Introduction
In 2025, Texas is rewarding businesses that invest in clean energy and zero-emission technologies with a valuable franchise tax credit under §171.602.
If you’re a manufacturer, warehouse, data center, or logistics startup using electric vehicles, battery storage, or clean HVAC systems, this could reduce your state tax bill significantly.
Here’s how the Texas zero-emission franchise tax credit works—and how to claim it.
Texas Code References
- Texas Tax Code §171.602 – Credit for purchase of clean energy equipment
- Texas Tax Code §171.653 – Limitations and carryforward
- IRC §48C – Federal clean energy property credit (for cross-reference)
What Qualifies as Zero-Emission Equipment?
Texas defines eligible property to include:
- Electric vehicle charging stations
- Solar panels and inverters
- Battery energy storage systems
- Clean HVAC and heat pumps
- Electric forklifts or transport vehicles
- Renewable-powered manufacturing machinery
To qualify:
- Equipment must be placed in service in Texas
- Must be new and not previously used
- Used directly in production, distribution, or business operations
Example: Data Center Upgrade
Example: EcoCore Cloud LLC installs:
- $300,000 in rooftop solar
- $150,000 in lithium battery storage
- $100,000 in EV charging infrastructure
They can claim a 10% franchise tax credit under §171.602, totaling $55,000, which can be used to reduce their franchise tax liability or carried forward for up to 5 years.
Step-by-Step: Claiming the Credit in 2025
- Purchase & Install Eligible Equipment
Property must be placed in service in Texas during the tax year. - Maintain Records
Keep vendor invoices, proof of installation, and operational use logs. - File Franchise Tax Report
Use Form 05-158 and indicate clean energy credit under applicable section. - Attach Credit Schedule
Include detailed worksheet with purchase dates, descriptions, and costs. - Retain Documentation for 5 Years
Especially if carrying the credit forward across multiple tax years.
Conclusion
Texas is actively incentivizing the shift to clean tech through franchise tax relief. If you’re electrifying your fleet, upgrading your facility, or investing in renewable tech, §171.602 can offer real ROI on your tax filings.
Plan ahead to install, document, and file correctly.
Call to Action
Invested in clean technology or zero-emission systems for your Texas business?
Book a consultation with Anshul Goyal, CPA, EA, FCA to:
- Confirm §171.602 eligibility
- Maximize your tax credit filing
- Reduce franchise tax through multi-year strategy
Don’t let green investments go unrewarded. File smart.
https://calendly.com/anshulcpa/
About Our CPA
Anshul Goyal, CPA, EA, FCA
Anshul brings 15+ years of U.S. and international tax experience. He specializes in helping online sellers, foreign founders, and U.S. residents with IRS and multi-state compliance. Known for his deep knowledge in Shopify and Amazon seller tax strategy, Anshul has helped hundreds of entrepreneurs minimize taxes and scale legally.
Disclaimer
This blog is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional regarding your individual tax situation.
Top 5 High-Searched FAQs (2025)
1. What is the §171.602 tax credit?
A Texas franchise tax credit for qualified zero-emission equipment placed in service.
2. How much is the credit worth?
Up to 10% of qualifying clean technology equipment costs.
3. Can I carry unused credit forward?
Yes, for up to 5 years.
4. Do EV charging stations qualify?
Yes, if used directly in your business operations.
5. How do I report this on my return?
Via Form 05-158 with a detailed clean energy credit worksheet.