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Texas Tax Code Incentives for Renewable Energy

Although the state does not have a tax exemption program at this time that provides funding of renewable energy equipment on an individual basis, there are a few allowable tax exemptions and deductions.

Texas Tax Codes Related to Renewable Energy Systems

The state offers a 100 percent property tax exemption on the appraised value of an on-site solar, wind or biomass power generating device. Additionally, a franchise tax exemption is extended to manufacturers, sellers, or installers of solar energy devices. Also, Texas allows a deduction from margin apportioned to this state for the purchase and use of certain solar energy devices in this state.

Solar and Wind-Powered Energy Devices Property Tax Exemption

Texas Tax Code, Title 1, Property Tax Code
Subtitle C, Chapter 11, Taxable Property & Exemptions,
Subchapter B. Exemptions, Section 11.27

Texas offers this property tax exemption that allows residents to take an exemption from taxation (using form 50-123) of the amount of the appraised value of the property that arises from the installation or construction of a solar or wind-powered energy device that is primarily for the production and distribution of thermal, mechanical, or electrical energy for on-site use, or devices used to store that energy. "Solar" is broadly defined to include a range of biomass technologies.

Example: If your property is valued and taxed at $150,000 and you add a $15,000 system that increases the property value, the exemption applies to the added value, so with the exemption you will only be taxed on the property value before you added the system.

Incentive Type:  Property tax exemption - commercial, industrial & residential.

Eligible Renewable Technologies:  Passive solar space heat, solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics, wind, biomass, storage technologies, solar pool heating, anaerobic digestion.

Exemption Handbook:  The Texas Comptroller's Office provides Solar and Wind-Powered Device Exemption Guidelines that outlines a list of the eligible solar and wind-powered devices, valuation methods and application requirements.

Solar Energy Devices Business Franchise Tax Exemption

Texas Tax Code, Title 2, State Taxation
Subtitle F, Chapter 171, Franchise Tax, Subchapter B, Exemptions
Section 171.056, Exemption, Corporation with Business Interest in Solar Energy Devices

AP-204 Application for Exemption - Federal and All Others
An entity that is solely engaged in the business of manufacturing, selling or installing qualifying solar (wind) energy devices, as defined by Sec. 171.107, or certain component parts of such devices, may qualify for the franchise tax exemption under Sec. 171.056.

Incentive Type:  Franchise (Business) Tax exemption - commercial and industrial.

Eligible Renewable & Other Technologies:  solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics. Wind energy continues to qualify under the term "solar energy" for the exemption and deduction under Sections 171.056 and 171.107.

Note: "Solely engaged" applies to all the entity's activities, not merely its activities in Texas.

Solar Energy Devices Franchise Tax Deduction

Texas Tax Code, Title 2, State Taxation
Subtitle F, Chapter 171, Franchise Tax
Subchapter C, Determination of Taxable Capital; Allocation and Apportionment
Section 171.107, Deduction of Cost of Solar Energy Device From Taxable Capital or Taxable Earned Surplus Apportioned to this State

Texas allows a corporation to deduct the cost of a solar energy device from the franchise tax in one of two ways: (1) the total cost of the system may be deducted from the company's taxable capital; or, (2) 10% of the system's cost may be deducted from the company's income. Both taxable capital and a company's income are taxed under the franchise tax, which is Texas's equivalent to a corporate tax.

Incentive Type: Franchise (Business) Tax deduction for commercial and industrial

Eligible Renewable & Other Technologies:  Solar water heat, solar space heat, solar thermal electric, solar thermal process heat, photovoltaics. Wind energy continues to qualify under the term "solar energy" for the exemption and deduction under Sections 171.056 and 171.107.

Note: If you are planning to install renewable energy devices in anticipation of a Sec. 171.107 franchise tax deduction, please make sure that your devices are listed here.  If you are uncertain, you can contact us at tax.help@cpa.state.tx.us.

Questions?

If you have questions, contact the Comptroller of Public Accounts, Tax Policy Division, toll-free:

Franchise tax questions: 1-800-252-1382

Property tax questions: 1-800-252-9121, ext. 5-9999 or (512) 305-9999

Solar Energy Devices Business Franchise Tax Exemption

Texas Tax Code, Title 2, State Taxation
Subtitle F, Chapter 171, Franchise Tax, Subchapter B, Exemptions
Section 171.056, Exemption, Corporation with Business Interest in Solar Energy Devices

A corporation in Texas engaged solely in the business of manufacturing, selling, or installing solar energy devices is exempted from the franchise tax.

Incentive Type:  Industry Recruitment for Commercial and Industrial.

Eligible Renewable & Other Technologies:  Solar Water Heat, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics. Wind energy continues to qualify under the term "solar energy" for the exemption and deduction under Sections 171.056 and 171.107.

Note: If you are planning to install a renewable energy devise in anticipation of a Section 171.056 franchise tax exemption, please make sure that your devise is listed here. If you are uncertain, you can call 1-800-531-5441, ext. 5-9952 or (512) 305-9952. Or you can write to the Tax Policy Division - Franchise Tax, Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3528.

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