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.