UNOFFICIAL COPY 23 RS BR 1132
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AN ACT relating to data centers. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 139 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section: 5
(a) "Capital investment" means: 6
1. Obligations incurred for labor and to contractors, subcontractors, 7
builders, and materialmen in connection with the acquisition, 8
construction, installation, equipping, and rehabilitation of a project; 9
2. The cost of acquiring land or rights in land within the development 10
area on the footprint of the project, and any cost incident thereto, 11
including recording fees; 12
3. The cost of contract bonds and of insurance of all kinds that may be 13
required or necessary during the course of acquisition, construction, 14
installation, equipping, and rehabilitation of a project which is not 15
paid by the contractor or contractors or otherwise provided; 16
4. All costs of architectural and engineering services, including test 17
borings, surveys, estimates, plans, specifications, preliminary 18
investigations, supervision of construction, and the performance of all 19
the duties required by or consequent upon the acquisition, 20
construction, installation, equipping, and rehabilitation of a project; 21
5. All costs that are required to be paid under the terms of any contract 22
for the acquisition, construction, installation, equipping, and 23
rehabilitation of a project; and 24
6. All other costs of a nature comparable to those described in this 25
subsection that occur after preliminary approval; 26
(b) "Commencement of construction" means the first date on which a capital 27 UNOFFICIAL COPY 23 RS BR 1132
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investment has been made for a data center; 1
(c) "Commencement of operations" means the date on which a certificate of 2
occupancy is issued for a data center; 3
(d) "Data center" means a person that has a facility comprised of one (1) or 4
more buildings in Kentucky that is used to house and continuously operate 5
computer servers and associated data center equipment for the transmission 6
and storage of data where the facility has the following characteristics: 7
1. Uninterruptible power supplies, generator power, or both; 8
2. Sophisticated fire suppression and prevention systems; 9
3. Enhanced physical security; and 10
4. Restricted access; 11
(e) 1. "Data center equipment" means: 12
a. Equipment that is used to outfit, operate, or benefit a data 13
center; and 14
b. Component parts, installations, refreshments, replacements, and 15
upgrades to the equipment, regardless of whether any of the 16
equipment is affixed to or incorporated into real property. 17
2. Eligible "data center equipment" includes: 18
a. Equipment necessary for the transformation, generation, 19
distribution, or management of electricity that is required to 20
operate computer servers or similar data storage equipment, 21
including: 22
i. Uninterruptible energy supplies; 23
ii. Generators; 24
iii. Conduit; 25
iv. Gaseous fuel piping; 26
v. Cabling; 27 UNOFFICIAL COPY 23 RS BR 1132
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vi. Duct banks; 1
vii. Switches; 2
viii. Switchboards; 3
ix. Batteries; and 4
x. Testing equipment; 5
b. Equipment necessary to cool and maintain a controlled 6
environment for the operation of computer servers or data 7
storage systems and other components of a computer data center, 8
including: 9
i. Mechanical equipment; 10
ii. Refrigerant piping; 11
iii. Gaseous fuel piping; 12
iv. Adiabatic and free cooling systems; 13
v. Cooling towers; 14
vi. Water softeners; 15
vii. Air handling units; 16
viii. Indoor direct exchange units; 17
ix. Fans; 18
x. Ducting; and 19
xi. Filters; 20
c. Water conservation systems, including facilities or mechanisms 21
that are designed to collect, conserve, and reuse water; 22
d. Related equipment, including but not limited to: 23
i. Enabling software and licensing agreements; 24
ii. Computer servers or similar data storage equipment; 25
iii. Chassis; 26
iv. Networking equipment; 27 UNOFFICIAL COPY 23 RS BR 1132
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v. Switches; 1
vi. Racks; 2
vii. Cabling; 3
viii. Trays; and 4
ix. Conduits; 5
e. Monitoring equipment; 6
f. Security systems; 7
g. i. Modular data centers; and 8
ii. Preassembled components of any item, including 9
components used in the manufacturing of modular data 10
centers; and 11
h. Other tangible personal property that is essential to the 12
operations of a computer data center; 13
(f) "Full-time employee" means a person employed for a minimum of thirty-14
five (35) hours per week and subject to the tax imposed by KRS 141.020; 15
and 16
(g) "New jobs": 17
1. Means new jobs that: 18
a. Are created and located in the state; 19
b. Are nonseasonal; 20
c. Are full-time, meaning a minimum of thirty-five (35) hours a 21
week and subject to the state income tax imposed by KRS 22
141.020; and 23
d. i. Collectively pay an average weekly wage that equals or 24
exceeds one hundred twenty-five percent (125%) of the 25
average weekly wage for the county in which the data 26
center is located, as determined by the most recent report of 27 UNOFFICIAL COPY 23 RS BR 1132
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the United States Bureau of Labor Statistics; and 1
ii. If the average weekly wage calculated in subpart i. of this 2
subdivision is less than one hundred fifty percent (150%) of 3
the federal minimum wage, then the base hourly wage shall 4
be one hundred fifty percent (150%) of the federal 5
minimum wage; and 6
2. Does not include jobs that merely change locations within the state. 7
(2) On and after July 1, 2023, and on and before June 30, 2053, the taxes imposed by 8
this chapter shall not apply to: 9
(a) Tangible personal property used to construct, retrofit, or upgrade a data 10
center; and 11
(b) Data center equipment for use in that data center; 12
purchased by a person engaged primarily in a commercial activity or separately 13
operated segment of business that exists for the purposes of engaging solely in the 14
operation of a data center or operating by colocating with a person that operates 15
a data center. 16
(3) The exemption provided in subsection (2) of this section shall apply whether or 17
not the seller is under contract to deliver, assemble, and incorporate into real 18
estate the equipment, machinery, attachments, and any materials incorporated 19
into the construction, retrofit, or upgrade of the data center. 20
(4) To qualify for the exemption provided in subsection (2) of this section: 21
(a) A data center located in a county with a population of less than one 22
hundred thousand (100,000) shall certify to the department that it will: 23
1. Make capital investments in one (1) or more data centers after July 1, 24
2023, in amounts of at least one hundred fifty million dollars 25
($150,000,000) in the aggregate within the first five (5) years after 26
commencement of construction; and 27 UNOFFICIAL COPY 23 RS BR 1132
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2. Create and maintain at least twenty (20) new jobs at the data center 1
within two (2) calendar years after the commencement of operations; 2
and 3
(b) A data center located in a county with a population of one hundred 4
thousand (100,000) or more shall certify to the department that it will: 5
1. Make capital investments in one (1) or more data centers after July 1, 6
2023, in amounts of at least three hundred million dollars 7
($300,000,000) in the aggregate within the first five (5) years after 8
commencement of construction; and 9
2. Create and maintain at least thirty (30) new jobs at the data center 10
within two (2) calendar years after the commencement of operations. 11
(5) (a) Data centers shall report to the department annually, on or before 12
November 1 of each year, on behalf of itself and any person colocating with 13
the data center: 14
1. The progress made toward achieving performance targets, which shall 15
include: 16
a. i. A listing of the new jobs, each with an associated average 17
annual wage; and 18
ii. The annual aggregate amount of all payroll taxes paid, 19
both federal and state, related to wages; and 20
b. The amount of capital investment in data center facilities and 21
equipment; 22
2. The address of the location of the data center; 23
3. The county in which the data center is located; 24
4. A statement as to whether the county where the data center is located 25
has a population density, as calculated by dividing the number of 26
residents in the county based on the most recent federal decennial 27 UNOFFICIAL COPY 23 RS BR 1132
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census by the square miles in the county, of: 1
a. Less than sixty-two (62) persons per square mile; 2
b. Between sixty-two (62) persons per square mile and up to one 3
hundred four (104) persons per square mile; or 4
c. One hundred four (104) persons or more per square mile; 5
5. A statement as to whether the data center is located in a qualified 6
opportunity zone as designated in 26 U.S.C. sec. 1400Z-1 and 1400Z-7
2; and 8
6. The total amount of the sales and use tax exemption claimed for the 9
immediately preceding fiscal year. 10
(b) If a data center fails to meet the investment and job creation requirements 11
outlined in subsection (4) of this section, the department may require the 12
data center to repay up to the entire amount of the previously exempted 13
sales or use taxes to the department, plus accrued interest, within sixty (60) 14
days. The department shall issue written notice to the data center that it is 15
out of compliance and provide sixty (60) days for the data center to 16
demonstrate compliance. 17
(6) On or before December 31, 2023, and every biennium on December 31 thereafter 18
as long as the exemption applies, the department shall report to the Interim Joint 19
Committee on Appropriations and Revenue: 20
(a) The aggregate amount of capital investment and new jobs from all 21
qualifying data centers reported for the immediately preceding fiscal year 22
and in total for the year; 23
(b) Based on the most recent federal decennial census data, a statement as to 24
whether the county where the data center is located has a population density 25
of: 26
1. Less than sixty-two (62) persons per square mile; 27 UNOFFICIAL COPY 23 RS BR 1132
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2. Between sixty-two (62) persons per square mile and up to one hundred 1
four (104) persons per square mile; or 2
3. One hundred four (104) persons or more per square mile; 3
(c) The number of qualifying data centers located in a qualified opportunity 4
zone as designated in 26 U.S.C. sec. 1400Z-1 and 1400Z-2; and 5
(d) The aggregate amount of the exemption claimed from all qualifying data 6
centers and the number of qualifying data centers benefitting from the 7
exemption, after three (3) or more qualified data centers have claimed the 8
exemption for at least two (2) years. 9
(7) Notwithstanding KRS 139.720, every qualifying data center using this exemption 10
shall keep the records, receipts, invoices, and other pertinent papers in the form 11
and timeframe as the department may require. 12
(8) Any reporting shall not include, and the department shall not publish or disclose, 13
any information that is not aggregated or any information or publication that 14
could be used to identify a specific person. 15
Section 2. KRS 131.190 is amended to read as follows: 16
(1) No present or former commissioner or employee of the department, present or 17
former member of a county board of assessment appeals, present or former property 18
valuation administrator or employee, present or former secretary or employee of the 19
Finance and Administration Cabinet, former secretary or employee of the Revenue 20
Cabinet, or any other person, shall intentionally and without authorization inspect 21
or divulge any information acquired by him or her of the affairs of any person, or 22
information regarding the tax schedules, returns, or reports required to be filed with 23
the department or other proper officer, or any information produced by a hearing or 24
investigation, insofar as the information may have to do with the affairs of the 25
person's business. 26
(2) The prohibition established by subsection (1) of this section shall not extend to: 27 UNOFFICIAL COPY 23 RS BR 1132
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(a) Information required in prosecutions for making false reports or returns of 1
property for taxation, or any other infraction of the tax laws; 2
(b) Any matter properly entered upon any assessment record, or in any way made 3
a matter of public record; 4
(c) Furnishing any taxpayer or his or her properly authorized agent with 5
information respecting his or her own return; 6
(d) Testimony provided by the commissioner or any employee of the department 7
in any court, or the introduction as evidence of returns or reports filed with the 8
department, in an action for violation of state or federal tax laws or in any 9
action challenging state or federal tax laws; 10
(e) Providing an owner of unmined coal, oil or gas reserves, and other mineral or 11
energy resources assessed under KRS 132.820, or owners of surface land 12
under which the unmined minerals lie, factual information about the owner's 13
property derived from third-party returns filed for that owner's property, under 14
the provisions of KRS 132.820, that is used to determine the owner's 15
assessment. This information shall be provided to the owner on a confidential 16
basis, and the owner shall be subject to the penalties provided in KRS 17
131.990(2). The third-party filer shall be given prior notice of any disclosure 18
of information to the owner that was provided by the third-party filer; 19
(f) Providing to a third-party purchaser pursuant to an order entered in a 20
foreclosure action filed in a court of competent jurisdiction, factual 21
information related to the owner or lessee of coal, oil, gas reserves, or any 22
other mineral resources assessed under KRS 132.820. The department may 23
promulgate an administrative regulation establishing a fee schedule for the 24
provision of the information described in this paragraph. Any fee imposed 25
shall not exceed the greater of the actual cost of providing the information or 26
ten dollars ($10); 27 UNOFFICIAL COPY 23 RS BR 1132
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(g) Providing information to a licensing agency, the Transportation Cabinet, or 1
the Kentucky Supreme Court under KRS 131.1817; 2
(h) Statistics of gasoline and special fuels gallonage reported to the department 3
under KRS 138.210 to 138.448; 4
(i) Providing any utility gross receipts license tax return information that is 5
necessary to administer the provisions of KRS 160.613 to 160.617 to 6
applicable school districts on a confidential basis; 7
(j) Providing documents, data, or other information to a third party pursuant to an 8
order issued by a court of competent jurisdiction; or 9
(k) Providing information to the Legislative Research Commission under: 10
1. KRS 139.519 for purposes of the sales and use tax refund on building 11
materials used for disaster recovery; 12
2. KRS 141.436 for purposes of the energy efficiency products credits; 13
3. KRS 141.437 for purposes of the ENERGY STAR home and the 14
ENERGY STAR manufactured home credits; 15
4. KRS 141.383 for purposes of the film industry incentives; 16
5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization 17
tax credits and the job assessment fees; 18
6. KRS 141.068 for purposes of the Kentucky investment fund; 19
7. KRS 141.396 for purposes of the angel investor tax credit; 20
8. KRS 141.389 for purposes of the distilled spirits credit; 21
9. KRS 141.408 for purposes of the inventory credit; 22
10. KRS 141.390 for purposes of the recycling and composting credit; 23
11. KRS 141.3841 for purposes of the selling farmer tax credit; 24
12. KRS 141.4231 for purposes of the renewable chemical production tax 25
credit; 26
13. KRS 141.524 for purposes of the Education Opportunity Account 27 UNOFFICIAL COPY 23 RS BR 1132
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Program tax credit; 1
14. KRS 141.398 for purposes of the development area tax credit; 2
15. KRS 139.516 for the purposes of the sales and use tax exemption on the 3
commercial mining of cryptocurrency;[ and] 4
16. KRS 141.419 for purposes of the decontamination tax credit; and 5
17. Section 1 of this Act for the purposes of the data center sales and use 6
tax exemption. 7
(3) The commissioner shall make available any information for official use only and on 8
a confidential basis to the proper officer, agency, board or commission of this state, 9
any Kentucky county, any Kentucky city, any other state, or the federal 10
government, under reciprocal agreements whereby the department shall receive 11
similar or useful information in return. 12
(4) Access to and inspection of information received from the Internal Revenue Service 13
is for department use only, and is restricted to tax administration purposes. 14
Information received from the Internal Revenue Service shall not be made available 15
to any other agency of state government, or any county, city, or other state, and 16
shall not be inspected intentionally and without authorization by any present 17
secretary or employee of the Finance and Administration Cabinet, commissioner or 18
employee of the department, or any other person. 19
(5) Statistics of crude oil as reported to the department under the crude oil excise tax 20
requirements of KRS Chapter 137 and statistics of natural gas production as 21
reported to the department under the natural resources severance tax requirements 22
of KRS Chapter 143A may be made public by the department by release to the 23
Energy and Environment Cabinet, Department for Natural Resources. 24
(6) Notwithstanding any provision of law to the contrary, beginning with mine-map 25
submissions for the 1989 tax year, the department may make public or divulge only 26
those portions of mine maps submitted by taxpayers to the department pursuant to 27 UNOFFICIAL COPY 23 RS BR 1132
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KRS Chapter 132 for ad valorem tax purposes that depict the boundaries of mined-1
out parcel areas. These electronic maps shall not be relied upon to determine actual 2
boundaries of mined-out parcel areas. Property boundaries contained in mine maps 3
required under KRS Chapters 350 and 352 shall not be construed to constitute land 4
surveying or boundary surveys as defined by KRS 322.010 and any administrative 5
regulations promulgated thereto. 6
Section 3. This Act takes effect July 1, 2023. 7