Texas 2023 - 88th Regular

Texas Senate Bill SB1265 Compare Versions

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1	1	88R15019 CJD-F
2	2	By: Parker S.B. No. 1265
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 connected data center projects from
9	9	sales and use taxes.
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 CERTAIN CONNECTED DATA
14	14	CENTER PROJECTS; TEMPORARY EXEMPTION. (a) In this section:
15	15	(1) "Affiliated group" has the meaning assigned by
16	16	Section 171.0001.
17	17	(2) "Connected data center project" means a project
18	18	that:
19	19	(A) is located in this state;
20	20	(B) is composed of one or more buildings:
21	21	(i) comprising at least 250,000 square feet
22	22	of space;
23	23	(ii) located or to be located on contiguous
24	24	or noncontiguous parcels of land that are commonly owned, owned by
25	25	affiliation with the qualifying operator, or leased by a common
26	26	qualifying operator; and
27	27	(iii) connected to each other:
28	28	(a) by fiber and associated equipment
29	29	required for operating a fiber transmission network between data
30	30	center buildings and upstream Internet peering points for the sole
31	31	use of the qualifying occupant; and
32	32	(b) for the purpose of providing
33	33	redundancy and resiliency for the data center services provided in
34	34	each building;
35	35	(C) is specifically constructed or refurbished
36	36	and primarily used to house servers and related equipment and
37	37	support staff for the processing, storage, and distribution of
38	38	data;
39	39	(D) is used by a single qualifying occupant for
40	40	the processing, storage, and distribution of data;
41	41	(E) is not used primarily by a telecommunications
42	42	provider to place tangible personal property used to deliver
43	43	telecommunications services; and
44	44	(F) has an uninterruptible power source, backup
45	45	electricity generation system, fire suppression and prevention
46	46	system, and physical security that includes restricted access,
47	47	video surveillance, and electronic systems.
48	48	(3) "County average weekly wage" means the average
49	49	weekly wage in a county for all jobs during the most recent four
50	50	quarterly periods for which data is available, as computed by the
51	51	Texas Workforce Commission, at the time a connected data center
52	52	project creates a job used to qualify under this section. If the
53	53	connected data center project is located in more than one county,
54	54	the county average weekly wage for each county in which the project
55	55	is located may be calculated by averaging the county average weekly
56	56	wages of all counties in which the project is located.
57	57	(4) "Permanent job" means an employment position that
58	58	will exist for at least five years after the date the job is
59	59	created.
60	60	(5) "Qualifying connected data center project" means a
61	61	connected data center project that meets the qualifications
62	62	prescribed by Subsection (d).
63	63	(6) "Qualifying job" means a full-time, permanent job
64	64	that pays at least 120 percent of the county average weekly wage in
65	65	the county in which the job is based. The term includes a new
66	66	employment position staffed by a third-party employer if a written
67	67	contract exists between the third-party employer and a qualifying
68	68	owner, qualifying operator, or qualifying occupant that provides
69	69	that the employment position is permanently assigned to an
70	70	associated qualifying connected data center project. The term does
71	71	not include a job that is moved from one county in this state to
72	72	another county in this state.
73	73	(7) "Qualifying operator" means a person who controls
74	74	access to a qualifying connected data center project, regardless of
75	75	whether that person owns each item of tangible personal property
76	76	located at the qualifying connected data center project. A
77	77	qualifying operator may also be the qualifying owner.
78	78	(8) "Qualifying owner" means a person who owns one or
79	79	more buildings in which a qualifying connected data center project
80	80	is located. The term includes a member of the person's affiliated
81	81	group. A qualifying owner may also be the qualifying operator.
82	82	(9) "Qualifying occupant" means a person who contracts
83	83	with a qualifying owner or qualifying operator to place, or cause to
84	84	be placed, and to use tangible personal property at the qualifying
85	85	connected data center project or, in the case of a qualifying
86	86	occupant who is also the qualifying owner and the qualifying
87	87	operator, who places or causes to be placed and uses tangible
88	88	personal property at the qualifying connected data center project.
89	89	The term includes a member of the person's affiliated group.
90	90	(b) Except as otherwise provided by this section, tangible
91	91	personal property that is necessary and essential to the operation
92	92	of a qualifying connected data center project is exempted from the
93	93	taxes imposed by this chapter if the tangible personal property is
94	94	purchased for installation at, incorporation into, or in the case
95	95	of electricity, use in a qualifying connected data center project
96	96	by a qualifying owner, qualifying operator, or qualifying occupant,
97	97	and the tangible personal property is:
98	98	(1) electricity;
99	99	(2) an electrical system;
100	100	(3) a cooling system;
101	101	(4) a backup electricity generation system;
102	102	(5) hardware or a distributed mainframe computer or
103	103	server;
104	104	(6) a data storage device;
105	105	(7) network connectivity equipment;
106	106	(8) a rack, cabinet, and raised floor system;
107	107	(9) a peripheral component or system;
108	108	(10) software;
109	109	(11) a mechanical, electrical, or plumbing system that
110	110	is necessary to operate any tangible personal property described by
111	111	Subdivisions (2)-(10);
112	112	(12) any other item of equipment or system necessary
113	113	to operate any tangible personal property described by Subdivisions
114	114	(2)-(11), including a fixture; and
115	115	(13) a component part of any tangible personal
116	116	property described by Subdivisions (2)-(10).
117	117	(c) The exemption provided by this section does not apply
118	118	to:
119	119	(1) office equipment or supplies;
120	120	(2) maintenance or janitorial supplies or equipment;
121	121	(3) equipment or supplies used primarily in sales
122	122	activities or transportation activities;
123	123	(4) tangible personal property on which the purchaser
124	124	has received or has a pending application for a refund under Section
125	125	151.429;
126	126	(5) tangible personal property not otherwise exempted
127	127	under Subsection (b) that is incorporated into real estate or into
128	128	an improvement of real estate;
129	129	(6) tangible personal property that is rented or
130	130	leased for a term of one year or less; or
131	131	(7) notwithstanding Section 151.3111, a taxable
132	132	service that is performed on tangible personal property exempted
133	133	under this section.
134	134	(d) Subject to Subsection (j), a connected data center
135	135	project may be certified by the comptroller as a qualifying
136	136	connected data center project for purposes of this section if, on or
137	137	after September 1, 2023:
138	138	(1) a single qualifying occupant:
139	139	(A) contracts with a qualifying owner or
140	140	qualifying operator to lease space in which the qualifying occupant
141	141	will locate a connected data center project; or
142	142	(B) occupies a space that was not previously used
143	143	as a data center in which the qualifying occupant will locate a
144	144	connected data center project, in the case of a qualifying occupant
145	145	who is also the qualifying operator and the qualifying owner; and
146	146	(2) the qualifying owner, qualifying operator, or
147	147	qualifying occupant, jointly or independently:
148	148	(A) creates at least 40 qualifying jobs in the
149	149	county or counties in which the connected data center project is
150	150	located;
151	151	(B) makes or agrees to make a capital investment,
152	152	on or after September 1, 2023, of at least $500 million in that
153	153	particular connected data center project, the amount of which may
154	154	not include a capital investment to replace personal property
155	155	previously placed in service in that connected data center project,
156	156	over a five-year period beginning on the earlier of:
157	157	(i) the date the connected data center
158	158	project submits the application described by Subsection (e); or
159	159	(ii) the date the connected data center
160	160	project is certified by the comptroller as a qualifying connected
161	161	data center project; and
162	162	(C) agrees to contract for at least 20 megawatts
163	163	of transmission capacity for the operation of the connected data
164	164	center project.
165	165	(e) A connected data center project that is eligible under
166	166	Subsection (d) to be certified by the comptroller as a qualifying
167	167	connected data center project shall apply to the comptroller for
168	168	certification as a qualifying connected data center project and for
169	169	the issuance of a registration number or numbers by the
170	170	comptroller. The application must be made on a form prescribed by
171	171	the comptroller and include the information required by the
172	172	comptroller. The application must include the name and contact
173	173	information for the qualifying occupant, and, if applicable, the
174	174	name and contact information for the qualifying owner and the
175	175	qualifying operator who will claim the exemption authorized under
176	176	this section. The application form must include a section for the
177	177	applicant to certify that the capital investment required by
178	178	Subsection (d)(2)(B) will be met independently or jointly by the
179	179	qualifying occupant, qualifying owner, or qualifying operator
180	180	within the time period prescribed by Subsection (d)(2)(B).
181	181	(f) The exemption provided by this section begins on the
182	182	date the connected data center project is certified by the
183	183	comptroller as a qualifying connected data center project and
184	184	expires on the 20th anniversary of that date, if the qualifying
185	185	occupant, qualifying owner, or qualifying operator, independently
186	186	or jointly makes a capital investment of $500 million or more as
187	187	provided by Subsection (d)(2)(B).
188	188	(g) Each person who is eligible to claim an exemption
189	189	authorized by this section must hold a registration number issued
190	190	by the comptroller. The registration number must be stated on the
191	191	exemption certificate provided by the purchaser to the seller of
192	192	tangible personal property eligible for the exemption.
193	193	(h) The comptroller shall revoke all registration numbers
194	194	issued in connection with a qualifying connected data center
195	195	project that the comptroller determines does not meet the
196	196	requirements prescribed by Subsection (d). Each person who has the
197	197	person's registration number revoked by the comptroller is liable
198	198	for taxes, including penalty and interest from the date of
199	199	purchase, imposed under this chapter on purchases for which the
200	200	person claimed an exemption under this section, regardless of
201	201	whether the purchase occurred before the date the registration
202	202	number was revoked.
203	203	(i) The comptroller shall adopt rules consistent with and
204	204	necessary to implement this section, including rules relating to:
205	205	(1) a qualifying connected data center project,
206	206	qualifying owner, qualifying operator, and qualifying occupant;
207	207	(2) issuance and revocation of a registration number
208	208	required under this section; and
209	209	(3) reporting and other procedures necessary to ensure
210	210	that a qualifying connected data center project, qualifying owner,
211	211	qualifying operator, and qualifying occupant comply with this
212	212	section and remain entitled to the exemption authorized by this
213	213	section.
214	214	(j) A connected data center project is not eligible to
215	215	receive an exemption under this section if the connected data
216	216	center project is subject to an agreement limiting the appraised
217	217	value of the connected data center's property under former
218	218	Subchapter B or C, Chapter 313.
219	219	SECTION 2. Section 151.317(a), Tax Code, is amended to read
220	220	as follows:
221	221	(a) Subject to Sections 151.1551, 151.359, [and] 151.3595,
222	222	and 151.3596 and Subsection (d) of this section, gas and
223	223	electricity are exempted from the taxes imposed by this chapter
224	224	when sold for:
225	225	(1) residential use;
226	226	(2) use in powering equipment exempt under Section
227	227	151.318 or 151.3185 by a person processing tangible personal
228	228	property for sale as tangible personal property, other than
229	229	preparation or storage of prepared food described by Section
230	230	151.314(c-2);
231	231	(3) use in lighting, cooling, and heating in the
232	232	manufacturing area during the actual manufacturing or processing of
233	233	tangible personal property for sale as tangible personal property,
234	234	other than preparation or storage of prepared food described by
235	235	Section 151.314(c-2);
236	236	(4) use directly in exploring for, producing, or
237	237	transporting, a material extracted from the earth;
238	238	(5) use in agriculture, including dairy or poultry
239	239	operations and pumping for farm or ranch irrigation;
240	240	(6) use directly in electrical processes, such as
241	241	electroplating, electrolysis, and cathodic protection;
242	242	(7) use directly in the off-wing processing, overhaul,
243	243	or repair of a jet turbine engine or its parts for a certificated or
244	244	licensed carrier of persons or property;
245	245	(8) use directly in providing, under contracts with or
246	246	on behalf of the United States government or foreign governments,
247	247	defense or national security-related electronics, classified
248	248	intelligence data processing and handling systems, or
249	249	defense-related platform modifications or upgrades;
250	250	(9) use directly by a data center, [or] large data
251	251	center project, or connected data center project that is certified
252	252	by the comptroller as a qualifying data center under Section
253	253	151.359, [or] a qualifying large data center project under Section
254	254	151.3595, or a qualifying connected data center project under
255	255	Section 151.3596 in the processing, storage, and distribution of
256	256	data;
257	257	(10) a direct or indirect use, consumption, or loss of
258	258	electricity by an electric utility engaged in the purchase of
259	259	electricity for resale; or
260	260	(11) use in timber operations, including pumping for
261	261	irrigation of timberland.
262	262	SECTION 3. The change in law made by this Act does not
263	263	affect tax liability accruing before the effective date of this
264	264	Act. That liability continues in effect as if this Act had not been
265	265	enacted, and the former law is continued in effect for the
266	266	collection of taxes due and for civil and criminal enforcement of
267	267	the liability for those taxes.
268	268	SECTION 4. This Act takes effect September 1, 2023.