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A BILL TO BE ENTITLED
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AN ACT
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relating to the temporary exemption of certain tangible personal |
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property related to certain connected data center projects from |
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sales and use taxes. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended |
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by adding Section 151.3596 to read as follows: |
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Sec. 151.3596. PROPERTY USED IN CERTAIN CONNECTED DATA |
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CENTER PROJECTS; TEMPORARY EXEMPTION. (a) In this section: |
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(1) "Affiliated group" has the meaning assigned by |
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Section 171.0001. |
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(2) "Connected data center project" means a project |
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that: |
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(A) is located in this state; |
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(B) is composed of one or more buildings: |
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(i) comprising at least 250,000 square feet |
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of space; |
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(ii) located or to be located on contiguous |
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or noncontiguous parcels of land that are commonly owned, owned by |
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affiliation with the qualifying operator, or leased by a common |
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qualifying operator; and |
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(iii) connected to each other: |
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(a) by fiber and associated equipment |
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required for operating a fiber transmission network between data |
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center buildings and upstream Internet peering points for the sole |
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use of the qualifying occupant; and |
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(b) for the purpose of providing |
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redundancy and resiliency for the data center services provided in |
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each building; |
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(C) is specifically constructed or refurbished |
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and primarily used to house servers and related equipment and |
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support staff for the processing, storage, and distribution of |
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data; |
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(D) is used by a single qualifying occupant for |
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the processing, storage, and distribution of data; |
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(E) is not used primarily by a telecommunications |
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provider to place tangible personal property used to deliver |
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telecommunications services; and |
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(F) has an uninterruptible power source, backup |
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electricity generation system, fire suppression and prevention |
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system, and physical security that includes restricted access, |
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video surveillance, and electronic systems. |
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(3) "County average weekly wage" means the average |
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weekly wage in a county for all jobs during the most recent four |
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quarterly periods for which data is available, as computed by the |
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Texas Workforce Commission, at the time a connected data center |
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project creates a job used to qualify under this section. If the |
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connected data center project is located in more than one county, |
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the county average weekly wage for each county in which the project |
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is located may be calculated by averaging the county average weekly |
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wages of all counties in which the project is located. |
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(4) "Permanent job" means an employment position that |
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will exist for at least five years after the date the job is |
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created. |
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(5) "Qualifying connected data center project" means a |
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connected data center project that meets the qualifications |
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prescribed by Subsection (d). |
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(6) "Qualifying job" means a full-time, permanent job |
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that pays at least 120 percent of the county average weekly wage in |
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the county in which the job is based. The term includes a new |
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employment position staffed by a third-party employer if a written |
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contract exists between the third-party employer and a qualifying |
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owner, qualifying operator, or qualifying occupant that provides |
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that the employment position is permanently assigned to an |
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associated qualifying connected data center project. The term does |
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not include a job that is moved from one county in this state to |
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another county in this state. |
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(7) "Qualifying occupant" means a person who contracts |
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with a qualifying owner or qualifying operator to place, or cause to |
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be placed, and to use tangible personal property at the qualifying |
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connected data center project or, in the case of a qualifying |
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occupant who is also the qualifying owner and the qualifying |
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operator, who places or causes to be placed and uses tangible |
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personal property at the qualifying connected data center project. |
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The term includes a member of the person's affiliated group. |
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(8) "Qualifying operator" means a person who controls |
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access to a qualifying connected data center project, regardless of |
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whether that person owns each item of tangible personal property |
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located at the qualifying connected data center project. The term |
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includes a member of the person's affiliated group. A qualifying |
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operator may also be the qualifying owner. |
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(9) "Qualifying owner" means a person who owns one or |
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more buildings in which a qualifying connected data center project |
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is located. The term includes a member of the person's affiliated |
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group. A qualifying owner may also be the qualifying operator. |
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(b) Except as otherwise provided by this section, tangible |
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personal property that is necessary and essential to the operation |
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of a qualifying connected data center project is exempted from the |
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taxes imposed by this chapter if the tangible personal property is |
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purchased for installation at, incorporation into, or in the case |
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of electricity, use in a qualifying connected data center project |
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by a qualifying owner, qualifying operator, or qualifying occupant, |
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and the tangible personal property is: |
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(1) electricity; |
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(2) an electrical system; |
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(3) a cooling system; |
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(4) a backup electricity generation system; |
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(5) hardware or a distributed mainframe computer or |
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server; |
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(6) a data storage device; |
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(7) network connectivity equipment; |
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(8) a rack, cabinet, and raised floor system; |
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(9) a peripheral component or system; |
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(10) software; |
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(11) a mechanical, electrical, or plumbing system that |
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is necessary to operate any tangible personal property described by |
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Subdivisions (2)-(10); |
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(12) any other item of equipment or system necessary |
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to operate any tangible personal property described by Subdivisions |
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(2)-(11), including a fixture; and |
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(13) a component part of any tangible personal |
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property described by Subdivisions (2)-(10). |
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(c) The exemption provided by this section does not apply |
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to: |
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(1) office equipment or supplies; |
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(2) maintenance or janitorial supplies or equipment; |
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(3) equipment or supplies used primarily in sales |
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activities or transportation activities; |
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(4) tangible personal property on which the purchaser |
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has received or has a pending application for a refund under Section |
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151.429; |
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(5) tangible personal property not otherwise exempted |
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under Subsection (b) that is incorporated into real estate or into |
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an improvement of real estate; |
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(6) tangible personal property that is rented or |
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leased for a term of one year or less; or |
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(7) notwithstanding Section 151.3111, a taxable |
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service that is performed on tangible personal property exempted |
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under this section. |
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(d) Subject to Subsection (j), a connected data center |
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project may be certified by the comptroller as a qualifying |
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connected data center project for purposes of this section if, on or |
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after September 1, 2023: |
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(1) a single qualifying occupant: |
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(A) contracts with a qualifying owner or |
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qualifying operator to lease space in which the qualifying occupant |
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will locate a connected data center project; or |
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(B) occupies a space that was not previously used |
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as a data center in which the qualifying occupant will locate a |
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connected data center project, in the case of a qualifying occupant |
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who is also the qualifying operator and the qualifying owner; and |
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(2) the qualifying owner, qualifying operator, or |
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qualifying occupant, jointly or independently: |
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(A) creates at least 40 qualifying jobs in the |
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county or counties in which the connected data center project is |
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located; |
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(B) makes or agrees to make a capital investment, |
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on or after September 1, 2023, of at least $500 million in that |
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particular connected data center project, the amount of which may |
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not include a capital investment to replace personal property |
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previously placed in service in that connected data center project, |
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over a five-year period beginning on the earlier of: |
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(i) the date the connected data center |
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project submits the application described by Subsection (e); or |
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(ii) the date the connected data center |
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project is certified by the comptroller as a qualifying connected |
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data center project; and |
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(C) agrees to contract for at least 20 megawatts |
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of transmission capacity for the operation of the connected data |
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center project. |
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(e) A connected data center project that is eligible under |
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Subsection (d) to be certified by the comptroller as a qualifying |
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connected data center project shall apply to the comptroller for |
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certification as a qualifying connected data center project and for |
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the issuance of a registration number or numbers by the |
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comptroller. The application must be made on a form prescribed by |
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the comptroller and include the information required by the |
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comptroller. The application must include the name and contact |
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information for the qualifying occupant, and, if applicable, the |
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name and contact information for the qualifying owner and the |
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qualifying operator who will claim the exemption authorized under |
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this section. The application form must include a section for the |
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applicant to certify that the capital investment required by |
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Subsection (d)(2)(B) will be met independently or jointly by the |
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qualifying occupant, qualifying owner, or qualifying operator |
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within the time period prescribed by Subsection (d)(2)(B). |
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(f) The exemption provided by this section begins on the |
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date the connected data center project is certified by the |
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comptroller as a qualifying connected data center project and |
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expires on the 20th anniversary of that date, if the qualifying |
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occupant, qualifying owner, or qualifying operator, independently |
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or jointly makes a capital investment of $500 million or more as |
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provided by Subsection (d)(2)(B). |
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(g) Each person who is eligible to claim an exemption |
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authorized by this section must hold a registration number issued |
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by the comptroller. The registration number must be stated on the |
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exemption certificate provided by the purchaser to the seller of |
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tangible personal property eligible for the exemption. |
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(h) The comptroller shall revoke all registration numbers |
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issued in connection with a qualifying connected data center |
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project that the comptroller determines does not meet the |
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requirements prescribed by Subsection (d). Each person who has the |
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person's registration number revoked by the comptroller is liable |
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for taxes, including penalty and interest from the date of |
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purchase, imposed under this chapter on purchases for which the |
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person claimed an exemption under this section, regardless of |
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whether the purchase occurred before the date the registration |
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number was revoked. |
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(i) The comptroller shall adopt rules consistent with and |
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necessary to implement this section, including rules relating to: |
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(1) a qualifying connected data center project, |
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qualifying owner, qualifying operator, and qualifying occupant; |
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(2) issuance and revocation of a registration number |
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required under this section; and |
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(3) reporting and other procedures necessary to ensure |
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that a qualifying connected data center project, qualifying owner, |
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qualifying operator, and qualifying occupant comply with this |
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section and remain entitled to the exemption authorized by this |
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section. |
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(j) A connected data center project is not eligible to |
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receive an exemption under this section if the connected data |
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center project is subject to an agreement limiting the appraised |
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value of the connected data center's property under former |
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Subchapter B or C, Chapter 313. |
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SECTION 2. Section 151.317(a), Tax Code, is amended to read |
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as follows: |
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(a) Subject to Sections 151.1551, 151.359, [and] 151.3595, |
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and 151.3596 and Subsection (d) of this section, gas and |
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electricity are exempted from the taxes imposed by this chapter |
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when sold for: |
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(1) residential use; |
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(2) use in powering equipment exempt under Section |
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151.318 or 151.3185 by a person processing tangible personal |
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property for sale as tangible personal property, other than |
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preparation or storage of prepared food described by Section |
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151.314(c-2); |
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(3) use in lighting, cooling, and heating in the |
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manufacturing area during the actual manufacturing or processing of |
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tangible personal property for sale as tangible personal property, |
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other than preparation or storage of prepared food described by |
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Section 151.314(c-2); |
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(4) use directly in exploring for, producing, or |
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transporting, a material extracted from the earth; |
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(5) use in agriculture, including dairy or poultry |
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operations and pumping for farm or ranch irrigation; |
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(6) use directly in electrical processes, such as |
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electroplating, electrolysis, and cathodic protection; |
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(7) use directly in the off-wing processing, overhaul, |
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or repair of a jet turbine engine or its parts for a certificated or |
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licensed carrier of persons or property; |
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(8) use directly in providing, under contracts with or |
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on behalf of the United States government or foreign governments, |
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defense or national security-related electronics, classified |
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intelligence data processing and handling systems, or |
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defense-related platform modifications or upgrades; |
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(9) use directly by a data center, [or] large data |
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center project, or connected data center project that is certified |
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by the comptroller as a qualifying data center under Section |
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151.359, [or] a qualifying large data center project under Section |
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151.3595, or a qualifying connected data center project under |
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Section 151.3596 in the processing, storage, and distribution of |
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data; |
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(10) a direct or indirect use, consumption, or loss of |
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electricity by an electric utility engaged in the purchase of |
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electricity for resale; or |
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(11) use in timber operations, including pumping for |
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irrigation of timberland. |
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SECTION 3. The change in law made by this Act does not |
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affect tax liability accruing before the effective date of this |
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Act. That liability continues in effect as if this Act had not been |
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enacted, and the former law is continued in effect for the |
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collection of taxes due and for civil and criminal enforcement of |
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the liability for those taxes. |
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SECTION 4. This Act takes effect September 1, 2023. |
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