By Delisi                                             H.B. No. 2236
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to franchise tax incentives for hydrogen energy devices.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. The Tax Code is amended to include Section 171.090
 1-5     to read as follows:
 1-6           Sec. 171.090.  EXEMPTION - CORPORATION WITH BUSINESS INTEREST
 1-7     IN HYDROGEN ENERGY DEVICES. (a)  In this section, "hydrogen energy
 1-8     device" means a system or series of mechanisms designed primarily
 1-9     to provide heating or cooling or to produce electrical or
1-10     mechanical power by collecting and transferring hydrogen-generated
1-11     energy.  The term includes a mechanical or chemical device that has
1-12     the ability to store hydrogen-generated energy for use in heating
1-13     or cooling or in the production of power.
1-14           (b)  A corporation engaged soley in the business of
1-15     manufacturing, selling, or installing hydrogen energy devices is
1-16     exempted from the franchise tax.
1-17           SECTION 2.  The Tax Code is amended to include Section
1-18     171.902 to read as follows:
1-19           Sec. 171.902.  DEDUCTION OF COST OF HYDROGEN ENERGY DEVICE
1-20     FROM TAXABLE CAPITAL OR TAXABLE EARNED SURPLUS APPORTIONED TO THIS
1-21     STATE. (a)  In this section, "hydrogen energy device" has the
1-22     meaning assigned to it in section 171.090 of this code.
 2-1           (b)  A corporation may deduct from its apportioned taxable
 2-2     capital the amortized cost of a hydrogen energy device or from its
 2-3     apportioned taxable earned surplus 10 percent of the amortized cost
 2-4     of a hydrogen energy device if:
 2-5                 (1)  the device is acquired by the corporation for
 2-6     heating or cooling or for the production of power;
 2-7                 (2)  the device is used in this state by the
 2-8     corporation; and
 2-9                 (3)  the cost of the device is amortized in accordance
2-10     with Subsection (c) of this section.
2-11           (c)  The amortization of the cost of a hydrogen energy device
2-12     must:
2-13                 (1)  be for a period of at least 60 months;
2-14                 (2)  provide for equal monthly amounts;
2-15                 (3)  begin on the month in which the device is placed
2-16     in service in this state; and
2-17                 (4)  cover only a period in which the device is in use
2-18     in this state.
2-19           (d)  A corporation that makes a deduction under this section
2-20     shall file with the comptroller an amortization schedule showing
2-21     the period in which a deduction is to be made.  On the request of
2-22     the comptroller, the corporation shall file with the comptroller
2-23     proof of the cost of the hydrogen energy device or proof of the
2-24     device's operation in this state.
2-25           (e)  A corporation may elect to make the deduction authorized
2-26     by this section either from apportioned taxable capital or
 3-1     apportioned taxable earned surplus for each separate regular annual
 3-2     period.  An election for an initial period applies to the second
 3-3     tax period and to the first regular annual period.
 3-4           SECTION 3. EFFECTIVE DATE. (a)  This Act takes effect January
 3-5     1, 2002, and applies only to a report due on or after that date.
 3-6           (b)  A corporation may claim an exemption or deduction under
 3-7     Sections 171.090 and 171.902, Tax Code, as added by this Act, only
 3-8     for an expenditure made on or after January 1, 2002.