The bill, S.B. No. 1639, proposes the establishment of a new tax on the generation of electricity by certain electric generators in Texas, specifically targeting those that use energy sources other than natural gas or coal. This tax is intended to generate revenue that will be allocated exclusively for teacher pay raises in school districts and open-enrollment charter schools. The bill introduces Chapter 165 to the Tax Code, which includes definitions of key terms, the imposition and collection of the tax, and the reporting requirements for electric generators.

Under the new provisions, electric generators must calculate and report their tax obligations monthly, based on the kilowatt hours of electricity produced using non-natural gas or coal sources. The tax rate will be determined annually by the comptroller, who will also oversee the collection and reporting processes. The proceeds from this tax will be deposited into the general revenue fund, with a stipulation that the funds can only be used for teacher salary increases. The first tax payment and report are due on March 25, 2026, and the law will take effect on January 1, 2026.

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