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Signed Into Law
Signed May 24, 2025Effective 2025-09-01
SB771

Regular Session

Relating to a credit or refund for diesel fuel taxes paid on diesel fuel used in this state by auxiliary power units or power take-off equipment.

Government Affairs & Regulatory Compliance Analysis

SB771: Government Affairs Overview

SB771 reinstates the statutory mechanism allowing businesses to claim tax credits or refunds for diesel fuel used in Auxiliary Power Units (APUs) and Power Take-Off (PTO) equipment, effective September 1, 2025. This legislation creates a revenue recovery opportunity for construction, waste management, and energy sectors, provided they can substantiate non-propulsion fuel usage through strict data logging.

Sen. Juan Hinojosa·Senate Bill·Regular Session

Moderate
Low Cost
Effective:2025-09-01

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SB771
Moderate
Relating to a credit or refund for diesel fuel taxes paid on diesel fuel used in this state by auxiliary power units or power take-off equipment.
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
Comptroller of Public Accounts
Primary Author: Sen. Juan Hinojosa
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: September 1, 2025. To claim refunds for the first eligible period, data tracking systems (metering or logging) must be operational on this date. There is no retroactive "look-back" period.
  • Agency Rulemaking: The Comptroller of Public Accounts must publish rules prior to September 1, 2025. This rulemaking will define the specific "fixed percentage" allowed for claims without meters and establish the approval process for metering devices.

Immediate Action Plan

  • Audit Fleet Assets: Immediately identify and list all vehicles with PTO or APU units (excluding sleeper cab APUs).
  • Verify Telematics Capabilities: Contact your telematics vendor to confirm they can generate a report separating "PTO-On Fuel Burn" from general idling by Q2 2025.
  • Calculate ROI: Compare estimated tax recovery against the cost of metering upgrades. If the recovery is low, plan to use the state's default "Percentage Method" to minimize administrative burden.
  • Monitor Rulemaking: Assign a compliance officer to track the Comptroller’s proposed rules in Summer 2025 regarding approved devices and percentage rates.

Operational Changes Required

Contracts

  • Full-Service Leases: Review agreements immediately. If the lessor pays for fuel/tax, the lessor owns the credit. You must renegotiate to pass this tax benefit through to your organization.
  • Telematics/Vendor Agreements: Update service level agreements (SLAs) with telematics providers (e.g., Geotab, Samsara). You require a guarantee that their reporting tools can isolate "PTO Active" fuel burn from general "Idling." Standard idling reports are insufficient for tax substantiation.

Hiring/Training

  • Fleet Management Training: Fleet managers must be trained to distinguish between *taxable idling* (driver comfort/HVAC) and *non-taxable PTO usage* (active pumping, mixing, lifting).
  • Driver Protocols: Drivers of vehicles using manual PTO engagement must be trained to engage the PTO system strictly during work operations to ensure ECU data logs are accurate.

Reporting & Record-Keeping

  • Refund Claim Workflow (Non-License Holders): Most businesses must implement a new workflow to aggregate fuel invoices and PTO data logs to file periodic refund claims (likely Form 06-106).
  • Tax Return Modification (License Holders): Licensed suppliers/distributors must update tax software to utilize the specific line item for Section 162.227(d-1) credits.
  • Audit Defense: You must retain digital data logs and calibration records for metering devices for four years. Data must explicitly separate propulsion fuel from auxiliary fuel.

Fees & Costs

  • Hardware/Software Upgrades: While there are no new state fees, businesses opting for the "Metered Method" (to maximize refunds) may incur capital costs to retrofit vehicles with physical flow meters or upgrade telematics subscriptions to access ECU fuel data.

Strategic Ambiguities & Considerations

  • The "Percentage" Determination: The statute grants the Comptroller authority to determine a fixed percentage of fuel eligible for refund if a meter is not used. It is currently unclear if this will be a blanket flat rate (e.g., 5% for all trucks) or asset-specific (e.g., 30% for cement mixers vs. 5% for bucket trucks). A low blanket rate would disadvantage heavy-use industries.
  • Definition of "Approved Device": The law requires the use of a "metering or measuring device." The Comptroller has not yet confirmed if standard OEM Engine Control Unit (ECU) data satisfies this requirement or if external, physical flow meters will be mandated.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Jan 13, 2025
Passed Senate
Apr 30, 2025
Passed House
May 10, 2025
Signed
May 24, 2025
Effective
Sep 1, 2025
TopicsTaxationTaxation--motor FuelsComptroller of Public Accounts
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Senate Authors

Sen. Juan HinojosaDemocrat · Primary Author

House Sponsor

Rep. Trent AshbyRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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Quick Reference

Frequently Asked Questions

Common questions about SB771

Q

What does Texas SB771 do?

SB771 reinstates the statutory mechanism allowing businesses to claim tax credits or refunds for diesel fuel used in Auxiliary Power Units (APUs) and Power Take-Off (PTO) equipment, effective September 1, 2025. This legislation creates a revenue recovery opportunity for construction, waste management, and energy sectors, provided they can substantiate non-propulsion fuel usage through strict data logging.

Q

Who authored SB771?

SB771 was authored by Texas Senator Juan Hinojosa during the Regular Session.

Q

When was SB771 signed into law?

SB771 was signed into law by Governor Greg Abbott on May 24, 2025.

Q

Which agencies enforce SB771?

SB771 is enforced by Comptroller of Public Accounts.

Q

How significant are the changes in SB771?

The regulatory priority for SB771 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB771?

The cost impact of SB771 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB771 address?

SB771 addresses topics including taxation, taxation--motor fuels and comptroller of public accounts.

Q

What are the key dates for SB771?

Key dates for SB771: Effective date is 2025-09-01. Rulemaking: Must determine and publish the specific percentage of diesel fuel eligible for credit/refund for vehicles lacking separate metering devices. (Prior to 2025-09-01); Establish approval process for specific metering or measuring devices to calculate exact fuel usage. (Ongoing). Consult with legal counsel regarding applicability.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026