The exemption of certain gas and electricity from sales and use taxes

Texas House Bill 3746, introduced in March 2025 by Representative Drew Darby, aims to amend the state's tax code to exempt certain types of gas and electricity from sales and use taxes. Specifically, the bill seeks to include hydrogen under the definition of 'gas' for tax exemption purposes. This means that sales of hydrogen gas would not be subject to state sales and use taxes, potentially encouraging the use and development of hydrogen as an energy source in Texas. The bill was left pending in the House Ways & Means Committee as of April 28, 2025.

Supporters of HB3746 argue that exempting hydrogen from sales and use taxes could stimulate investment in hydrogen production and infrastructure, positioning Texas as a leader in the emerging hydrogen economy. They believe this tax incentive would promote cleaner energy alternatives, reduce carbon emissions, and create new job opportunities in the renewable energy sector.

Critics of HB3746 express concerns that the tax exemption could lead to decreased state revenue, potentially impacting funding for public services. They also question whether the benefits of promoting hydrogen energy justify the loss in tax income, especially if the adoption of hydrogen technology does not meet expectations. Additionally, some environmental advocates worry that focusing on hydrogen may divert attention and resources from other renewable energy sources like wind and solar.