The General Laws are hereby amended by inserting after chapter 64M the following chapter:

CHAPTER 64N: TAXATION ON CARBON EMISSION

SECTION 1: DEFINITIONS

As used in this chapter, the following words shall, have the following meaning:

“Carbon-based fuel”, coal, natural gas, petroleum products and any other product used for fuel that contains carbon and emits carbon dioxide when combusted; provided, however, that  carbon-based fuel shall not include any product used for fuel that is derived from a resource that is less than 1,000 years old in its natural state.

“Commissioner”, the commissioner of revenue.

“Fuel”, shall have the same meaning as in section one of chapter sixty-four A, except shall also include diesel motor fuel.

“Non-carbon tax”, a tax imposed pursuant to any chapter in the general laws other than this chapter.

“Person”, shall have the same meaning as defined in section seven of chapter four.

“Petroleum products”, propane, gasoline, unleaded gasoline, kerosene, number 2 heating oil, diesel fuel, kerosene base jet fuel, and number 4, number 5 and number 6 residual oil for utility and non-utility uses, and all petroleum derivatives, whether in bond or not, which are commonly burned to produce heat, power, electricity or motion or which are commonly processed to produce synthetic gas for burning.

“Renewable Biomass”, shall have the same meaning as defined in section one of chapter sixty-four A.

“Retail Customer”, a person who purchases carbon-based fuel for his or her own consumption.

“Retail Purchase”, a purchase of carbon-based fuel made by a person for his or her own consumption.

“Secretary”, the secretary of administration and finance.

“Tax”, the tax imposed pursuant to this chapter.

SECTION 2: SUBJECT TO TAXATION

Any person who is licensed to sell fuel in the commonwealth pursuant to section two of chapter sixty-four A; or distributes any type of carbon-based fuel or renewable biomass for the retail purchase of residential or commercial building heat, is subject to the tax of this chapter.

SECTION 3: DETERMINATION OF TAX

a)The tax shall be imposed at a rate of $5 per ton of carbon in any carbon-based fuel that is sold to retail customers in the commonwealth as follows: 

(1)The department of revenue shall calculate the tax liability associated with any retail purchase by multiplying the rate designated in this section by the total amount of carbon in each carbon-based fuel sold to retail consumers in the commonwealth. 

(2)The department of energy resources shall assist the department of revenue in calculating the tax liability associated with any retail purchase by determining the average amount of carbon used in the usage of carbon-based fuel and renewable biomass as taxed in this chapter.  For the purpose of calculating the tax, the department of energy resources shall determine the percentage of carbon in each carbon-based fuel and report those percentages to the department of revenue.

(3)The department of revenue and the department of energy resources shall inform the secretary of their findings, and provide any information or data that the secretary requests to carry out of his responsibilities pursuant to section six of this chapter, by January 1 of each year.   

(4)The legislature may vote to increase the tax at any time after the secretary’s presentation to the legislature pursuant to section six of this chapter; provided, however, that the legislature may not vote to decrease the tax; provided further that the tax shall increase by at least the rate of annual inflation plus 1 percent for the first ten years that this chapter is in effect, and by at least the rate of annual inflation thereafter. 

(5)The legislature may vote to increase the revenue cap described in subsection 6(a)(3) by more than the rate of annual inflation at any time after the secretary’s presentation to the legislature pursuant to section six; provided, however, that the vote to increase the revenue cap must also increase the tax by more than the rate of annual inflation.

(6)The department of revenue and the department of energy resources may adopt any rules necessary for the calculation and collection of the tax imposed under this section.  

SECTION 4: MONTHLY RETURNS AND PAYMENT OF EXCISE

a)Any person licensed to sell fuel in the commonwealth pursuant to section two of chapter sixty-four A, who is required to file a return pursuant to subsection (a) of section 16 of chapter sixty-two C, shall pay to the commissioner an excise at the tax per gallon determined by the department of revenue pursuant to section 3 of this chapter, upon each gallon of fuel sold by such person in the commonwealth during the calendar month covered by the return.

b)Any person who distributes any type of carbon-based fuel or renewable biomass for the retail purchase of residential or commercial building heat shall pay to the commissioner an excise at the tax per gallon determined by the department of revenue pursuant to section 3 of this chapter, upon each gallon of carbon-based fuel sold by such person in the commonwealth during the calendar month covered by the return, in the same manner and at the same time as those returns and excises described in chapter sixty-two C. 

c)Notwithstanding the revenue disbursement requirement pursuant to subsection 8(b) of this chapter, the commissioner shall deposit the revenue from the tax into the Carbon Tax Revenue Fund, as established in section 7 of this chapter.

SECTION 5: PURCHASER TO BEAR TAX

The tax in every instance shall be borne by the retail customer, and no person offering carbon-based fuel or renewable biomass for sale shall sell, advertise or offer for sale said carbon-based fuel or renewable biomass separately from the tax imposed by this chapter.

SECTION 6: PLANS AND REPORTS RESPECTING THE CARBON TAX

The secretary must annually prepare and present a carbon tax plan and report to the legislature in the following manner:

a)The carbon tax plan must cover a 3-year period beginning with the start of the fiscal year following the fiscal year in which the plan is presented to the legislature, and must include the following information for each fiscal year covered by the plan:

(1)a forecast for the carbon tax revenues to be collected;

(2)a forecast of the reduction in the non-carbon tax revenues as a result of the carbon tax revenues; and

(3)a forecast that specifies a manner by which the carbon tax will be revenue-neutral for the first fiscal year of the plan, and revenue-positive by no more than $100 million dollars for each subsequent fiscal year of the plan.  The revenue cap of $100 million shall increase each year at the rate of annual inflation plus 1 percent for the first ten years that this chapter is in effect, and by at least the rate of annual inflation thereafter.

b)The carbon tax report must cover a 2-year period that ends at the end of the the fiscal year before the fiscal year in which the report is presented to the legislature and must include the following information for each fiscal year covered by the report:

(1)the actual carbon tax revenue collected;

(2)the reduction in non-carbon tax revenues as a result of the carbon tax revenues; and

(3)any difference between the actual carbon tax revenue collected and the reduction in non-carbon tax revenues; provided that any such difference shall be included in the carbon tax plan.

c)The secretary must present the carbon tax plan and report to the House and Senate Ways and Means Committees and to the Joint Revenue Committee before March 1 of the fiscal year in which this chapter takes effect.

SECTION 7: ESTABLISHMENT OF A CARBON TAX REVENUE FUND

a)There shall be established and set up on the books of the commonwealth a separate fund to be known as the Carbon Tax Revenue Fund, consisting of amounts transferred to the fund in accordance with the provisions of section 4(c) and section 8 of this chapter, and income derived from the investment of amounts so transferred.  The purpose of the fund shall be to maintain a reserve which shall be used only in the manner as provided herein:

(1)A decrease in the rate of tax for general corporate income, pursuant to subsection 39(a)(2) of chapter sixty-three, shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that 80 percent of the amount in the Carbon Tax Revenue Fund generated by commercial and industrial emitters plus 50 percent of the amount in the Carbon Tax Revenue Fund generated by retail customers of fuel equals an integer multiple of one-tenth of one percent of the rate of general corporate income taxes which will not be collected for said taxable year on account of said rate reductions.

(2)An increase in the amounts of the personal exemption allowable on the income tax, pursuant to subsections 3(B)(b)(1)(A), 3(B)(b)(1A)(A), and 3(B)(b)(2)(A) of chapter sixty-two, shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that 20 percent of the amount in the Carbon Tax Revenue Fund generated by commercial and industrial emitters plus 40 percent of the amount in the Carbon Tax Revenue Fund generated by individual emitters plus 30 percent of the amount in the Carbon Tax Revenue Fund generated by retail customers of fuel equals an integer multiple of five percent of each respective exemption, the result of which is the amount of the personal income taxes which will not be collected for said taxable year on account of said increased personal exemptions.

(3)An increase in the amount of exempt income of individuals of the income tax, pursuant to section 5(a) of chapter sixty-two, shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that 60 percent of the amount in the Carbon Tax Revenue Fund generated by individual emitters equals an integer multiple of five percent of the exemption, the result of which is the amount of the personal income taxes which will not be collected for said taxable year on account of said increased exempt amount.

(4)An increase in the amount of the potential tax credit (the so-called “senior circuit breaker”), pursuant to subsection 6(k)(2) of chapter sixty-two, shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that 10 percent of the amount in the Carbon Tax Revenue Fund generated by retail consumers of fuel equals an integer multiple of five percent of the total credit, the result of which is the amount of the personal income taxes which will not be collected for said taxable year on account of said personal credits.

(5)An increase in the rate of the earned income tax credit (the so-called “Massachusetts Match”), pursuant to section 6(h) of chapter sixty-two, shall be provided, subject to appropriation, for the taxable year ending on the succeeding December thirty-first to the extent that 30 percent of the amount in the Carbon Tax Revenue Fund generated by retail consumers of fuel equals an integer multiple of one percent of the rate of the state credit, the result of which is the amount of personal income taxes which will not be collected for said taxable year on account of said personal credits. 

SECTION 8: CARBON TAX REVENUE REQUIREMENTS

a)In the first year of the tax, the treasurer shall disburse the full balance of the revenue from the tax into the Carbon Tax Revenue Fund.

b)In each subsequent year in which the tax is imposed, excluding the first year, the net annual commonwealth revenue from the tax shall be $100 million, and shall increase by the amount of inflation plus 1 percent each year for ten years, and the rate of inflation for each year thereafter.  The treasurer shall disburse the commonwealth revenue from this subsection, to the schedule of disbursements described in section 9, and shall deposit the remaining balance of the revenue from the carbon tax into the Carbon Tax Revenue Fund.

SECTION 9: COMMONWEALTH DISBURSEMENTS

a)The treasurer shall disburse the commonwealth revenue pursuant to subsection 8(b) of this chapter according to the following schedule:

(1)90% towards one or more of the following needs and measures:

i.eliminating the Central Artery/Tunnel debt that resides on the balance sheets of the Massachusetts Department of Transportation and Massachusetts Bay Transit Authority; or

ii.Preventing an increase in tolls on the Massachusetts Turnpike; or

iii.Massachusetts Bay Transit  Authority operating and capital needs to limit fare and parking increases to no more than 3 percent per year; or

iv.Massachusetts Department of Transportation for road and bridge repair and maintenance; or

v.Massachusetts association of regional transit authorities

(2)Ten percent towards the Renewable Energy Trust Fund, administered by the Massachusetts Clean Energy Center, as described in section nine of chapter twenty-three J.

b)The treasurer shall make such disbursements under this section after the secretary’s presentation pursuant to section six of this chapter.