Bill Text: IL SB1711 | 2023-2024 | 103rd General Assembly | Introduced

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Bill Title: Creates the Hydrogen Fuel Replacement Tax Credit Act. Creates an income tax credit for eligible taxpayers in an amount equal to $1 per kilogram of eligible zero-carbon hydrogen used by the eligible taxpayer during the tax year for which a credit is sought. Provides for additional credits if the use of the zero-carbon hydrogen by the eligible taxpayer occurs in an equity investment eligible community. Provides that the total amount of tax credits to be allocated by the Department of Revenue to taxpayers for eligible zero-carbon hydrogen use occurring in the tax year ending during that State fiscal year shall not exceed $100,000,000, plus the amount of tax credits that were available to be allocated for eligible zero-carbon hydrogen use in the tax year ending during the prior State fiscal year but were not allocated. Effective immediately.

Spectrum: Slight Partisan Bill (Democrat 2-1)

Status: (Introduced) 2023-04-28 - Rule 3-9(a) / Re-referred to Assignments [SB1711 Detail]

Download: Illinois-2023-SB1711-Introduced.html

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103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB1711 Introduced 2/9/2023, by Sen. Laura Ellman SYNOPSIS AS INTRODUCED:
New Act
35 ILCS 5/240 new
Creates the Hydrogen Fuel Replacement Tax Credit Act. Creates an income tax credit for eligible taxpayers in an amount equal to $1 per kilogram of eligible zero-carbon hydrogen used by the eligible taxpayer during the tax year for which a credit is sought. Provides for additional credits if the use of the zero-carbon hydrogen by the eligible taxpayer occurs in an equity investment eligible community. Provides that the total amount of tax credits to be allocated by the Department of Revenue to taxpayers for eligible zero-carbon hydrogen use occurring in the tax year ending during that State fiscal year shall not exceed $100,000,000, plus the amount of tax credits that were available to be allocated for eligible zero-carbon hydrogen use in the tax year ending during the prior State fiscal year but were not allocated. Effective immediately.
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A BILL FOR
SB1711 LRB103 05880 HLH 50901 b
AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Hydrogen Fuel Replacement Tax Credit Act.
Section 5. Legislative findings; purpose. The General
Assembly finds that:
(1) the health, welfare, and prosperity of all
Illinois residents require that the State of Illinois act
to reduce carbon emissions and other air pollutants in the
State;
(2) the State currently invests in a variety of
strategies to reduce carbon emissions and other air
pollutants, including, but not limited to, strategies that
encourage the use of renewable energy, nuclear energy,
energy efficient processes, and low-emission vehicles;
(3) zero-carbon hydrogen can be produced through the
electrolysis of water using electricity generated by
emissions-free energy sources; and
(4) replacing fossil fuels and hydrogen produced from
fossil fuels with zero-carbon hydrogen will reduce carbon
emissions and other air pollutants and benefit the
environment and public health of this State.

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This Act is intended to encourage the replacement of
fossil fuels and hydrogen produced from fossil fuels with
zero-carbon hydrogen for the purposes of promoting
decarbonization and improving the State's air quality.
Section 10. Definitions. As used in this Act:
"Attestation" means a statement that is made under penalty
of perjury by a producer under Section 13.
"Department" means the Department of Revenue.
"Eligible taxpayer" means a taxpayer that:
(1) is subject to subsections (a) and (b) of Section
201 of the Illinois Income Tax Act;
(2) has eligible zero-carbon hydrogen use for which
the producer has provided an attestation and verification
under Section 13;
(3) complies with subsection (e) of Section 15 if
applicable; and
(4) is allocated credits by the Department under
Section 25.
If the taxpayer is an individual, partnership, trust,
estate, or Subchapter S corporation, then the taxpayer is an
eligible taxpayer only to the extent that the taxpayer's
Illinois income tax liability is due to an equity interest in a
partnership that uses zero-carbon hydrogen, a Subchapter S
corporation that uses zero-carbon hydrogen, or a similar
pass-through entity that uses zero-carbon hydrogen.

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"Eligible zero-carbon hydrogen use" means the consumption,
in Illinois, of zero-carbon hydrogen.
"Environmental attribute credit" means a renewable energy
credit, zero-emission credit, or carbon mitigation credit, as
those terms are defined in Sections 1-10 and 1-75 of the
Illinois Power Agency Act, or any other environmental
attribute credit tracked by the Generation Attribute Tracking
System administered by PJM Interconnection, LLC.
"Equity investment eligible community" has the meaning
provided in Section 5-5 of the Energy Transition Act.
"MISO" means Midcontinent Independent System Operator,
Inc.
"MISO maximum generation event" has the same meaning as in
MISO's Reliability Operating Procedures.
"PJM performance assessment interval" has the same meaning
as provided in the PJM Open Access Transmission Tariff.
"Producer" means a zero-carbon hydrogen producer.
"Qualified renewable energy resource" means an electric
generator that (1) is fueled by wind, solar thermal energy,
photovoltaic cells and panels, geothermal energy, or
hydropower that does not involve new construction or
significant expansion of hydropower dams; and (2) produces
renewable energy credits that are eligible to be counted
toward the renewable energy requirements in subsection (c) of
Section 1-75 of the Illinois Power Agency Act.
"Regional grid" means the territory served by a specific

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regional transmission organization.
"Regional transmission organization" means PJM
Interconnection, LLC; Midcontinent Independent System
Operator; or any other entity charged with regional real-time
balancing of electricity generation and load.
"Zero-carbon hydrogen" means hydrogen that is produced
through electrolysis by an electrolyzer powered from
electricity generated by one or more zero-emission facilities
or qualified renewable energy resources that, in either
instance, are located in the same regional grid where the
zero-carbon hydrogen is produced.
"Zero-emission facility" has the same meaning as provided
in Section 1-10 of the Illinois Power Agency Act as that Act
exists on the effective date of this Act.
Section 13. Attestation and verification required. Each
taxpayer seeking credits under this Act shall submit with its
application for credits under this Act an attestation from the
producer, made under penalty of perjury, that the producer or
its electricity supplier has retired environmental attribute
credits associated with generation from a zero-emission
facility or a qualified renewable energy resource facility,
located in the same regional grid where the zero-carbon
hydrogen is produced, during each hour in which the hydrogen
for which a tax credit is claimed is produced, in an amount at
least as great as the energy consumed in that hour for

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production of the volume of hydrogen for which a tax credit is
claimed. The attestation shall also confirm that the hydrogen
for which a tax credit is claimed has not been produced during
an applicable PJM performance assessment interval or an
applicable MISO maximum generation event. In so attesting, the
producer may credit a portion of a monthly attribute
certificate to a specific hour within that month in an amount
equal to the generation quantity reflected in the certificate,
multiplied by the ratio of the zero-emission facility's or
qualified renewable energy resource's total generation in that
hour to its total monthly generation. Each taxpayer seeking
credits under this Act shall also be required to submit to the
Department, at the time of the tax filing for the applicable
year, documentation verifying the facts set forth in the
attestation required by this Section.
Section 15. Allowable credit.
(a) For tax years ending on or after December 31, 2023, a
credit is allowed against the taxes imposed on an eligible
taxpayer under subsections (a) and (b) of Section 201 of the
Illinois Income Tax Act in an amount equal to $1 per kilogram
of eligible zero-carbon hydrogen used by the eligible taxpayer
during the tax year for which a credit is sought.
(b) The allowable credit provided in subsection (a) of
this Section shall be increased by $0.15 per kilogram of
eligible zero-carbon hydrogen if the use of the zero-carbon

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hydrogen by the eligible taxpayer occurs in an equity
investment eligible community, after consultation with the
community and reasonable efforts to accommodate the community.
(c) The allowable credit provided in subsection (a) of
this Section shall be increased by $0.15 per kilogram of
eligible zero-carbon hydrogen if the eligible taxpayer uses
contractors or employs labor at a project location in an
equity investment eligible community, as defined in Section
5-5 of the Energy Transition Act on the effective date of this
Act, to convert existing equipment or install new equipment to
enable eligible zero-carbon hydrogen use for which a credit is
claimed under this Act.
(d) An eligible taxpayer may not earn tax credits for a tax
year for eligible zero-carbon hydrogen use in an amount that
exceeds the amount of tax credit allocated to it for the tax
year under Section 25. The credit or credits may not reduce the
taxpayer's liability to less than zero. An eligible taxpayer
may carry forward any tax credit that has been earned but not
used (or transferred pursuant to Section 35) for a period of up
to 5 tax years after the last tax year in which a credit was
earned by that taxpayer for eligible zero-carbon hydrogen use.
Unused credits that are not transferred pursuant to Section 35
shall expire at the end of this 5-year carryforward period.
(e) Labor performed on or after the effective date of this
Act to convert the eligible taxpayer's existing equipment or
install for the eligible taxpayer new equipment to enable

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eligible zero-carbon hydrogen use for which a credit is
claimed under this Act shall be performed by general
contractors that enter into a project labor agreement, as
defined by the Illinois Power Agency Act, prior to
construction. The project labor agreement shall be filed with
the Department. At a minimum, the project labor agreement must
provide the names, addresses, and occupations of the owner of
the facilities and the individuals representing the labor
organization employees participating in the project labor
agreement consistent with the Project Labor Agreements Act.
The agreement must also specify the terms and conditions as
defined by the Illinois Power Agency Act. Any information
submitted pursuant to this subsection (e) shall be considered
commercially sensitive information.
Section 20. Credit availability. Beginning with the State
fiscal year ending on June 30, 2024, and in each subsequent
State fiscal year, the total amount of tax credits to be
allocated by the Department to taxpayers for eligible
zero-carbon hydrogen use occurring in a tax year ending during
that State fiscal year shall not exceed $100,000,000, plus the
amount of tax credits that were available under this Section
to be allocated for eligible zero-carbon hydrogen use in the
tax year ending during the prior State fiscal year but were not
allocated.

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Section 25. Credit allocation by the Department.
(a) Taxpayers shall notify the Department, by July 1,
2023, of the dollar amount of credit the taxpayer estimates it
will earn for eligible zero-carbon hydrogen use in tax years
ending on or after December 31, 2023 and ending on or before
June 30, 2024. For tax years ending on or after July 1, 2024,
taxpayers shall notify the Department of the dollar amount of
credit the taxpayer estimates it will earn for eligible
zero-carbon hydrogen use by January 1 immediately preceding
the first day of the fiscal year in which the tax year ends.
(b) The Department shall notify each taxpayer of the
dollar amount of credit allocated to that taxpayer for
zero-carbon hydrogen use. That notification shall occur by
March 1 following the date on which the taxpayer notifies the
Department of its estimated zero-carbon hydrogen use under
subsection (a). The taxpayer must notify the Department within
30 days after the notification by the Department under this
subsection (b) if it wishes to surrender its allocation.
(c) The Department shall not allocate any credit under
this Act to a taxpayer for a tax year that ends on or after
December 31, 2032 if the taxpayer has not previously claimed a
credit under this Act for eligible zero-carbon hydrogen use.
(d) Notwithstanding any other provision of this Section or
Section 30, the Department shall not allocate credits under
this Act to a taxpayer for more than 10 years.
(e) The amount of credit allocated to a taxpayer by the

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Department in subsection (b) of this Section shall be the
maximum credit that the taxpayer is permitted to earn for the
tax year ending in the State fiscal year for which credits are
allocated.
(f) In years when the total allocation of credits sought
by taxpayers exceeds the available credits to be allocated to
all taxpayers under Section 20, a taxpayer that fails to earn
credit for eligible zero-carbon hydrogen use for at least 90%
of the credit allocated to that taxpayer shall pay a penalty
equal to the dollar amount of tax credit allocated but
unearned. This subsection shall not apply if a taxpayer's
failure to use its full allocation of credits is due to an
extraordinary event that was unforeseen at the time of the
requested allocation under subsection (a) of this Section or
the 30-day surrender period in subsection (b) of this Section,
such as an unexpected outage of the generator providing
electricity used to produce zero-carbon hydrogen, an
unexpected outage of the hydrogen production facility, or an
unexpected outage of the taxpayer's facility using the
zero-carbon hydrogen.
(g) Except as provided in Section 35, an allocation may
not be transferred, sold, or otherwise conveyed, nor may an
allocation be rolled forward to a subsequent year.
Section 30. Prioritization of tax credit allocation. If
the total amount of tax credits sought by taxpayers under

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Section 25 exceeds the total amount of tax credits that are
allowed to be allocated under Section 20, the Department shall
prioritize allocation as follows:
(1) First, tax credits shall be allocated to eligible
taxpayers who (i) participate in a United States
Department of Energy Hydrogen Hub for their associated
eligible zero-carbon hydrogen use, (ii) purchase hydrogen
from a participant in a United States Department of Energy
Hydrogen Hub for their associated eligible zero-carbon
hydrogen use, or (iii) purchase electricity to produce and
use zero-carbon hydrogen from a participant in a United
States Department of Energy Hydrogen Hub for their
associated eligible zero-carbon hydrogen use.
(2) Next, any remaining credits shall be allocated to
eligible taxpayers who previously received a credit
allocation and who engaged in eligible zero-carbon
hydrogen use in the prior calendar year, in an amount
equal to the most recent allocation; however, if there are
insufficient remaining credits available, then priority
shall be given to such eligible taxpayers based on the
amount of eligible zero-carbon hydrogen they used in the
prior calendar year, in order from greatest to least.
(3) Finally, any remaining credits shall be allocated
to taxpayers in proportion to their requested allocation,
excluding any amount already allocated to a taxpayer
pursuant to subsections (1) and (2) of this Section.

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Section 35. Transfer of credits.
(a) Any eligible taxpayer earning tax credits under this
Act (referred to in this Section as the assignor), which tax
credits have been allocated and earned but not yet used by the
eligible taxpayer against its tax liability for any tax year
and which have not expired, may sell, assign, convey, or
otherwise transfer such credits. The taxpayer acquiring the
credits (referred to in this Section as the assignee) may use
the amount of the acquired credits against the tax imposed
under subsections (a) and (b) of Section 201 of the Illinois
Income Tax Act for the tax year in which the assignee acquired
the credit and may carry forward any unused credit for 5 tax
years after the tax year in which the assignee acquired the
credit.
(b) The Department shall certify the eligibility of the
credit to be transferred by the assignor upon assignor's
application to the Department. The application shall set forth
the hydrogen producer's name and attestation, the amount of
all credits earned and previously used by the assignor, the
amount of all credits earned and unused by the assignor, the
amount of credits proposed to be transferred, and the
assignee's name and tax identification number. The Department
shall thereafter certify whether the amount of credits
proposed to be transferred to the assignee is available to the
assignor.

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Section 37. Rules. The Department may adopt rules to
implement and administer this Act.
Section 40. Severability. If any provision of this Act or
its application to any person or circumstance is held invalid,
the invalidity of that provision or application does not
affect other provisions or applications of this Act that can
be given effect without the invalid provision or application.
Section 900. The Illinois Income Tax Act is amended by
adding Section 240 as follows:
(35 ILCS 5/240 new)
Sec. 240. Hydrogen fuel replacement tax credits.
(a) For tax years ending on or after December 31, 2023 and
before January 1, 2043, an eligible taxpayer who qualifies for
a credit under the Hydrogen Fuel Replacement Tax Credit Act is
entitled to a credit against the taxes imposed under
subsections (a) and (b) of Section 201 of this Act as provided
in that Act. If the eligible taxpayer is a partnership or
Subchapter S corporation, the credit shall be allowed to the
partners or shareholders in accordance with the determination
of income and distributive share of income under Sections 702
and 704 and Subchapter S of the Internal Revenue Code.
(b) If the amount of any tax credit awarded under this

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Section exceeds the qualified taxpayer's income tax liability
for the year, the excess amount may be carried forward as
provided in the Hydrogen Fuel Replacement Tax Credit Act.
(c) The Department shall allocate available credits to
taxpayers in accordance with the Hydrogen Fuel Replacement Tax
Credit Act.
(d) A sale, assignment, or transfer of the tax credit may
be made in accordance with the Hydrogen Fuel Replacement Tax
Credit Act by the taxpayer earning the credit.
(e) The Department shall certify the available credit for
transfer by an assignor in accordance with the Hydrogen Fuel
Replacement Tax Credit Act.
Section 999. Effective date. This Act takes effect upon
becoming law.