87R6448 SMT-D
 
  By: Capriglione H.B. No. 3236
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the temporary exemption of certain tangible personal
  property related to certain colocation data centers from sales and
  use taxes.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter H, Chapter 151, Tax Code, is amended
  by adding Section 151.3596 to read as follows:
         Sec. 151.3596.  PROPERTY USED IN COLOCATION DATA CENTERS;
  TEMPORARY EXEMPTION. (a) In this section:
               (1)  "Colocation data center" means all or part of a new
  or redeveloped facility that:
                     (A)  is located in this state;
                     (B)  is composed of space in a building or a series
  of buildings and related improvements located or to be located on
  one or more parcels of land;
                     (C)  is specifically constructed or refurbished,
  repaired, restored, remodeled, or otherwise modified and actually
  used primarily to house servers and related equipment and support
  staff for the processing, storage, and distribution of data;
                     (D)  if redeveloped, has not been previously used
  for the purpose specified by Paragraph (C);
                     (E)  is designed for use by one or more tenants for
  the processing, storage, and distribution of data;
                     (F)  has an uninterruptible power source or
  generator backup power and cooling systems, towers, and other
  temperature control infrastructure; and
                     (G)  does not generate electricity for resale or
  for use outside the facility.
               (2)  "Operator" means a person who controls access to a
  colocation data center, regardless of whether that person owns each
  item of tangible personal property located at the colocation data
  center.
               (3)  "Qualifying tenant" means a tenant who is
  certified by the comptroller under Subsection (d).
               (4)  "Tenant" means a person who:
                     (A)  contracts with an operator, for a period of
  at least five years:
                           (i)  for at least one megawatt of critical IT
  load capacity per month beginning not later than the first
  anniversary of the date the operator and tenant enter into the
  contract; and
                           (ii)  to place, or cause to be placed, and
  use tangible personal property at the colocation data center; or
                     (B)  is the operator and who places or causes to be
  placed and uses tangible personal property at the colocation data
  center.
         (b)  Except as otherwise provided by this section, tangible
  personal property that is necessary and essential to the operation
  of a colocation data center is exempted from the taxes imposed by
  this chapter if the tangible personal property is purchased by a
  qualifying tenant for installation at, incorporation into, or in
  the case of electricity, use in a colocation data center, 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 tenant may be certified by the comptroller as a
  qualifying tenant for purposes of this section if:
               (1)  the tenant employs at least 500 people full time in
  this state; and
               (2)  on or after January 1, 2021, the tenant:
                     (A)  contracts with an operator or tenant, as
  applicable, to lease space in a facility in which the tenant will
  locate a colocation data center; and
                     (B)  makes or agrees to make a capital investment
  of at least $15 million in the facility in which the colocation data
  center will be located over a three-year period beginning on the
  date the tenant is certified by the comptroller as a qualifying
  tenant.
         (e)  A tenant that is eligible under Subsection (d) to be
  certified by the comptroller as a qualifying tenant shall apply to
  the comptroller for certification and for the issuance of a
  registration number by the comptroller. The application must be
  made on a form prescribed by the comptroller and must include the
  information required by the comptroller. The application must
  include the tenant's name and contact information and the address
  of the colocation data center. The application form must include a
  section for the tenant to certify that the tenant will meet the
  capital investment required by Subsection (d)(2)(B) within the
  period prescribed by that paragraph.
         (f)  The comptroller shall:
               (1)  act on an application submitted under Subsection
  (e) not later than the 60th day after the date the comptroller
  receives the application from the applicant; and
               (2)  issue the certification and registration number to
  the applicant not later than the 14th day after the date the
  comptroller approves the application.
         (g)  The exemption provided by this section begins as to a
  qualifying tenant on the date the comptroller issues a registration
  number to the qualifying tenant under Subsection (f) and expires:
               (1)  on the 10th anniversary of that date, if the
  qualifying tenant makes a capital investment of at least $15
  million but less than $50 million as provided by Subsection
  (d)(2)(B); or
               (2)  on the 15th anniversary of that date, if the
  qualifying tenant makes a capital investment of $50 million or more
  as provided by Subsection (d)(2)(B).
         (h)  Each qualifying tenant 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 tenant to the
  seller of tangible personal property eligible for the exemption.
         (i)  The comptroller shall revoke a registration number
  issued to a tenant if the comptroller determines that the tenant
  does not meet the requirements prescribed by Subsection (d). Each
  tenant who has the tenant's registration number revoked by the
  comptroller is liable for taxes, including penalties and interest
  from the date of purchase, imposed under this chapter on purchases
  for which the tenant claimed an exemption under this section,
  regardless of whether the purchase occurred before the date the
  registration number was revoked.
         (j)  The comptroller shall adopt rules consistent with and
  necessary to implement this section, including rules relating to:
               (1)  a colocation data center, operator, and qualifying
  tenant;
               (2)  the issuance and revocation of a registration
  number required under this section; and
               (3)  reporting and other procedures necessary to ensure
  that a colocation data center, operator, and qualifying tenant
  comply with this section and that the qualifying tenant remains
  entitled to the exemption authorized by this section.
         (k)  The exemption provided under this section does not apply
  to the taxes imposed under Chapter 321, 322, or 323.
         (l)  Information submitted to the comptroller in an
  application under Subsection (e) is confidential and excepted from
  the requirements of Section 552.021, Government Code.
         SECTION 2.  Section 151.317(a), Tax Code, is amended to read
  as follows:
         (a)  Subject to Sections 151.1551, 151.359, [and] 151.3595,
  and 151.3596 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 or large data center
  project 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;
               (9-a)  use directly in the processing, storage, and
  distribution of data by a tenant of a colocation data center who is
  certified by the comptroller as a qualifying tenant under Section
  151.3596;
               (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.  Section 151.3596, Tax Code, as added by this Act,
  applies only to a qualifying tenant of a colocation data center who
  becomes a qualifying tenant on or after the effective date of this
  Act.
         SECTION 5.  This Act takes effect September 1, 2021.