HB 4725

relating to a sales tax exemption for the sale, lease, or
installation of distributed energy systems for residential and
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
This Act may be cited as the "Texas Distributed Energy Sales
SECTION 2.  LEGISLATIVE FINDINGS AND PURPOSE.
(a)  The legislature finds that:
(1)  advancements in energy generation technology
enable homeowners, businesses, and industrial facilities to
produce electricity on-site using distributed energy systems;
(2)  exempting distributed energy systems from sales
and use taxes is necessary to maintain a competitive and equitable
energy market, support energy security, and promote economic growth
(3)  the imposition of sales and use taxes on
distributed energy systems creates a financial barrier to adoption
and limits access to energy self-sufficiency.
(b)  The purpose of this Act is to exempt from sales and use
taxes the sale, lease, or installation of distributed energy
SECTION 3.  SALES TAX EXEMPTION FOR DISTRIBUTED ENERGY
Chapter 151, Tax Code, is amended by adding Section 151.3187
Sec. 151.3187.  DISTRIBUTED ENERGY SYSTEMS.
(a)  In this section, "distributed energy system" means a
(1)  generates electricity solely for on-site use:
(2)  includes equipment necessary to support the
operation of the system, including:
(D)  mounting hardware rated for solar or battery
(E)  natural gas or hydrogen generators; or
(3)  is primarily designed and used to supply
electricity to a structure or facility located in this state.
(b)  The sale, use, lease, or installation of a distributed
energy system is exempt from the taxes imposed by this chapter.
(c)  The exemption under Subsection (b) applies only to the
portion of a transaction directly attributable to the purchase,
lease, or installation of a distributed energy system and does not
(1)  construction not directly required for the
(d)  A person claiming an exemption under this section shall,
on request of the comptroller, provide documentation sufficient to
establish eligibility for the exemption, including records
verifying that the system meets the requirements of Subsection (a).
SECTION 4.  COMPTROLLER RULEMAKING.
(a)  The comptroller shall adopt rules as necessary to
implement and administer Section 151.3187, Tax Code, as added by
(1)  establish criteria for determining the
eligibility of a device or system as a distributed energy system;
(2)  prescribe reporting requirements for sellers,
lessors, and installers claiming the exemption; and
(3)  provide for enforcement measures to ensure
(b)  The comptroller shall adopt the rules required by
Subsection (a) not later than June 1, 2025.
SECTION 5.  EFFECTIVE DATE; APPLICATION.
(a)  This Act takes effect July 1, 2025.
(b)  The exemption provided by Section 151.3187, Tax Code, as
added by this Act, applies only to a sale, lease, or installation of
a distributed energy system that occurs on or after July 1, 2025.
If a provision of this Act or its application to a person or
circumstance is held invalid, the invalidity does not affect
another provision or application of this Act that can be given
effect without the invalid provision or application, and to this
end the provisions of this Act are severable.