| 1 | 1 | | By: Hancock S.B. No. 1104 |
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| 2 | 2 | | |
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| 3 | 3 | | |
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| 4 | 4 | | A BILL TO BE ENTITLED |
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| 5 | 5 | | AN ACT |
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| 6 | 6 | | relating to the temporary exemption of certain tangible personal |
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| 7 | 7 | | property related to large data center projects from the sales and |
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| 8 | 8 | | use tax. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended |
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| 11 | 11 | | by adding Section 151.3595 to read as follows: |
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| 12 | 12 | | Sec. 151.3595. PROPERTY USED IN CERTAIN LARGE DATA CENTER |
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| 13 | 13 | | PROJECTS; TEMPORARY EXEMPTION. (a) In this section: |
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| 14 | 14 | | (1) "County average weekly wage" means the average |
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| 15 | 15 | | weekly wage in a county for all jobs during the most recent four |
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| 16 | 16 | | quarterly periods for which data is available, as computed by the |
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| 17 | 17 | | Texas Workforce Commission, at the time a data center creates a job |
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| 18 | 18 | | used to qualify under this section. |
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| 19 | 19 | | (2) "Large data center project" means a project |
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| 20 | 20 | | comprised of a building or series of buildings located or to be |
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| 21 | 21 | | located on a single parcel of land or on contiguous parcels of land |
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| 22 | 22 | | that are commonly owned or owned by affiliation with the operator of |
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| 23 | 23 | | the with at least 250,000 square feet of space, which space: |
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| 24 | 24 | | (A) is located in this state; |
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| 25 | 25 | | (B) is specifically constructed or refurbished |
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| 26 | 26 | | and actually used primarily to house servers and related equipment |
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| 27 | 27 | | and support staff for the processing, storage, and distribution of |
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| 28 | 28 | | data; |
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| 29 | 29 | | (C) is used by a single qualifying occupant for |
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| 30 | 30 | | the processing, storage, and distribution of data; |
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| 31 | 31 | | (D) is not used primarily by a telecommunications |
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| 32 | 32 | | provider to place tangible personal property that is used to |
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| 33 | 33 | | deliver telecommunications services; and |
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| 34 | 34 | | (E) has an uninterruptible power source, |
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| 35 | 35 | | generator backup power, a fire suppression and prevention system, |
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| 36 | 36 | | and physical security that includes restricted access, video |
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| 37 | 37 | | surveillance, and electronic systems. |
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| 38 | 38 | | (3) "Permanent job" means an employment position that |
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| 39 | 39 | | will exist for at least five years after the date the job is |
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| 40 | 40 | | created. |
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| 41 | 41 | | (4) "Qualifying large data center project" means a |
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| 42 | 42 | | data center that meets the qualifications prescribed by Subsection |
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| 43 | 43 | | (d). |
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| 44 | 44 | | (5) "Qualifying job" means a full-time, permanent job |
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| 45 | 45 | | that pays at least 120 percent of the county average weekly wage in |
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| 46 | 46 | | the county in which the job is based. A qualifying job includes a |
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| 47 | 47 | | new employment position staffed by a third-party employer if there |
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| 48 | 48 | | is a written contract between the third-party employer and a |
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| 49 | 49 | | qualifying owner, qualifying operator, or qualifying occupant that |
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| 50 | 50 | | provides the third-party employment position is permanently |
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| 51 | 51 | | assigned to the associated qualifying large data center project. |
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| 52 | 52 | | (6) "Qualifying operator" means a person who controls |
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| 53 | 53 | | access to a qualifying large data center project, regardless of |
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| 54 | 54 | | whether that person owns each item of tangible personal property |
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| 55 | 55 | | located at the qualifying large data center project. A qualifying |
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| 56 | 56 | | operator may also be the qualifying owner. |
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| 57 | 57 | | (7) "Qualifying owner" means a person who owns the |
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| 58 | 58 | | building or buildings in which a qualifying large data center |
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| 59 | 59 | | project is located. A qualifying owner may also be the qualifying |
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| 60 | 60 | | operator. |
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| 61 | 61 | | (8) "Qualifying occupant" means a person who: |
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| 62 | 62 | | (A) contracts with a qualifying owner or |
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| 63 | 63 | | qualifying operator to place, or cause to be placed, and to use |
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| 64 | 64 | | tangible personal property at the qualifying large data center |
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| 65 | 65 | | project; or |
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| 66 | 66 | | (B) in the case of a qualifying occupant who is |
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| 67 | 67 | | also the qualifying owner and the qualifying operator, places or |
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| 68 | 68 | | causes to be placed, and uses tangible personal property at the |
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| 69 | 69 | | qualifying large data center project. |
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| 70 | 70 | | (b) Except as otherwise provided by this section, tangible |
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| 71 | 71 | | personal property that is necessary and essential to the operation |
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| 72 | 72 | | of a qualified large data center project is exempted from the taxes |
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| 73 | 73 | | imposed by this chapter if the tangible personal property is |
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| 74 | 74 | | purchased for installation at, incorporation into, or in the case |
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| 75 | 75 | | of Subdivision (1), use in a qualifying large data center project by |
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| 76 | 76 | | a qualifying owner, qualifying operator, or qualifying occupant, |
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| 77 | 77 | | and the tangible personal property is: |
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| 78 | 78 | | (1) electricity; |
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| 79 | 79 | | (2) an electrical system; |
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| 80 | 80 | | (3) a cooling system; |
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| 81 | 81 | | (4) an emergency generator; |
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| 82 | 82 | | (5) hardware or a distributed mainframe computer or |
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| 83 | 83 | | server; |
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| 84 | 84 | | (6) a data storage device; |
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| 85 | 85 | | (7) network connectivity equipment; |
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| 86 | 86 | | (8) a rack, cabinet, and raised floor system; |
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| 87 | 87 | | (9) a peripheral component or system; |
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| 88 | 88 | | (10) software; |
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| 89 | 89 | | (11) a mechanical, electrical, or plumbing system that |
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| 90 | 90 | | is necessary to operate any tangible personal property described by |
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| 91 | 91 | | Subdivisions (2)-(10); |
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| 92 | 92 | | (12) any other item of equipment or system necessary |
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| 93 | 93 | | to operate any tangible personal property described by Subdivisions |
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| 94 | 94 | | (2)-(11), including a fixture; and |
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| 95 | 95 | | (13) a component part of any tangible personal |
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| 96 | 96 | | property described by Subdivisions (2)-(10). |
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| 97 | 97 | | (c) The exemption provided by this section does not apply |
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| 98 | 98 | | to: |
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| 99 | 99 | | (1) office equipment or supplies; |
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| 100 | 100 | | (2) maintenance or janitorial supplies or equipment; |
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| 101 | 101 | | (3) equipment or supplies used primarily in sales |
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| 102 | 102 | | activities or transportation activities; |
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| 103 | 103 | | (4) tangible personal property on which the purchaser |
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| 104 | 104 | | has received or has a pending application for a refund under Section |
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| 105 | 105 | | 151.429; |
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| 106 | 106 | | (5) tangible personal property not otherwise exempted |
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| 107 | 107 | | under Subsection (b) that is incorporated into real estate or into |
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| 108 | 108 | | an improvement of real estate; |
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| 109 | 109 | | (6) tangible personal property that is rented or |
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| 110 | 110 | | leased for a term of one year or less; or |
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| 111 | 111 | | (7) notwithstanding Section 151.3111, a taxable |
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| 112 | 112 | | service that is performed on tangible personal property exempted |
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| 113 | 113 | | under this section. |
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| 114 | 114 | | (d) A large data center project may be certified by the |
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| 115 | 115 | | comptroller as a qualifying large data center project for purposes |
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| 116 | 116 | | of this section if, on or after June 1, 2015: |
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| 117 | 117 | | (1) a single qualifying occupant: |
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| 118 | 118 | | (A) contracts with a qualifying owner or |
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| 119 | 119 | | qualifying operator to lease space in which the qualifying occupant |
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| 120 | 120 | | will locate a large data center project; or |
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| 121 | 121 | | (B) occupies a space that was not previously used |
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| 122 | 122 | | as a data center in which the qualifying occupant will locate a |
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| 123 | 123 | | large data center project, in the case of a qualifying occupant who |
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| 124 | 124 | | is also the qualifying operator and the qualifying owner; and |
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| 125 | 125 | | (2) the qualifying owner, qualifying operator, or |
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| 126 | 126 | | qualifying occupant, jointly or independently: |
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| 127 | 127 | | (A) creates 40 qualifying jobs in the county in |
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| 128 | 128 | | which the data center is located, not including jobs moved from one |
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| 129 | 129 | | county in this state to another county in this state; |
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| 130 | 130 | | (B) makes or agrees to make a capital investment, |
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| 131 | 131 | | on or after May 1, 2015, of at least $500 million in that particular |
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| 132 | 132 | | large data center project over a five-year period beginning on the |
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| 133 | 133 | | application submission date for certification by the comptroller as |
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| 134 | 134 | | a qualifying large data center project or beginning on the date the |
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| 135 | 135 | | data center is certified by the comptroller as a qualifying large |
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| 136 | 136 | | data center project; and |
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| 137 | 137 | | (C) will contract for at least 20 megawatts of |
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| 138 | 138 | | transmission capacity for operations of the large data center |
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| 139 | 139 | | project. |
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| 140 | 140 | | (e) A large data center project that is eligible under |
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| 141 | 141 | | Subsection (d) to be certified by the comptroller as a qualified |
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| 142 | 142 | | large data center project shall apply to the comptroller for |
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| 143 | 143 | | certification as a qualifying large data center project and for |
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| 144 | 144 | | issuance of a registration number or numbers by the comptroller. |
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| 145 | 145 | | The application must be made on a form prescribed by the comptroller |
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| 146 | 146 | | and include the information required by the comptroller. The |
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| 147 | 147 | | application must include the name and contact information for the |
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| 148 | 148 | | qualifying occupant and, if applicable, the name and contact |
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| 149 | 149 | | information for the qualifying owner and the qualifying operator |
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| 150 | 150 | | who will claim the exemption authorized under this section. The |
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| 151 | 151 | | application form must include a section for the applicant to |
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| 152 | 152 | | certify that the capital investment required by Subsection |
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| 153 | 153 | | (d)(2)(B) will be met independently or jointly by the qualifying |
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| 154 | 154 | | occupant, qualifying owner, or qualifying operator within the time |
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| 155 | 155 | | period prescribed by Subsection (d)(2)(B). |
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| 156 | 156 | | (f) The exemption provided by this section begins on the |
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| 157 | 157 | | date the large data center project is certified by the comptroller |
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| 158 | 158 | | as a qualifying data center and expires on the 20th anniversary of |
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| 159 | 159 | | that date, if the qualifying occupant, qualifying owner, or |
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| 160 | 160 | | qualifying operator independently or jointly makes a capital |
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| 161 | 161 | | investment of at least $500 million or more as provided by |
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| 162 | 162 | | Subsection (d)(2)(B). |
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| 163 | 163 | | (g) Each person who is eligible to claim an exemption |
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| 164 | 164 | | authorized by this section must hold a registration number issued |
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| 165 | 165 | | by the comptroller. The registration number must be stated on the |
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| 166 | 166 | | exemption certificate provided by the purchaser to the seller of |
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| 167 | 167 | | tangible personal property eligible for the exemption. |
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| 168 | 168 | | (h) The comptroller shall revoke all registration numbers |
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| 169 | 169 | | issued in connection with a qualifying large data center project |
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| 170 | 170 | | that the comptroller determines does not meet the requirements |
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| 171 | 171 | | prescribed by Subsection (d). Each person who has the person's |
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| 172 | 172 | | registration number revoked by the comptroller is liable for taxes, |
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| 173 | 173 | | including penalty and interest from the date of purchase, imposed |
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| 174 | 174 | | under this chapter on purchases for which the person claimed an |
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| 175 | 175 | | exemption under this section, regardless of whether the purchase |
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| 176 | 176 | | occurred before the date the registration number was revoked. |
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| 177 | 177 | | (i) The comptroller shall adopt rules consistent with and |
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| 178 | 178 | | necessary to implement this section, including rules relating to: |
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| 179 | 179 | | (1) a qualifying large data center project, qualifying |
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| 180 | 180 | | owner, qualifying operator, and qualifying occupant; |
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| 181 | 181 | | (2) issuance and revocation of a registration number |
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| 182 | 182 | | required under this section; and |
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| 183 | 183 | | (3) reporting and other procedures necessary to ensure |
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| 184 | 184 | | that a qualifying large data center project, qualifying owner, |
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| 185 | 185 | | qualifying operator, and qualifying occupant comply with this |
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| 186 | 186 | | section and remain entitled to the exemption authorized by this |
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| 187 | 187 | | section. |
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| 188 | 188 | | SECTION 2. Sections 151.317(a), Tax Code, are amended to |
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| 189 | 189 | | read as follows: |
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| 190 | 190 | | (a) Subject to Sections 151.359 and 151.1551 and Subsection |
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| 191 | 191 | | (d) of this section, gas and electricity are exempted from the taxes |
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| 192 | 192 | | imposed by this chapter when sold for: |
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| 193 | 193 | | (1) residential use; |
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| 194 | 194 | | (2) use in powering equipment exempt under Section |
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| 195 | 195 | | 151.318 or 151.3185 by a person processing tangible personal |
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| 196 | 196 | | property for sale as tangible personal property, other than |
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| 197 | 197 | | preparation or storage of prepared food described by Section |
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| 198 | 198 | | 151.314(c-2); |
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| 199 | 199 | | (3) use in lighting, cooling, and heating in the |
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| 200 | 200 | | manufacturing area during the actual manufacturing or processing of |
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| 201 | 201 | | tangible personal property for sale as tangible personal property, |
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| 202 | 202 | | other than preparation or storage of prepared food described by |
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| 203 | 203 | | Section 151.314(c-2); |
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| 204 | 204 | | (4) use directly in exploring for, producing, or |
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| 205 | 205 | | transporting, a material extracted from the earth; |
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| 206 | 206 | | (5) use in agriculture, including dairy or poultry |
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| 207 | 207 | | operations and pumping for farm or ranch irrigation; |
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| 208 | 208 | | (6) use directly in electrical processes, such as |
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| 209 | 209 | | electroplating, electrolysis, and cathodic protection; |
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| 210 | 210 | | (7) use directly in the off-wing processing, overhaul, |
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| 211 | 211 | | or repair of a jet turbine engine or its parts for a certificated or |
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| 212 | 212 | | licensed carrier of persons or property; |
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| 213 | 213 | | (8) use directly in providing, under contracts with or |
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| 214 | 214 | | on behalf of the United States government or foreign governments, |
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| 215 | 215 | | defense or national security-related electronics, classified |
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| 216 | 216 | | intelligence data processing and handling systems, or |
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| 217 | 217 | | defense-related platform modifications or upgrades; |
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| 218 | 218 | | (9) use directly by a data center that is certified by |
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| 219 | 219 | | the comptroller as a qualifying data center under Section 151.359 |
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| 220 | 220 | | or a qualifying large data center project under Section 151.3595 in |
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| 221 | 221 | | the processing, storage, and distribution of data; |
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| 222 | 222 | | (10) a direct or indirect use, consumption, or loss of |
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| 223 | 223 | | electricity by an electric utility engaged in the purchase of |
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| 224 | 224 | | electricity for resale; or |
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| 225 | 225 | | (11) use in timber operations, including pumping for |
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| 226 | 226 | | irrigation of timberland. |
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| 227 | 227 | | SECTION 3. The change in law made by this Act does not |
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| 228 | 228 | | affect tax liability accruing before the effective date of this |
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| 229 | 229 | | Act. That liability continues in effect as if this Act had not been |
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| 230 | 230 | | enacted, and the former law is continued in effect for the |
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| 231 | 231 | | collection of taxes due and for civil and criminal enforcement of |
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| 232 | 232 | | the liability for those taxes. |
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| 233 | 233 | | SECTION 4. This Act takes effect immediately if it receives |
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| 234 | 234 | | a vote of two-thirds of all the members elected to each house, as |
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| 235 | 235 | | provided by Section 39, Article III, Texas Constitution. If this |
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| 236 | 236 | | Act does not receive the vote necessary for immediate effect, this |
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| 237 | 237 | | Act takes effect September 1, 2015. |
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