86R13397 CJC-D
By: Bohac H.B. No. 4376
A BILL TO BE ENTITLED
AN ACT
relating to the temporary exemption of certain tangible personal
property related to certain colocation data centers 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 151.3596 to read as follows:
Sec. 151.3596. PROPERTY USED IN COLOCATION DATA CENTERS;
TEMPORARY EXEMPTION. (a) In this section:
(1) "Colocation data center" means all or part of a new
or redeveloped facility that:
(A) is located in this state;
(B) is composed of space in a building or a series
of buildings and related improvements located or to be located on
one or more parcels of land;
(C) is specifically constructed or refurbished,
repaired, restored, remodeled, or otherwise modified and actually
used primarily to house servers and related equipment and support
staff for the processing, storage, and distribution of data;
(D) is designed for use by one or more qualifying
tenants for the processing, storage, and distribution of data; and
(E) has an uninterruptible power source or
generator backup power and cooling systems, towers, and other
temperature control infrastructure.
(2) "Qualifying colocation data center" means a
colocation data center that:
(A) meets the qualifications prescribed by
Subsection (d); and
(B) does not generate electricity for resale or
for use outside the colocation data center.
(3) "Qualifying operator" means a person who controls
access to a qualifying colocation data center, regardless of
whether that person owns each item of tangible personal property
located at the qualifying colocation data center.
(4) "Qualifying tenant" means a person who:
(A) contracts with a qualifying operator, for a
period of at least five years:
(i) for at least one megawatt of critical IT
load capacity per month beginning not later than the first
anniversary of the date the qualifying operator and qualifying
tenant enter into the contract; and
(ii) to place, or cause to be placed, and to
use tangible personal property at the qualifying colocation data
center; or
(B) in the case of a qualifying tenant who is also
the qualifying operator, places or causes to be placed and uses
tangible personal property at the qualifying colocation data
center.
(b) Except as otherwise provided by this section, tangible
personal property that is necessary and essential to the operation
of a qualifying colocation data center 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 electricity, use in a qualifying colocation data center by a
qualifying operator or qualifying tenant, 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 colocation data center may be certified by the
comptroller as a qualifying colocation data center for purposes of
this section if, on or after January 1, 2019:
(1) a qualifying tenant contracts with a qualifying
operator to lease space in which the qualifying tenant will locate a
colocation data center; and
(2) the qualifying operator and qualifying tenants,
independently or jointly:
(A) employ at least 500 people full time in this
state; and
(B) make or agree to make, on or after January 1,
2019, a capital investment of at least $15 million in that
particular colocation data center over a three-year period
beginning on the date the colocation data center is certified by the
comptroller as a qualifying colocation data center.
(e) A colocation data center that is eligible under
Subsection (d) to be certified by the comptroller as a qualifying
colocation data center shall apply to the comptroller for
certification and for the issuance of a registration number or
numbers by the comptroller. The application must be made on a form
prescribed by the comptroller and must include the information
required by the comptroller. The application must include the name
and contact information for each qualifying tenant, if any, as of
the date on which the application is filed with the comptroller and
the name and contact information for the qualifying operator who
will claim the exemption authorized under this section, as well as
the address of the colocation data center. 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 operator or qualifying
tenants within the time period prescribed by that paragraph.
(f) A person who is not listed as a qualifying tenant on an
application filed under Subsection (e) may submit an application to
the comptroller for a registration number in relation to a
certified qualifying colocation data center on a form prescribed by
the comptroller. The comptroller shall issue the registration
number to the applicant on receipt of information sufficient for
the comptroller to determine that the applicant is a qualifying
tenant of the certified qualifying colocation data center.
(g) The comptroller shall:
(1) act on an application submitted under Subsection
(e) or (f) not later than the 60th day after the date the
comptroller receives the application from the applicant; and
(2) issue the certification and registration number or
numbers to the applicant not later than the 14th day after the date
the comptroller approves the application.
(h) The exemption provided by this section begins on the
date the colocation data center is certified by the comptroller as a
qualifying colocation data center and expires:
(1) on the 10th anniversary of that date, if the
qualifying operator or qualifying tenants, independently or
jointly, make a capital investment of at least $15 million but less
than $50 million as provided by Subsection (d)(2)(B); or
(2) on the 15th anniversary of that date, if the
qualifying operator or qualifying tenants, independently or
jointly, make a capital investment of $50 million or more as
provided by Subsection (d)(2)(B).
(i) 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.
(j) The comptroller shall revoke all registration numbers
issued in connection with a qualifying colocation data center 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.
(k) The comptroller shall adopt rules consistent with and
necessary to implement this section, including rules relating to:
(1) a qualifying colocation data center, qualifying
operator, and qualifying tenant;
(2) issuance and revocation of a registration number
required under this section; and
(3) reporting and other procedures necessary to ensure
that a qualifying colocation data center, qualifying operator, and
qualifying tenant comply with this section and remain entitled to
the exemption authorized by this section.
(l) The exemption provided under this section does not apply
to the taxes imposed under Chapter 321, 322, or 323.
(m) Information submitted to the comptroller in an
application under Subsection (e) or (f) is confidential and
excepted from the requirements of Section 552.021, Government Code.
SECTION 2. Section 151.317(a), Tax Code, is amended to read
as follows:
(a) Subject to Sections 151.1551, 151.359, [and] 151.3595,
and 151.3596 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, [or] large data
center project, or colocation 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, or a
qualifying colocation data center under Section 151.3596 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. Section 151.3596, Tax Code, as added by this Act,
applies only to:
(1) a colocation data center that becomes a qualifying
colocation data center on or after the effective date of this Act;
or
(2) an operator or tenant of a colocation data center
that becomes a qualifying operator or a qualifying tenant on or
after the effective date of this Act.
SECTION 5. This Act takes effect September 1, 2019.