87R6448 SMT-D
By: Capriglione H.B. No. 3236
A BILL TO BE ENTITLED
AN ACT
relating to the temporary exemption of certain tangible personal
property related to certain colocation data centers from sales and
use taxes.
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) if redeveloped, has not been previously used
for the purpose specified by Paragraph (C);
(E) is designed for use by one or more tenants for
the processing, storage, and distribution of data;
(F) has an uninterruptible power source or
generator backup power and cooling systems, towers, and other
temperature control infrastructure; and
(G) does not generate electricity for resale or
for use outside the facility.
(2) "Operator" means a person who controls access to a
colocation data center, regardless of whether that person owns each
item of tangible personal property located at the colocation data
center.
(3) "Qualifying tenant" means a tenant who is
certified by the comptroller under Subsection (d).
(4) "Tenant" means a person who:
(A) contracts with an 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 operator and tenant enter into the
contract; and
(ii) to place, or cause to be placed, and
use tangible personal property at the colocation data center; or
(B) is the operator and who places or causes to be
placed and uses tangible personal property at the colocation data
center.
(b) Except as otherwise provided by this section, tangible
personal property that is necessary and essential to the operation
of a colocation data center is exempted from the taxes imposed by
this chapter if the tangible personal property is purchased by a
qualifying tenant for installation at, incorporation into, or in
the case of electricity, use in a colocation data center, 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 tenant may be certified by the comptroller as a
qualifying tenant for purposes of this section if:
(1) the tenant employs at least 500 people full time in
this state; and
(2) on or after January 1, 2021, the tenant:
(A) contracts with an operator or tenant, as
applicable, to lease space in a facility in which the tenant will
locate a colocation data center; and
(B) makes or agrees to make a capital investment
of at least $15 million in the facility in which the colocation data
center will be located over a three-year period beginning on the
date the tenant is certified by the comptroller as a qualifying
tenant.
(e) A tenant that is eligible under Subsection (d) to be
certified by the comptroller as a qualifying tenant shall apply to
the comptroller for certification and for the issuance of a
registration number 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 tenant's name and contact information and the address
of the colocation data center. The application form must include a
section for the tenant to certify that the tenant will meet the
capital investment required by Subsection (d)(2)(B) within the
period prescribed by that paragraph.
(f) The comptroller shall:
(1) act on an application submitted under Subsection
(e) 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 to
the applicant not later than the 14th day after the date the
comptroller approves the application.
(g) The exemption provided by this section begins as to a
qualifying tenant on the date the comptroller issues a registration
number to the qualifying tenant under Subsection (f) and expires:
(1) on the 10th anniversary of that date, if the
qualifying tenant makes 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 tenant makes a capital investment of $50 million or more
as provided by Subsection (d)(2)(B).
(h) Each qualifying tenant 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 tenant to the
seller of tangible personal property eligible for the exemption.
(i) The comptroller shall revoke a registration number
issued to a tenant if the comptroller determines that the tenant
does not meet the requirements prescribed by Subsection (d). Each
tenant who has the tenant's registration number revoked by the
comptroller is liable for taxes, including penalties and interest
from the date of purchase, imposed under this chapter on purchases
for which the tenant claimed an exemption under this section,
regardless of whether the purchase occurred before the date the
registration number was revoked.
(j) The comptroller shall adopt rules consistent with and
necessary to implement this section, including rules relating to:
(1) a colocation data center, operator, and qualifying
tenant;
(2) the issuance and revocation of a registration
number required under this section; and
(3) reporting and other procedures necessary to ensure
that a colocation data center, operator, and qualifying tenant
comply with this section and that the qualifying tenant remains
entitled to the exemption authorized by this section.
(k) The exemption provided under this section does not apply
to the taxes imposed under Chapter 321, 322, or 323.
(l) Information submitted to the comptroller in an
application under Subsection (e) 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 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;
(9-a) use directly in the processing, storage, and
distribution of data by a tenant of a colocation data center who is
certified by the comptroller as a qualifying tenant under Section
151.3596;
(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 a qualifying tenant of a colocation data center who
becomes a qualifying tenant on or after the effective date of this
Act.
SECTION 5. This Act takes effect September 1, 2021.