Assembly Commerce and Economic Development Committee Statement to Assembly, No. 733, Dated March 8, 2021

Summary

Statement of the Assembly Commerce and Economic Development Committee of the State of New Jersey, dated March 8, 2021, reporting Assembly Bill 733 favorably with committee amendments. The bill exempts from the sales and use tax sales of fuel cell devices and systems and of tangible personal property powered directly and exclusively by a fuel cell, expanding the current exemption for solar energy devices and systems. As amended, it also exempts hydrogen, propane, natural gas and utility service used as fuel in a fuel cell, and electricity generated by a fuel cell. The exemptions apply from the first day of the fourth month after enactment. The bill was pre-filed for the 2020-2021 session.

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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT COMMITTEE

STATEMENT TO

ASSEMBLY,
No. 733

with
committee amendments

STATE
OF NEW JERSEY

DATED: MARCH
8, 2021

The Assembly Commerce and Economic Development
Committee reports favorably and with committee amendments Assembly Bill No.
733.

T his bill, as amended, provides an
exemption from the sales and use tax for sales of fuel cell devices and
systems, and sales of tangible personal property powered by fuel cells. The
bill, as amended, also exempts from the tax: sales of hydrogen, propane; and natural
gas and utility service that are used as a fuel in a fuel cell device or
system; and sales of electricity generated by a fuel cell.

In
general, fuel cells use a source of energy or another fuel (such as hydrogen)
and an oxidant to generate electricity through an electrochemical reaction
without combustion. The electricity generated by fuel cells is clean, safe,
and reliable, and can be depended upon to provide electrical power for a wide
variety of residential, industrial, and commercial applications, including
vehicles and material handling equipment, back-up or emergency electricity
generation units, and off-grid power stations for homes, businesses, and
utilities.

This
bill provides an exemption under the sales and use tax to recognize these
benefits and encourage the continued deployment of fuel cell technologies in
this State. Under the bill, the current exemption for solar energy devices and
systems is expanded to exempt sales of fuel cell devices and systems designed
to provide heating or cooling, or electrical or mechanical power by converting
the chemical energy of a fuel and an oxidant into electricity through a
non-combustive electrochemical process. In doing so, the bill exempts from tax
sales of mechanical or chemical devices used to store fuel cell-generated
energy.

The
bill also provides a stand-alone exemption from the sales and use tax for sales
of tangible personal property powered directly and exclusively by a fuel cell
device or system that is designed to provide heating or cooling, or electrical
or mechanical power to the tangible personal property as an integrated,
component part of the tangible personal property. Under the bill, this
exemption is included to ensure vehicles and material handling equipment (not
already exempt from tax under the exemption for sales of zero-emission
vehicles), electronic devices, and other consumer and commercial products that
rely on an embedded fuel cell for electrical power are permitted to be sold tax
free.

In
addition, as amended, the bill amends the sales and use tax to exempt from the
tax: sales of hydrogen, propane; natural gas and utility service that are used
as a fuel in a fuel cell device or system; and sales of electricity generated
by a fuel cell. Hydrogen, the fuel most commonly used in fuel cells, may be created from
propane and natural gas.

The
bill takes effect immediately upon enactment and provides for the sales and use
tax exemptions to apply to sales made, uses occurring, and billing periods
starting on or after the first day of the fourth month next following the date
of enactment.

This bill was pre-filed for introduction in the
2020-2021 session pending technical review. As reported, the bill includes the
changes required by technical review, which has been performed.

COMMITTEE AMENDMENTS:

The committee amendments provide that sales of hydrogen for the purpose of
fueling a fuel cell device or system would be exempt from the sales and use tax.

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