TX
Texas House Bill HB3104

Texas 2023 - 88th Regular

Texas House Bill HB3104 Compare Versions

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11 By: Anderson (Senate Sponsor - Parker) H.B. No. 3104
22 (In the Senate - Received from the House May 8, 2023;
33 May 9, 2023, read first time and referred to Committee on Finance;
44 May 15, 2023, reported favorably by the following vote: Yeas 17,
55 Nays 0; May 15, 2023, sent to printer.)
66 Click here to see the committee vote
77
88
99 A BILL TO BE ENTITLED
1010 AN ACT
1111 relating to the temporary exemption of certain tangible personal
1212 property related to certain connected data center projects from
1313 sales and use taxes.
1414 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1515 SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended
1616 by adding Section 151.3596 to read as follows:
1717 Sec. 151.3596. PROPERTY USED IN CERTAIN CONNECTED DATA
1818 CENTER PROJECTS; TEMPORARY EXEMPTION. (a) In this section:
1919 (1) "Affiliated group" has the meaning assigned by
2020 Section 171.0001.
2121 (2) "Connected data center project" means a project
2222 that:
2323 (A) is located in this state;
2424 (B) is composed of one or more buildings:
2525 (i) comprising at least 250,000 square feet
2626 of space;
2727 (ii) located or to be located on contiguous
2828 or noncontiguous parcels of land that are commonly owned, owned by
2929 affiliation with the qualifying operator, or leased by a common
3030 qualifying operator; and
3131 (iii) connected to each other:
3232 (a) by fiber and associated equipment
3333 required for operating a fiber transmission network between data
3434 center buildings and upstream Internet peering points for the sole
3535 use of the qualifying occupant; and
3636 (b) for the purpose of providing
3737 redundancy and resiliency for the data center services provided in
3838 each building;
3939 (C) is specifically constructed or refurbished
4040 and primarily used to house servers and related equipment and
4141 support staff for the processing, storage, and distribution of
4242 data;
4343 (D) is used by a single qualifying occupant for
4444 the processing, storage, and distribution of data;
4545 (E) is not used primarily by a telecommunications
4646 provider to place tangible personal property used to deliver
4747 telecommunications services; and
4848 (F) has an uninterruptible power source, backup
4949 electricity generation system, fire suppression and prevention
5050 system, and physical security that includes restricted access,
5151 video surveillance, and electronic systems.
5252 (3) "County average weekly wage" means the average
5353 weekly wage in a county for all jobs during the most recent four
5454 quarterly periods for which data is available, as computed by the
5555 Texas Workforce Commission, at the time a connected data center
5656 project creates a job used to qualify under this section. If the
5757 connected data center project is located in more than one county,
5858 the county average weekly wage for each county in which the project
5959 is located may be calculated by averaging the county average weekly
6060 wages of all counties in which the project is located.
6161 (4) "Permanent job" means an employment position that
6262 will exist for at least five years after the date the job is
6363 created.
6464 (5) "Qualifying connected data center project" means a
6565 connected data center project that meets the qualifications
6666 prescribed by Subsection (d).
6767 (6) "Qualifying job" means a full-time, permanent job
6868 that pays at least 120 percent of the county average weekly wage in
6969 the county in which the job is based. The term includes a new
7070 employment position staffed by a third-party employer if a written
7171 contract exists between the third-party employer and a qualifying
7272 owner, qualifying operator, or qualifying occupant that provides
7373 that the employment position is permanently assigned to an
7474 associated qualifying connected data center project. The term does
7575 not include a job that is moved from one county in this state to
7676 another county in this state.
7777 (7) "Qualifying occupant" means a person who contracts
7878 with a qualifying owner or qualifying operator to place, or cause to
7979 be placed, and to use tangible personal property at the qualifying
8080 connected data center project or, in the case of a qualifying
8181 occupant who is also the qualifying owner and the qualifying
8282 operator, who places or causes to be placed and uses tangible
8383 personal property at the qualifying connected data center project.
8484 The term includes a member of the person's affiliated group.
8585 (8) "Qualifying operator" means a person who controls
8686 access to a qualifying connected data center project, regardless of
8787 whether that person owns each item of tangible personal property
8888 located at the qualifying connected data center project. The term
8989 includes a member of the person's affiliated group. A qualifying
9090 operator may also be the qualifying owner.
9191 (9) "Qualifying owner" means a person who owns one or
9292 more buildings in which a qualifying connected data center project
9393 is located. The term includes a member of the person's affiliated
9494 group. A qualifying owner may also be the qualifying operator.
9595 (b) Except as otherwise provided by this section, tangible
9696 personal property that is necessary and essential to the operation
9797 of a qualifying connected data center project is exempted from the
9898 taxes imposed by this chapter if the tangible personal property is
9999 purchased for installation at, incorporation into, or in the case
100100 of electricity, use in a qualifying connected data center project
101101 by a qualifying owner, qualifying operator, or qualifying occupant,
102102 and the tangible personal property is:
103103 (1) electricity;
104104 (2) an electrical system;
105105 (3) a cooling system;
106106 (4) a backup electricity generation system;
107107 (5) hardware or a distributed mainframe computer or
108108 server;
109109 (6) a data storage device;
110110 (7) network connectivity equipment;
111111 (8) a rack, cabinet, and raised floor system;
112112 (9) a peripheral component or system;
113113 (10) software;
114114 (11) a mechanical, electrical, or plumbing system that
115115 is necessary to operate any tangible personal property described by
116116 Subdivisions (2)-(10);
117117 (12) any other item of equipment or system necessary
118118 to operate any tangible personal property described by Subdivisions
119119 (2)-(11), including a fixture; and
120120 (13) a component part of any tangible personal
121121 property described by Subdivisions (2)-(10).
122122 (c) The exemption provided by this section does not apply
123123 to:
124124 (1) office equipment or supplies;
125125 (2) maintenance or janitorial supplies or equipment;
126126 (3) equipment or supplies used primarily in sales
127127 activities or transportation activities;
128128 (4) tangible personal property on which the purchaser
129129 has received or has a pending application for a refund under Section
130130 151.429;
131131 (5) tangible personal property not otherwise exempted
132132 under Subsection (b) that is incorporated into real estate or into
133133 an improvement of real estate;
134134 (6) tangible personal property that is rented or
135135 leased for a term of one year or less; or
136136 (7) notwithstanding Section 151.3111, a taxable
137137 service that is performed on tangible personal property exempted
138138 under this section.
139139 (d) Subject to Subsection (j), a connected data center
140140 project may be certified by the comptroller as a qualifying
141141 connected data center project for purposes of this section if, on or
142142 after September 1, 2023:
143143 (1) a single qualifying occupant:
144144 (A) contracts with a qualifying owner or
145145 qualifying operator to lease space in which the qualifying occupant
146146 will locate a connected data center project; or
147147 (B) occupies a space that was not previously used
148148 as a data center in which the qualifying occupant will locate a
149149 connected data center project, in the case of a qualifying occupant
150150 who is also the qualifying operator and the qualifying owner; and
151151 (2) the qualifying owner, qualifying operator, or
152152 qualifying occupant, jointly or independently:
153153 (A) creates at least 40 qualifying jobs in the
154154 county or counties in which the connected data center project is
155155 located;
156156 (B) makes or agrees to make a capital investment,
157157 on or after September 1, 2023, of at least $500 million in that
158158 particular connected data center project, the amount of which may
159159 not include a capital investment to replace personal property
160160 previously placed in service in that connected data center project,
161161 over a five-year period beginning on the earlier of:
162162 (i) the date the connected data center
163163 project submits the application described by Subsection (e); or
164164 (ii) the date the connected data center
165165 project is certified by the comptroller as a qualifying connected
166166 data center project; and
167167 (C) agrees to contract for at least 20 megawatts
168168 of transmission capacity for the operation of the connected data
169169 center project.
170170 (e) A connected data center project that is eligible under
171171 Subsection (d) to be certified by the comptroller as a qualifying
172172 connected data center project shall apply to the comptroller for
173173 certification as a qualifying connected data center project and for
174174 the issuance of a registration number or numbers by the
175175 comptroller. The application must be made on a form prescribed by
176176 the comptroller and include the information required by the
177177 comptroller. The application must include the name and contact
178178 information for the qualifying occupant, and, if applicable, the
179179 name and contact information for the qualifying owner and the
180180 qualifying operator who will claim the exemption authorized under
181181 this section. The application form must include a section for the
182182 applicant to certify that the capital investment required by
183183 Subsection (d)(2)(B) will be met independently or jointly by the
184184 qualifying occupant, qualifying owner, or qualifying operator
185185 within the time period prescribed by Subsection (d)(2)(B).
186186 (f) The exemption provided by this section begins on the
187187 date the connected data center project is certified by the
188188 comptroller as a qualifying connected data center project and
189189 expires on the 20th anniversary of that date, if the qualifying
190190 occupant, qualifying owner, or qualifying operator, independently
191191 or jointly makes a capital investment of $500 million or more as
192192 provided by Subsection (d)(2)(B).
193193 (g) Each person who is eligible to claim an exemption
194194 authorized by this section must hold a registration number issued
195195 by the comptroller. The registration number must be stated on the
196196 exemption certificate provided by the purchaser to the seller of
197197 tangible personal property eligible for the exemption.
198198 (h) The comptroller shall revoke all registration numbers
199199 issued in connection with a qualifying connected data center
200200 project that the comptroller determines does not meet the
201201 requirements prescribed by Subsection (d). Each person who has the
202202 person's registration number revoked by the comptroller is liable
203203 for taxes, including penalty and interest from the date of
204204 purchase, imposed under this chapter on purchases for which the
205205 person claimed an exemption under this section, regardless of
206206 whether the purchase occurred before the date the registration
207207 number was revoked.
208208 (i) The comptroller shall adopt rules consistent with and
209209 necessary to implement this section, including rules relating to:
210210 (1) a qualifying connected data center project,
211211 qualifying owner, qualifying operator, and qualifying occupant;
212212 (2) issuance and revocation of a registration number
213213 required under this section; and
214214 (3) reporting and other procedures necessary to ensure
215215 that a qualifying connected data center project, qualifying owner,
216216 qualifying operator, and qualifying occupant comply with this
217217 section and remain entitled to the exemption authorized by this
218218 section.
219219 (j) A connected data center project is not eligible to
220220 receive an exemption under this section if the connected data
221221 center project is subject to an agreement limiting the appraised
222222 value of the connected data center's property under former
223223 Subchapter B or C, Chapter 313.
224224 SECTION 2. Section 151.317(a), Tax Code, is amended to read
225225 as follows:
226226 (a) Subject to Sections 151.1551, 151.359, [and] 151.3595,
227227 and 151.3596 and Subsection (d) of this section, gas and
228228 electricity are exempted from the taxes imposed by this chapter
229229 when sold for:
230230 (1) residential use;
231231 (2) use in powering equipment exempt under Section
232232 151.318 or 151.3185 by a person processing tangible personal
233233 property for sale as tangible personal property, other than
234234 preparation or storage of prepared food described by Section
235235 151.314(c-2);
236236 (3) use in lighting, cooling, and heating in the
237237 manufacturing area during the actual manufacturing or processing of
238238 tangible personal property for sale as tangible personal property,
239239 other than preparation or storage of prepared food described by
240240 Section 151.314(c-2);
241241 (4) use directly in exploring for, producing, or
242242 transporting, a material extracted from the earth;
243243 (5) use in agriculture, including dairy or poultry
244244 operations and pumping for farm or ranch irrigation;
245245 (6) use directly in electrical processes, such as
246246 electroplating, electrolysis, and cathodic protection;
247247 (7) use directly in the off-wing processing, overhaul,
248248 or repair of a jet turbine engine or its parts for a certificated or
249249 licensed carrier of persons or property;
250250 (8) use directly in providing, under contracts with or
251251 on behalf of the United States government or foreign governments,
252252 defense or national security-related electronics, classified
253253 intelligence data processing and handling systems, or
254254 defense-related platform modifications or upgrades;
255255 (9) use directly by a data center, [or] large data
256256 center project, or connected data center project that is certified
257257 by the comptroller as a qualifying data center under Section
258258 151.359, [or] a qualifying large data center project under Section
259259 151.3595, or a qualifying connected data center project under
260260 Section 151.3596 in the processing, storage, and distribution of
261261 data;
262262 (10) a direct or indirect use, consumption, or loss of
263263 electricity by an electric utility engaged in the purchase of
264264 electricity for resale; or
265265 (11) use in timber operations, including pumping for
266266 irrigation of timberland.
267267 SECTION 3. The change in law made by this Act does not
268268 affect tax liability accruing before the effective date of this
269269 Act. That liability continues in effect as if this Act had not been
270270 enacted, and the former law is continued in effect for the
271271 collection of taxes due and for civil and criminal enforcement of
272272 the liability for those taxes.
273273 SECTION 4. This Act takes effect September 1, 2023.
274274 * * * * *