According to the Legislative Budget Board (LBB), SB 771 is projected to have a negative fiscal impact on the state’s General Revenue-related funds, totaling approximately $5.23 million over the biennium ending August 31, 2027. This anticipated loss stems from the diesel fuel tax credits and refunds that would be newly available for fuel used by auxiliary power units (APUs) and power take-off (PTO) equipment, removing those gallons from full taxation.

Over a five-year period (2026–2030), the bill would consistently reduce General Revenue, the Available School Fund, and the State Highway Fund. For example, in fiscal year 2026, the General Revenue Fund would lose an estimated $207,000, the Available School Fund would lose $2.266 million, and the State Highway Fund would lose $6.798 million. Losses slightly increase year-over-year as diesel consumption projections grow.

The fiscal methodology used assumes reinstatement of an older deduction formerly available under Chapter 153 of the Texas Tax Code, before it was repealed. The Comptroller distributed estimated revenue losses across funds according to current statutory allocation formulas for diesel fuel tax revenue. The initial year’s estimates also reflect a statutory lag in tax remittances affecting cash flow.

Importantly, no fiscal impact is anticipated for local governments, meaning cities and counties would not experience budgetary effects directly from this change.

SB 771 addresses a longstanding inconsistency in Texas diesel fuel tax policy by reinstating tax credits and refunds for diesel fuel used in auxiliary power units (APUs) and power take-off (PTO) equipment. Before 2003, Texas recognized that fuel used for non-propulsion purposes — such as powering refrigeration units, hydraulic systems, and other equipment — should not be taxed like road-use fuel. That credit was mistakenly removed during a restructuring of the tax code. SB 771 simply restores that fair treatment​.

Importantly, this bill does not grow the size or scope of government. It uses existing administrative mechanisms through the Comptroller’s office and does not create new regulatory burdens. Businesses are given flexibility: they can either measure eligible fuel use with a meter or use a default percentage established by the state.

While the bill results in a modest negative revenue impact (approximately $5.23 million over two years​) and does indirectly shift a small burden to general taxpayers, it corrects an unjust tax rather than creating a new special exemption. It does not create a new carveout favoring a particular industry; it restores tax equity between gasoline and diesel users.

Though we generally do not support tax carveouts due to concerns about complexity and favoritism in the tax code, Texas Policy Research recommends that lawmakers vote YES on SB 771 because it corrects an unfair tax burden rather than introducing a new subsidy. This aligns with core principles of Individual Liberty, Free Enterprise, Limited Government, Personal Responsibility, and Fair Taxation.

• Individual Liberty: The bill protects the right of businesses and individuals to be free from unfair taxation. Diesel users are no longer forced to pay taxes on fuel used for purposes unrelated to highway use, meaning citizens retain more of their own resources to use as they see fit.
• Personal Responsibility: The bill encourages businesses to either accurately measure their non-propulsion fuel use with metering devices or honestly estimate fuel usage based on a comptroller-set percentage. Businesses that take the initiative to track usage precisely are rewarded with more accurate credits, incentivizing responsible tracking and reporting.
• Free Enterprise: By lowering the cost of operating equipment that uses diesel auxiliary power (especially in trucking, construction, and agriculture), the bill removes an unfair government-imposed cost on private economic activity. It helps level the playing field and allows businesses to operate more freely and competitively.
• Private Property Rights: Fuel purchased for auxiliary uses is the property of the business or individual. Taxing that fuel for road maintenance — when it is not used on public roads — violates the principle that taxes should only be levied in proportion to public use. By correcting this, the bill upholds the right of Texans to use their property (fuel) without unjust taxation.
• Limited Government: The bill restricts government taxation to its proper sphere: taxing diesel fuel only when it is used to impact public roads and infrastructure. It does not create a new program, bureaucracy, or regulatory regime. Instead, it tightens government action to match actual public purpose, keeping it properly limited.

• HB 1663 (Same As)