Texas House Bill HB4405

Texas 2021 - 87th Regular

Caption

Relating to imposing a tax on certain electric generators and gas producers.

Impact

The funds collected through this new tax regime will be allocated to vital state funds, with 25% directed to the foundation school fund and the remaining revenue credited to the general revenue fund. Importantly, the general revenue portion will be earmarked exclusively for the energy conservation office, which is responsible for funding energy conservation programs. This allocation underscores the dual objective of the bill: to generate revenue while simultaneously promoting energy efficiency and sustainability through weatherization activities.

Summary

House Bill 4405 introduces a tax framework specifically aimed at electric generators and gas producers in Texas. This legislation amends the Tax Code by adding Chapter 165, which imposes a tax based on net profits accrued from selling electricity and gas above specified thresholds. Electric generators will be taxed on profits associated with sales exceeding $9,000 per megawatt hour for electricity sold wholesale beyond the first four hours, while gas producers will incur taxes for profits from gas sold at prices exceeding $200 per thousand cubic feet at the wellhead. This unique taxation structure aims to ensure that higher profits from energy sales contribute to state revenues.

Contention

While proponents of HB 4405 argue that the measure will help stabilize the state's energy market by adding a fair taxation scheme for highly profitable companies, opponents may raise concerns regarding the potential impact on energy producers’ profit margins. The requirement for electric generators and gas producers to keep comprehensive records and comply with new tax regulations could lead to accusations of excessive governmental regulation. Furthermore, discussions surrounding the thresholds for taxation might also provoke dissent, particularly from industry stakeholders who feel the limitations could stifle overall energy production efforts.