By: Hancock S.B. No. 1104
 
 
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the temporary exemption of certain tangible personal
  property related to large data center projects from the sales and
  use tax.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter H, Chapter 151, Tax Code, is amended
  by adding Section 151.3595 to read as follows:
         Sec. 151.3595.  PROPERTY USED IN CERTAIN LARGE DATA CENTER
  PROJECTS; TEMPORARY EXEMPTION. (a) In this section:
               (1)  "County average weekly wage" means the average
  weekly wage in a county for all jobs during the most recent four
  quarterly periods for which data is available, as computed by the
  Texas Workforce Commission, at the time a data center creates a job
  used to qualify under this section.
               (2)  "Large data center project" means a project
  comprised of a building or series of buildings located or to be
  located on a single parcel of land or on contiguous parcels of land
  that are commonly owned or owned by affiliation with the operator of
  the with at least 250,000 square feet of space, which space:
                     (A)  is located in this state;
                     (B)  is specifically constructed or refurbished
  and actually used primarily to house servers and related equipment
  and support staff for the processing, storage, and distribution of
  data;
                     (C)  is used by a single qualifying occupant for
  the processing, storage, and distribution of data;
                     (D)  is not used primarily by a telecommunications
  provider to place tangible personal property that is used to
  deliver telecommunications services; and
                     (E)  has an uninterruptible power source,
  generator backup power, a fire suppression and prevention system,
  and physical security that includes restricted access, video
  surveillance, and electronic systems.
               (3)  "Permanent job" means an employment position that
  will exist for at least five years after the date the job is
  created.
               (4)  "Qualifying large data center project" means a
  data center that meets the qualifications prescribed by Subsection
  (d).
               (5)  "Qualifying job" means a full-time, permanent job
  that pays at least 120 percent of the county average weekly wage in
  the county in which the job is based. A qualifying job includes a
  new employment position staffed by a third-party employer if there
  is a written contract between the third-party employer and a
  qualifying owner, qualifying operator, or qualifying occupant that
  provides the third-party employment position is permanently
  assigned to the associated qualifying large data center project. 
               (6)  "Qualifying operator" means a person who controls
  access to a qualifying large data center project, regardless of
  whether that person owns each item of tangible personal property
  located at the qualifying large data center project. A qualifying
  operator may also be the qualifying owner.
               (7)  "Qualifying owner" means a person who owns the
  building or buildings in which a qualifying large data center
  project is located. A qualifying owner may also be the qualifying
  operator.
               (8)  "Qualifying occupant" means a person who:
                     (A)  contracts with a qualifying owner or
  qualifying operator to place, or cause to be placed, and to use
  tangible personal property at the qualifying large data center
  project; or
                     (B)  in the case of a qualifying occupant who is
  also the qualifying owner and the qualifying operator, places or
  causes to be placed, and uses tangible personal property at the
  qualifying large data center project.
         (b)  Except as otherwise provided by this section, tangible
  personal property that is necessary and essential to the operation
  of a qualified large data center project is exempted from the taxes
  imposed by this chapter if the tangible personal property is
  purchased for installation at, incorporation into, or in the case
  of Subdivision (1), use in a qualifying large data center project by
  a qualifying owner, qualifying operator, or qualifying occupant,
  and the tangible personal property is:
               (1)  electricity;
               (2)  an electrical system;
               (3)  a cooling system;
               (4)  an emergency generator;
               (5)  hardware or a distributed mainframe computer or
  server;
               (6)  a data storage device;
               (7)  network connectivity equipment;
               (8)  a rack, cabinet, and raised floor system;
               (9)  a peripheral component or system;
               (10)  software;
               (11)  a mechanical, electrical, or plumbing system that
  is necessary to operate any tangible personal property described by
  Subdivisions (2)-(10);
               (12)  any other item of equipment or system necessary
  to operate any tangible personal property described by Subdivisions
  (2)-(11), including a fixture; and
               (13)  a component part of any tangible personal
  property described by Subdivisions (2)-(10).
         (c)  The exemption provided by this section does not apply
  to:
               (1)  office equipment or supplies;
               (2)  maintenance or janitorial supplies or equipment;
               (3)  equipment or supplies used primarily in sales
  activities or transportation activities;
               (4)  tangible personal property on which the purchaser
  has received or has a pending application for a refund under Section
  151.429;
               (5)  tangible personal property not otherwise exempted
  under Subsection (b) that is incorporated into real estate or into
  an improvement of real estate;
               (6)  tangible personal property that is rented or
  leased for a term of one year or less; or
               (7)  notwithstanding Section 151.3111, a taxable
  service that is performed on tangible personal property exempted
  under this section.
         (d)  A large data center project may be certified by the
  comptroller as a qualifying large data center project for purposes
  of this section if, on or after June 1, 2015:
               (1)  a single qualifying occupant:
                     (A)  contracts with a qualifying owner or
  qualifying operator to lease space in which the qualifying occupant
  will locate a large data center project; or
                     (B)  occupies a space that was not previously used
  as a data center in which the qualifying occupant will locate a
  large data center project, in the case of a qualifying occupant who
  is also the qualifying operator and the qualifying owner; and
               (2)  the qualifying owner, qualifying operator, or
  qualifying occupant, jointly or independently:
                     (A)  creates 40 qualifying jobs in the county in
  which the data center is located, not including jobs moved from one
  county in this state to another county in this state; 
                     (B)  makes or agrees to make a capital investment,
  on or after May 1, 2015, of at least $500 million in that particular
  large data center project over a five-year period beginning on the
  application submission date for certification by the comptroller as
  a qualifying large data center project or beginning on the date the
  data center is certified by the comptroller as a qualifying large
  data center project; and
                     (C)  will contract for at least 20 megawatts of
  transmission capacity for operations of the large data center
  project.
         (e)  A large data center project that is eligible under
  Subsection (d) to be certified by the comptroller as a qualified
  large data center project shall apply to the comptroller for
  certification as a qualifying large data center project and for
  issuance of a registration number or numbers by the comptroller.
  The application must be made on a form prescribed by the comptroller
  and include the information required by the comptroller. The
  application must include the name and contact information for the
  qualifying occupant and, if applicable, the name and contact
  information for the qualifying owner and the qualifying operator
  who will claim the exemption authorized under this section. The
  application form must include a section for the applicant to
  certify that the capital investment required by Subsection
  (d)(2)(B) will be met independently or jointly by the qualifying
  occupant, qualifying owner, or qualifying operator within the time
  period prescribed by Subsection (d)(2)(B).
         (f)  The exemption provided by this section begins on the
  date the large data center project is certified by the comptroller
  as a qualifying data center and expires on the 20th anniversary of
  that date, if the qualifying occupant, qualifying owner, or
  qualifying operator independently or jointly makes a capital
  investment of at least $500 million or more as provided by
  Subsection (d)(2)(B).
         (g)  Each person who is eligible to claim an exemption
  authorized by this section must hold a registration number issued
  by the comptroller. The registration number must be stated on the
  exemption certificate provided by the purchaser to the seller of
  tangible personal property eligible for the exemption.
         (h)  The comptroller shall revoke all registration numbers
  issued in connection with a qualifying large data center project
  that the comptroller determines does not meet the requirements
  prescribed by Subsection (d). Each person who has the person's
  registration number revoked by the comptroller is liable for taxes,
  including penalty and interest from the date of purchase, imposed
  under this chapter on purchases for which the person claimed an
  exemption under this section, regardless of whether the purchase
  occurred before the date the registration number was revoked.
         (i)  The comptroller shall adopt rules consistent with and
  necessary to implement this section, including rules relating to:
               (1)  a qualifying large data center project, qualifying
  owner, qualifying operator, and qualifying occupant;
               (2)  issuance and revocation of a registration number
  required under this section; and
               (3)  reporting and other procedures necessary to ensure
  that a qualifying large data center project, qualifying owner,
  qualifying operator, and qualifying occupant comply with this
  section and remain entitled to the exemption authorized by this
  section.
         SECTION 2.  Sections 151.317(a), Tax Code, are amended to
  read as follows:
         (a)  Subject to Sections 151.359 and 151.1551 and Subsection
  (d) of this section, gas and electricity are exempted from the taxes
  imposed by this chapter when sold for:
               (1)  residential use;
               (2)  use in powering equipment exempt under Section
  151.318 or 151.3185 by a person processing tangible personal
  property for sale as tangible personal property, other than
  preparation or storage of prepared food described by Section
  151.314(c-2);
               (3)  use in lighting, cooling, and heating in the
  manufacturing area during the actual manufacturing or processing of
  tangible personal property for sale as tangible personal property,
  other than preparation or storage of prepared food described by
  Section 151.314(c-2);
               (4)  use directly in exploring for, producing, or
  transporting, a material extracted from the earth;
               (5)  use in agriculture, including dairy or poultry
  operations and pumping for farm or ranch irrigation;
               (6)  use directly in electrical processes, such as
  electroplating, electrolysis, and cathodic protection;
               (7)  use directly in the off-wing processing, overhaul,
  or repair of a jet turbine engine or its parts for a certificated or
  licensed carrier of persons or property;
               (8)  use directly in providing, under contracts with or
  on behalf of the United States government or foreign governments,
  defense or national security-related electronics, classified
  intelligence data processing and handling systems, or
  defense-related platform modifications or upgrades;
               (9)  use directly by a data center that is certified by
  the comptroller as a qualifying data center under Section 151.359
  or a qualifying large data center project under Section 151.3595 in
  the processing, storage, and distribution of data;
               (10)  a direct or indirect use, consumption, or loss of
  electricity by an electric utility engaged in the purchase of
  electricity for resale; or
               (11)  use in timber operations, including pumping for
  irrigation of timberland.
         SECTION 3.  The change in law made by this Act does not
  affect tax liability accruing before the effective date of this
  Act. That liability continues in effect as if this Act had not been
  enacted, and the former law is continued in effect for the
  collection of taxes due and for civil and criminal enforcement of
  the liability for those taxes.
         SECTION 4.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution. If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2015.