECTION 4. Subchapter E, Chapter 152, Tax Code, is amended

by adding Section 152.094 to read as follows:

Sec.

152.094.

TEMPORARY EXEMPTION FOR HYDROGEN MOTOR

VEHICLES. (a)

In this section, "hydrogen motor vehicle" means a

motor vehicle powered by:

(1)

hydrogen, including a hydrogen internal

combustion engine vehicle or hydrogen fuel cell vehicle;

(2)

a fuel derived from hydrogen, as that term is

defined by Section 490J.0101, Government Code; or

(3)

compressed natural gas, if the vehicle is

certified to operate on renewable methane or electro-methane.

(b)

The taxes imposed by this chapter do not apply to the

sale, use, or rental of a hydrogen motor vehicle.

(c) This section expires September 1, 2035.

SECTION 5. Subchapter B, Chapter 171, Tax Code, is amended

by adding Section 171.089 to read as follows:

Sec.

171.089.

EXEMPTION FOR LIMITED PERIOD--HYDROGEN

ELECTROLYZER MANUFACTURER. (a) Subject to Subsection (b), an

entity that is engaged in the business of manufacturing hydrogen

electrolyzers is exempted from the franchise tax if the entity

relocates to this state from another state in the United States.

(b)

An exemption under this section terminates on the 10th

anniversary of the entity's beginning date.

SECTION 6. Chapter 171, Tax Code, is amended by adding

Subchapter Y to read as follows:

SUBCHAPTER Y. TAX CREDIT FOR CLEAN HYDROGEN PROJECTS

Sec. 171.9301. DEFINITIONS. In this subchapter:

(1)

"Clean hydrogen project" and "fuel derived from

hydrogen"

have the meanings assigned by Section 490J.0101,

Government Code.

(2)

"Qualifying capital expenditures" means

expenditures related to:

(A)

hydrogen production, including the purchase

of electrolyzers and related equipment;

(B)

the transport, storage, or purchase of

hydrogen or a fuel derived from hydrogen;

(C)

equipment used to convert hydrogen into fuels

or chemicals derived from hydrogen, including synthesis units and

related processing equipment; and

(D)

equipment used for the capture, processing,

or utilization of carbon dioxide from various sources, including

biogenic sources such as landfills, wastewater treatment

facilities, and ethanol plants, and from anthropogenic sources from

industrial processes.

Sec.

171.9302.

ENTITLEMENT TO CREDIT.

A taxable entity is

entitled to a credit in the amount and under the conditions provided

by this subchapter against the tax imposed under this chapter.

Sec.

171.9303.

QUALIFICATION.

A taxable entity qualifies

for a credit under this subchapter if, during the period on which

the report is based, the taxable entity develops or operates a clean

hydrogen project.

Sec.

171.9304.

AMOUNT OF CREDIT; LIMITATION.

The amount of

the credit for a report is equal to the lesser of:

(1)

20 percent of the taxable entity's qualifying

capital expenditures for the period on which the report is based; or

(2)

the amount of franchise tax due for the report

after applying all other applicable credits.

Sec.

171.9305.

APPLICATION FOR CREDIT.

(a)

A taxable

entity must apply for a credit under this subchapter on or with the

report for the period for which the credit is claimed.

(b)

A taxable entity must apply for the credit in the manner

prescribed by the comptroller and include with the application any

information requested by the comptroller to determine whether the

entity is eligible for the credit under this subchapter.

Sec.

171.9306.

ASSIGNMENT PROHIBITED; EXCEPTION.

A taxable

entity may not convey, assign, or transfer the credit allowed under

this subchapter to another taxable entity unless substantially all

of the assets of the taxable entity are conveyed, assigned, or

transferred in the same transaction.

Sec.

171.9307.

RULES.

The comptroller shall adopt rules

necessary to implement and administer this subchapter.

SECTION 7. Section 152.094, Tax Code, as added by this Act,

applies only to a sale, use, or rental of a motor vehicle that

occurs on or after September 1, 2025.

SECTION 8. The changes in law made by this Act to Chapter

171, Tax Code, apply only to a report originally due on or after

January 1, 2026.

SECTION 9. The changes in law made by this Act do not affect

tax liability accruing before the effective date of this Act. That

liability continues in effect as if this Act had not been enacted,

and the former law is continued in effect for the collection of

taxes due and for civil and criminal enforcement of the liability

for those taxes.

SECTION 10. This Act takes effect September 1, 2025.