House Bill No. [insert number] proposes the establishment of an income tax credit for taxpayers who incur costs related to the development of carbon sequestration wells that are subsequently prohibited by local ordinances. Specifically, the bill defines "eligible costs" as documented expenditures on Class V well testing, which includes drilling, equipment, labor, and geological assessments incurred before the effective date of the local ordinance. The tax credit amount is set to equal the total eligible costs, capped at $5 million per taxpayer, and will be allocated over five consecutive taxable years. Additionally, the total amount of credits granted per taxable year is limited to $25 million.

To qualify for the tax credit, taxpayers must submit an application to the Department of Revenue within 180 days of the local ordinance's effective date, including necessary documentation such as proof of well testing permits and itemized receipts. The Department of Revenue, in consultation with the Department of Energy and Natural Resources, will certify the eligible costs and issue or deny credits within 90 days of application receipt. The bill also stipulates that any unused credit can be carried forward for up to five years, and prohibits taxpayers from receiving any other state tax credits for the same activity. The provisions of this act will apply to taxable periods beginning on or after January 1, 2026, and will take effect on that same date.