Renewable Energy Memo

A new law in Texas, effective September 1, 2009, will create a new franchise tax credit for corporations that construct “clean coal” power plants in the state. Texas H.B. 469 creates a credit equal to the lesser of 10 percent of the total capital cost of the project, or $100 million, and is targeted to benefit integrated gasification combined cycle (IGCC) plants. The franchise tax credit is one of several incentives included in H.B. 469, according to the Clean Coal Technology Foundation of Texas. “The combination of H.B. 469 and key elements of S.B. 2111 establishes a two-tiered incentive package for clean coal projects in Texas,” the foundation said in a June 2 press release. “Projects that capture at least 50 percent of their carbon dioxide emissions are eligible for sales tax exemptions for the equipment that captures, transports, and stores their CO2 as well as more freedom for local taxing authorities to defer taxes in the early years of a project’s development.” The foundation characterized the franchise tax credit as a “bonus” and noted that another key incentive of H.B. 469 is a “75%, 30-year severance tax exemption for oil recovered using CO2 captured from a man-made emission source.” H.B. 469 sets out certain requirements for the franchise tax credit, which is available only if the project is implemented in connection with the construction of a new facility.  To secure the tax credit, a project must (a) obtain a certificate of compliance from the Texas Railroad Commission, (b) be completed and fully operation, (c) obtain verification from the Bureau of Economic Geology at the University of Texas that the facility is sequestering at least 70 percent of the CO2 being emitted by the facility, and (d) have an interconnection agreement with the Texas Electric Reliability Council.  Credits will not be eligible for issue until September 1, 2013.