Texas 2019 - 86th Regular

Texas House Bill HB4376 Compare Versions

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1	1	86R13397 CJC-D
2	2	By: Bohac H.B. No. 4376
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the temporary exemption of certain tangible personal
8	8	property related to certain colocation data centers from the sales
9	9	and use tax.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended
12	12	by adding Section 151.3596 to read as follows:
13	13	Sec. 151.3596. PROPERTY USED IN COLOCATION DATA CENTERS;
14	14	TEMPORARY EXEMPTION. (a) In this section:
15	15	(1) "Colocation data center" means all or part of a new
16	16	or redeveloped facility that:
17	17	(A) is located in this state;
18	18	(B) is composed of space in a building or a series
19	19	of buildings and related improvements located or to be located on
20	20	one or more parcels of land;
21	21	(C) is specifically constructed or refurbished,
22	22	repaired, restored, remodeled, or otherwise modified and actually
23	23	used primarily to house servers and related equipment and support
24	24	staff for the processing, storage, and distribution of data;
25	25	(D) is designed for use by one or more qualifying
26	26	tenants for the processing, storage, and distribution of data; and
27	27	(E) has an uninterruptible power source or
28	28	generator backup power and cooling systems, towers, and other
29	29	temperature control infrastructure.
30	30	(2) "Qualifying colocation data center" means a
31	31	colocation data center that:
32	32	(A) meets the qualifications prescribed by
33	33	Subsection (d); and
34	34	(B) does not generate electricity for resale or
35	35	for use outside the colocation data center.
36	36	(3) "Qualifying operator" means a person who controls
37	37	access to a qualifying colocation data center, regardless of
38	38	whether that person owns each item of tangible personal property
39	39	located at the qualifying colocation data center.
40	40	(4) "Qualifying tenant" means a person who:
41	41	(A) contracts with a qualifying operator, for a
42	42	period of at least five years:
43	43	(i) for at least one megawatt of critical IT
44	44	load capacity per month beginning not later than the first
45	45	anniversary of the date the qualifying operator and qualifying
46	46	tenant enter into the contract; and
47	47	(ii) to place, or cause to be placed, and to
48	48	use tangible personal property at the qualifying colocation data
49	49	center; or
50	50	(B) in the case of a qualifying tenant who is also
51	51	the qualifying operator, places or causes to be placed and uses
52	52	tangible personal property at the qualifying colocation data
53	53	center.
54	54	(b) Except as otherwise provided by this section, tangible
55	55	personal property that is necessary and essential to the operation
56	56	of a qualifying colocation data center is exempted from the taxes
57	57	imposed by this chapter if the tangible personal property is
58	58	purchased for installation at, incorporation into, or in the case
59	59	of electricity, use in a qualifying colocation data center by a
60	60	qualifying operator or qualifying tenant, and the tangible personal
61	61	property is:
62	62	(1) electricity;
63	63	(2) an electrical system;
64	64	(3) a cooling system;
65	65	(4) an emergency generator;
66	66	(5) hardware or a distributed mainframe computer or
67	67	server;
68	68	(6) a data storage device;
69	69	(7) network connectivity equipment;
70	70	(8) a rack, cabinet, and raised floor system;
71	71	(9) a peripheral component or system;
72	72	(10) software;
73	73	(11) a mechanical, electrical, or plumbing system that
74	74	is necessary to operate any tangible personal property described by
75	75	Subdivisions (2)-(10);
76	76	(12) any other item of equipment or system necessary
77	77	to operate any tangible personal property described by Subdivisions
78	78	(2)-(11), including a fixture; and
79	79	(13) a component part of any tangible personal
80	80	property described by Subdivisions (2)-(10).
81	81	(c) The exemption provided by this section does not apply
82	82	to:
83	83	(1) office equipment or supplies;
84	84	(2) maintenance or janitorial supplies or equipment;
85	85	(3) equipment or supplies used primarily in sales
86	86	activities or transportation activities;
87	87	(4) tangible personal property on which the purchaser
88	88	has received or has a pending application for a refund under Section
89	89	151.429;
90	90	(5) tangible personal property not otherwise exempted
91	91	under Subsection (b) that is incorporated into real estate or into
92	92	an improvement of real estate;
93	93	(6) tangible personal property that is rented or
94	94	leased for a term of one year or less; or
95	95	(7) notwithstanding Section 151.3111, a taxable
96	96	service that is performed on tangible personal property exempted
97	97	under this section.
98	98	(d) A colocation data center may be certified by the
99	99	comptroller as a qualifying colocation data center for purposes of
100	100	this section if, on or after January 1, 2019:
101	101	(1) a qualifying tenant contracts with a qualifying
102	102	operator to lease space in which the qualifying tenant will locate a
103	103	colocation data center; and
104	104	(2) the qualifying operator and qualifying tenants,
105	105	independently or jointly:
106	106	(A) employ at least 500 people full time in this
107	107	state; and
108	108	(B) make or agree to make, on or after January 1,
109	109	2019, a capital investment of at least $15 million in that
110	110	particular colocation data center over a three-year period
111	111	beginning on the date the colocation data center is certified by the
112	112	comptroller as a qualifying colocation data center.
113	113	(e) A colocation data center that is eligible under
114	114	Subsection (d) to be certified by the comptroller as a qualifying
115	115	colocation data center shall apply to the comptroller for
116	116	certification and for the issuance of a registration number or
117	117	numbers by the comptroller. The application must be made on a form
118	118	prescribed by the comptroller and must include the information
119	119	required by the comptroller. The application must include the name
120	120	and contact information for each qualifying tenant, if any, as of
121	121	the date on which the application is filed with the comptroller and
122	122	the name and contact information for the qualifying operator who
123	123	will claim the exemption authorized under this section, as well as
124	124	the address of the colocation data center. The application form
125	125	must include a section for the applicant to certify that the capital
126	126	investment required by Subsection (d)(2)(B) will be met
127	127	independently or jointly by the qualifying operator or qualifying
128	128	tenants within the time period prescribed by that paragraph.
129	129	(f) A person who is not listed as a qualifying tenant on an
130	130	application filed under Subsection (e) may submit an application to
131	131	the comptroller for a registration number in relation to a
132	132	certified qualifying colocation data center on a form prescribed by
133	133	the comptroller. The comptroller shall issue the registration
134	134	number to the applicant on receipt of information sufficient for
135	135	the comptroller to determine that the applicant is a qualifying
136	136	tenant of the certified qualifying colocation data center.
137	137	(g) The comptroller shall:
138	138	(1) act on an application submitted under Subsection
139	139	(e) or (f) not later than the 60th day after the date the
140	140	comptroller receives the application from the applicant; and
141	141	(2) issue the certification and registration number or
142	142	numbers to the applicant not later than the 14th day after the date
143	143	the comptroller approves the application.
144	144	(h) The exemption provided by this section begins on the
145	145	date the colocation data center is certified by the comptroller as a
146	146	qualifying colocation data center and expires:
147	147	(1) on the 10th anniversary of that date, if the
148	148	qualifying operator or qualifying tenants, independently or
149	149	jointly, make a capital investment of at least $15 million but less
150	150	than $50 million as provided by Subsection (d)(2)(B); or
151	151	(2) on the 15th anniversary of that date, if the
152	152	qualifying operator or qualifying tenants, independently or
153	153	jointly, make a capital investment of $50 million or more as
154	154	provided by Subsection (d)(2)(B).
155	155	(i) Each person who is eligible to claim an exemption
156	156	authorized by this section must hold a registration number issued
157	157	by the comptroller. The registration number must be stated on the
158	158	exemption certificate provided by the purchaser to the seller of
159	159	tangible personal property eligible for the exemption.
160	160	(j) The comptroller shall revoke all registration numbers
161	161	issued in connection with a qualifying colocation data center that
162	162	the comptroller determines does not meet the requirements
163	163	prescribed by Subsection (d). Each person who has the person's
164	164	registration number revoked by the comptroller is liable for taxes,
165	165	including penalty and interest from the date of purchase, imposed
166	166	under this chapter on purchases for which the person claimed an
167	167	exemption under this section, regardless of whether the purchase
168	168	occurred before the date the registration number was revoked.
169	169	(k) The comptroller shall adopt rules consistent with and
170	170	necessary to implement this section, including rules relating to:
171	171	(1) a qualifying colocation data center, qualifying
172	172	operator, and qualifying tenant;
173	173	(2) issuance and revocation of a registration number
174	174	required under this section; and
175	175	(3) reporting and other procedures necessary to ensure
176	176	that a qualifying colocation data center, qualifying operator, and
177	177	qualifying tenant comply with this section and remain entitled to
178	178	the exemption authorized by this section.
179	179	(l) The exemption provided under this section does not apply
180	180	to the taxes imposed under Chapter 321, 322, or 323.
181	181	(m) Information submitted to the comptroller in an
182	182	application under Subsection (e) or (f) is confidential and
183	183	excepted from the requirements of Section 552.021, Government Code.
184	184	SECTION 2. Section 151.317(a), Tax Code, is amended to read
185	185	as follows:
186	186	(a) Subject to Sections 151.1551, 151.359, [and] 151.3595,
187	187	and 151.3596 and Subsection (d) of this section, gas and
188	188	electricity are exempted from the taxes imposed by this chapter
189	189	when sold for:
190	190	(1) residential use;
191	191	(2) use in powering equipment exempt under Section
192	192	151.318 or 151.3185 by a person processing tangible personal
193	193	property for sale as tangible personal property, other than
194	194	preparation or storage of prepared food described by Section
195	195	151.314(c-2);
196	196	(3) use in lighting, cooling, and heating in the
197	197	manufacturing area during the actual manufacturing or processing of
198	198	tangible personal property for sale as tangible personal property,
199	199	other than preparation or storage of prepared food described by
200	200	Section 151.314(c-2);
201	201	(4) use directly in exploring for, producing, or
202	202	transporting, a material extracted from the earth;
203	203	(5) use in agriculture, including dairy or poultry
204	204	operations and pumping for farm or ranch irrigation;
205	205	(6) use directly in electrical processes, such as
206	206	electroplating, electrolysis, and cathodic protection;
207	207	(7) use directly in the off-wing processing, overhaul,
208	208	or repair of a jet turbine engine or its parts for a certificated or
209	209	licensed carrier of persons or property;
210	210	(8) use directly in providing, under contracts with or
211	211	on behalf of the United States government or foreign governments,
212	212	defense or national security-related electronics, classified
213	213	intelligence data processing and handling systems, or
214	214	defense-related platform modifications or upgrades;
215	215	(9) use directly by a data center, [or] large data
216	216	center project, or colocation data center that is certified by the
217	217	comptroller as a qualifying data center under Section 151.359, [or]
218	218	a qualifying large data center project under Section 151.3595, or a
219	219	qualifying colocation data center under Section 151.3596 in the
220	220	processing, storage, and distribution of data;
221	221	(10) a direct or indirect use, consumption, or loss of
222	222	electricity by an electric utility engaged in the purchase of
223	223	electricity for resale; or
224	224	(11) use in timber operations, including pumping for
225	225	irrigation of timberland.
226	226	SECTION 3. The change in law made by this Act does not
227	227	affect tax liability accruing before the effective date of this
228	228	Act. That liability continues in effect as if this Act had not been
229	229	enacted, and the former law is continued in effect for the
230	230	collection of taxes due and for civil and criminal enforcement of
231	231	the liability for those taxes.
232	232	SECTION 4. Section 151.3596, Tax Code, as added by this Act,
233	233	applies only to:
234	234	(1) a colocation data center that becomes a qualifying
235	235	colocation data center on or after the effective date of this Act;
236	236	or
237	237	(2) an operator or tenant of a colocation data center
238	238	that becomes a qualifying operator or a qualifying tenant on or
239	239	after the effective date of this Act.
240	240	SECTION 5. This Act takes effect September 1, 2019.